UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended:
For the transition period from: _________________ to ___________________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Capital Market | ||||
| The
|
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.
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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was
required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 12, 2026, there were shares of the registrant’s common stock, par value $ per share, issued and outstanding.
DRAGONFLY ENERGY HOLDINGS CORP.
TABLE OF CONTENTS
| 2 |
DRAGONFLY ENERGY HOLDINGS CORP.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
| March 31, 2026 | December 31, 2025 | |||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance for credit losses | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Prepaid inventory | ||||||||
| Prepaid income tax | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment | ||||||||
| Machinery and equipment | ||||||||
| Office furniture and equipment | ||||||||
| Leasehold improvements | ||||||||
| Vehicle | ||||||||
| Total | ||||||||
| Less accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and Equipment, Net | ||||||||
| Operating lease right of use asset, net | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued payroll and other liabilities | ||||||||
| Accrued tariffs | ||||||||
| Customer deposits | ||||||||
| Deferred revenue, current portion | ||||||||
| Dividends Payable | ||||||||
| Notes payable, current portion, net of debt issuance costs | ||||||||
| Operating lease liability, current portion | ||||||||
| Financing lease liability, current portion | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities | ||||||||
| Deferred revenue, net of current portion | ||||||||
| Warrant liabilities | ||||||||
| Notes payable, non current portion, net of debt issuance costs | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Financing lease liability, net of current portion | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (See Note 5) | ||||||||
| Redeemable Preferred Stock | ||||||||
| Preferred stock-Series A, shares at $ par value, authorized, shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Preferred stock-Series B, shares at $ par value, authorized, and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, shares at $ par value, authorized, shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Common stock, shares at $ par value,
authorized, and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 3 |
DRAGONFLY ENERGY HOLDINGS CORP.
Unaudited Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2026 and 2025
(in thousands, except share and per share data)
For The Three Months Ended March 31 | ||||||||
| 2026 | 2025 | |||||||
| Net Sales | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Selling and marketing | ||||||||
| Total Operating Expenses | ||||||||
| Loss From Operations | ( | ) | ( | ) | ||||
| Other (Expense) Income | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Change in fair market value of warrant liability | ||||||||
| Total Other Expense | ( | ) | ( | ) | ||||
| Net Loss Before Taxes | ( | ) | ( | ) | ||||
| Income Tax Expense (Benefit) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Less: Preferred Stock Dividends | ( | ) | ||||||
| Net Loss Attributable to Common Shareholders | $ | ( | ) | $ | ( | ) | ||
| Loss Per Share- Basic & Diluted | $ | ) | $ | ) | ||||
| Weighted Average Number of Shares - Basic & Diluted | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 4 |
DRAGONFLY ENERGY HOLDINGS CORP.
Unaudited Condensed Consolidated Statements of Shareholders’ Equity (Deficit)
For the Three Months Ended March 31, 2026 and 2025
(in thousands, except share data)
| Series
A Redeemable Preferred Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | (Deficit) | Total | ||||||||||||||||||||||
| Balance - January 1, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Cashless exercise of liability classified warrants | - | |||||||||||||||||||||||||||
| Shares issued for vested restricted stock units | - | |||||||||||||||||||||||||||
| Dividends Preferred Series B - Paid-in-kind | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Dividends Preferred Series B | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Accretion of discount on Series B Preferred | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock compensation expense | - | - | ||||||||||||||||||||||||||
| Balance - March 31, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Balance - January 1, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Common stock issued in public offering (ATM), net of costs | - | |||||||||||||||||||||||||||
| Redeemable preferred stock issued, net | - | |||||||||||||||||||||||||||
| Shares issued for vested restricted stock units | - | |||||||||||||||||||||||||||
| Conversion of preferred stock to common stock | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock compensation expense | - | - | ||||||||||||||||||||||||||
| Balance - March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 5 |
DRAGONFLY ENERGY HOLDINGS CORP.
Unaudited Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2026 and 2025
(in thousands)
| 2026 | 2025 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash | ||||||||
| Used in Operating Activities | ||||||||
| Stock based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Change in fair market value of warrant liability | ( | ) | ( | ) | ||||
| Non-cash interest expense (paid-in kind) | ||||||||
| Provision for credit losses | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right of use of assets | ||||||||
| Changes in Assets and Liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Prepaid inventory | ( | ) | ||||||
| Prepaid income tax | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Other assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Accrued tariffs | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Income tax payable | ( | ) | ||||||
| Customer deposits | ( | ) | ( | ) | ||||
| Total Adjustments | ( | ) | ||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| 6 |
DRAGONFLY ENERGY HOLDINGS CORP.
Unaudited Condensed Consolidated Statements of Cash Flows (continued)
For the Three Months Ended March 31, 2026 and 2025
(in thousands)
| (continued from previous page) | 2026 | 2025 | ||||||
| Cash Flows From Financing Activities | ||||||||
| Proceeds from public offering (ATM), net | ||||||||
| Repayment of note payable | ( | ) | ||||||
| Proceeds from preferred stock offering, net of fees | ||||||||
| Principal payments on finance leases | ( | ) | ( | ) | ||||
| Payment of dividends | ( | ) | ||||||
| Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
| Net Decrease in Cash and cash equivalents | ( | ) | ( | ) | ||||
| Beginning Cash and cash equivalents - beginning of period | ||||||||
| Ending Cash and cash equivalents - end of period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental Non-Cash Investing and Financing Activities | ||||||||
| Purchases of property and equipment, not yet paid | $ | $ | ||||||
| Recognition of warrant liability - Investor Warrants | $ | $ | ||||||
| Conversion of preferred stock to common stock | $ | $ | ||||||
| Accrued dividends | $ | $ | ||||||
| Dividends paid in kind | $ | $ | ||||||
| Accretion of preferred stock discount | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 7 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 1 - NATURE OF BUSINESS
Dragonfly Energy Holdings Corp. (the “Company”) sells lithium ion battery packs for use in a wide variety of applications. The Company sells to distributors under the Dragonfly Energy brand name, and sells direct to consumers under the trade name Battleborn Batteries. In addition, the Company develops technology for improved lithium ion battery manufacturing and assembly methods.
On
December 15, 2025, the Company’s Board of Directors approved a
All
shares of Common Stock, stock option awards and per share amounts contained in the Consolidated Financial Statements and Notes have been
retroactively adjusted to reflect the
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These condensed consolidated financial statements should be read along with the Annual Report on Form 10-K filed with the SEC on March 30, 2026 of the Company for the annual period ended December 31, 2025. The consolidated balance sheet as of December 31, 2025 was derived from the audited consolidated financial statements as of and for the year then ended.
Principles of consolidation
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and present the consolidated financial statements of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.
| 8 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
During
the three months ended March 31, 2026 and 2025, the Company incurred losses from operations and had negative cash flow from operations.
As of March 31, 2026, the Company had $
In
2025, the Company completed several capital raising and debt restructuring transactions, resulting in aggregate net cash proceeds of
approximately $
Management
has evaluated the conditions and events described above in relation to the Company’s obligations coming due within one year after
the date these condensed consolidated financial statements are issued. Based on this evaluation, the capital raise and debt restructuring
activities completed in 2025 and early 2026, including access to the at-the-market equity offering program, and the Company’s ability
to maintain covenant compliance with a monthly liquidity minimum of $
Inventory
Inventories
(Note 4), which consist of raw materials and finished goods, are stated at the lower of cost (first in, first out) or net realizable
value, net of reserves for obsolete inventory. The Company continually analyzes its slow moving and excess inventories. Based on historical
and projected sales volumes and anticipated selling prices, the Company established reserves. Inventory that is in excess of current
and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined
to be obsolete are written down to net realizable value. The Company had a reserve of $
Use of Estimates
The preparation of financial statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company utilizes the use of estimates in its calculations for the reserve for obsolete or slow moving inventory, going concern, right of use asset, warrant liability, equity based compensation, income taxes, leases, right-of-use asset impairment, and license arrangement.
| 9 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
Revenue Recognition
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
Revenue is recognized when control of the promised goods is transferred to the customer or reseller, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue associated with products holding rights of return are recognized when the Company concludes there is not a risk of significant revenue reversal in the future periods for the expected consideration in the transaction. There are no material instances including discounts and refunds where variable consideration is constrained and not recorded at the initial time of sale. Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment when title and risk of loss pass to the customer.
The Company recognizes revenue from right-to-access license agreements upon the transfer of control to the customer. Upfront fees are deferred and recognized over the estimated period of benefit. Royalties are recognized as revenue when the customer’s underlying sales occur. The transaction price and timing of revenue recognition are adjusted as necessary to reflect changes in expectations.
The
Company may receive payments at the onset of the contract before delivery of goods for customers in the retail channel. Payment terms
for distributors and OEMs are typically due within
The
Company recognized $
On
July 29, 2024, Dragonfly Energy Corp. (“Legacy Dragonfly”), a wholly-owned subsidiary of the Company, and Battle Born Battery
Products, LLC (“Battle Born LLC”), a wholly-owned subsidiary of Legacy Dragonfly, entered into a License Agreement (the “License
Agreement”) with Stryten Energy LLC. The $
| 10 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
Disaggregation of Revenue
The following table present our disaggregated revenues by distribution channel:
| For the Three Months Ended March 31, | ||||||||
| Sales | 2026 | 2025 | ||||||
| Direct to customer | ||||||||
| Original equipment manufacture | ||||||||
| License fee revenue | ||||||||
| Total | $ | $ | ||||||
Product Warranty
The
Company offers assurance type warranties from
The following table reflects the activity in the Company’s warranty obligation for the three months ended March 31, 2026:
| March 31, 2026 | ||||
| Beginning warranty obligation | ||||
| Provision of warranty expense | ||||
| Settlement of warranty claims | ( | ) | ||
| Ending warranty obligation | $ | |||
Concentrations
As
of March 31, 2026, receivables from Customer A, Customer B, and Customer C comprised approximately
Sales
from Customer D comprised approximately
As
of March 31, 2026, payables to Vendor A and Vendor B comprised approximately
For
the three months ended March 31, 2026, Vendor A and Vendor E accounted for approximately
The Company accounts for stock based compensation arrangements with employees and non-employee consultants using a fair value method which requires the recognition of compensation expense for costs related to all stock based payments, including stock options (Note 11). The fair value method requires the Company to estimate the fair value of stock based payment awards to employees and non-employees on the date of grant using an option pricing model. Stock based compensation costs are based on the fair value of the underlying option calculated using the Black Scholes option pricing model and recognized as expense on a straight line basis over the requisite service period, which is the vesting period. Restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award. The Company measures equity-based compensation awards granted to non-employees at fair value as the awards vest and recognizes the resulting value as compensation expense at each financial reporting period.
| 11 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
Stock-Based Compensation (continued)
Determining the appropriate fair value model and related assumptions requires judgment, including estimating stock price volatility, expected dividend yield, expected term, risk free rate of return, and the estimated fair value of the underlying common stock. Due to the lack of company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the lithium ion battery industry. The Company uses the simplified method, which is the average of the final vesting tranche date and the contractual term, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The risk free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company accounts for forfeitures as they occur.
Income Taxes
On July 4, 2025, the One Big Beautiful Bill (the “OBBB”) Act was signed into law in the United States. The OBBB Act includes significant provisions, such as the permanent extension and modification of certain provisions of the U.S. Tax Cuts and Jobs Act of 2017, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions beginning in 2025 and others beginning at various dates through 2027. The Company does not expect the OBBB Act to materially impact the Company’s income tax position as of March 31, 2026.
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss earnings per share is calculated using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock.
The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and warrants.
Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss, diluted net loss per share is generally the same as basic net loss per share since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Warrants | ||||||||
| Restricted stock units | ||||||||
| Series A Preferred Stock | ||||||||
| Options | ||||||||
| Weighted average number of common shares-basic | ||||||||
Reclassifications
Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on previously reported net loss, total assets, total liabilities, stockholders’ equity, or the previously reported net decrease in cash and cash equivalents.
Segment Reporting
Operating
segments are identified (Note 12) as components of the Company for which separate discrete financial information is available
and that are regularly reviewed by the Company’s Chief Executive Officer, the chief operating decision maker, to make decisions
about resource allocation and assess performance. The Company currently manages its business through
| 12 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
Recently issued accounting pronouncements:
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires a public entity to disclose additional information about specific expense categories in the notes to the financial statements on an annual and interim basis. It is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. In January 2025, the FASB issued ASU 2025-01 to clarify that all public entities, including non-calendar year-end entities, should adopt the disclosure requirements of ASU 2024-03. The Company is currently evaluating the impact.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient related to the estimation of expected credit losses for certain financial assets measured on an amortized cost basis, including current accounts receivable and current contract assets under FASB Accounting Standards Codification 606 - Revenues from Contracts with Customers. Under the practical expedient, a public entity may assume that current conditions as of the balance sheet date remain unchanged over the remaining life of the financial asset when developing reasonable and supportable forecasts used to estimate expected credit losses. This ASU is effective for the Company on January 1, 2026, with early adoption permitted. The adoption of this new standard did not have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim disclosure requirements and the applicability of Topic 270. This ASU is effective for the Company on January 1, 2028, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
Note 3 - FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:
| ● | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or indirectly. |
| ● | Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability. |
| 13 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 3 - Fair Value Measurements (continued)
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The following table presents assets and liabilities that were measured at fair value in the Unaudited Condensed Consolidated Balance Sheets on a recurring basis as of March 31, 2026.
| Carrying Amount | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
| As of March 31, 2026 | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Warrant liability- Term Loan | $ | $ | $ | $ | $ | |||||||||||||||
| Warrant liability- June Public Offering | ||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | |||||||||||||||
The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of December 31, 2025:
| Carrying
Amount | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Warrant liability- Term Loan | $ | $ | $ | $ | $ | |||||||||||||||
| Warrant liability- June Public Offering | ||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | |||||||||||||||
The carrying amounts of accounts receivable and accounts payable are considered level 1 and approximate fair value as of March 31, 2026 and December 31, 2025 because of the relatively short maturity of these instruments.
The carrying value of the term loan as of March 31, 2026 and December 31, 2025 approximates fair value as the interest rate does not differ significantly from the current market rates available to the Company for similar debt and is considered Level 2.
There was no Level 3 activity for the three months ended March 31, 2026 and 2025.
| 14 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
Note 4 - INVENTORY
Inventory consists of the following:
March 31, 2026 | December 31, 2025 | |||||||
| Raw material | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventory | $ | $ | ||||||
Note 5 - COMMITMENTS AND CONTINGENCIES
Litigation
From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, governmental actions, administrative actions, investigations or claims are pending against the Company or involve the Company that, in the opinion of the Company’s management, could reasonably be expected to have a material adverse effect on the Company’s business and financial condition.
Operating Leases
The
Company has leases related to the main office, warehouse space, research and development lab, engineering office, and sales office, all
located in Reno, Nevada. The leases require annual escalating monthly payments ranging from $
On
May 8, 2025,
The following table presents the breakout of the operating leases as of:
March 31, 2026 | December 31, 2025 | |||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Short-term operating lease liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate | % | % | ||||||
Assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data.
At March 31, 2026, the future minimum lease payments under these operating leases are as follows:
| Fiscal Years Ending | ||||
| December 31, 2026(1) | $ | |||
| December 31, 2027 | ||||
| December 31, 2028 | ||||
| December 31, 2029 | ||||
| December 31, 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less imputed interest | ||||
| Total operating lease liabilities | $ | |||
| (1) |
| For The Three Months Ended March 31, | ||||||||||
| Lease cost | Classification | 2026 | 2025 | |||||||
| Operating lease cost | Cost of goods sold | $ | $ | |||||||
| Operating lease cost | Research and development | |||||||||
| Operating lease cost | General and administration | |||||||||
| Operating lease cost | Selling and marketing | |||||||||
| Total lease cost | $ | $ | ||||||||
All lease costs included in the schedule above are fixed.
| 15 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
Note 5 - Commitments and Contingencies (continued)
Financing Leases
The
Company entered into finance lease agreements for equipment to support the Company’s operations. Payments under the finance lease
agreements are fixed for a term of
The following table presents the breakout of the financing leases as of:
March 31, 2026 | December 31, 2025 | |||||||
| Finance lease right-of-use assets | $ | $ | ||||||
| Short-term finance lease liabilities | ||||||||
| Long-term finance lease liabilities | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate | % | % | ||||||
Assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data.
At March 31, 2026, the future minimum lease payments under these financing leases are as follows:
| Fiscal Years Ending | ||||
| December 31, 2026(1) | $ | |||
| December 31, 2027 | ||||
| December 31, 2028 | ||||
| December 31, 2029 | ||||
| Total lease payments | ||||
| Less imputed interest | ||||
| Total financing lease liabilities | $ | |||
| (1) |
Other Contingencies
In
March 2025, the Company agreed to pay LithiumHub a total of $
Note 6 - LONG TERM DEBT
Term Loan Agreement
As
of March 31, 2026 and December 31, 2025, the Company had an outstanding term loan (the “Term Loan”) under a Term Loan, Guarantee
and Security Agreement (the “Term Loan Agreement”), dated October 7, 2022, with EICF Agent LLC, as agent, and certain lenders.
As amended, the Term Loan matures on
Prior
to any amendments, the Term Loan accrued interest based on the Company’s senior leverage ratio. From inception through September
30, 2024, interest accrued at a per annum rate equal to adjusted SOFR (subject to a floor of 1.0%) plus
| 16 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
Note 6 - Long Term Debt (continued)
Term Loan Agreement (continued)
During
the three months ended March 31, 2026 and 2025, the Company recognized interest expense of $
Subsequent to the original execution of the Term Loan Agreement, the Company entered into six amendments which modified terms of the facility, including, but not limited to, interest rate mechanics, the timing of principal payments, and certain financial and operational covenants. All six amendments were in effect as of March 31, 2026.
Financial Covenants
The
Company is subject to two restrictive financial covenants, one which pertains to liquidity, requiring the Company to maintain cash and
cash equivalents equal to or greater than $
At March 31, 2026, the future debt maturities are as follows:
| Fiscal Years Ending | ||||
| December 31, 2026(1) | $ | |||
| December 31, 2027 | ||||
| Total debt | ||||
| Less: Unamortized debt issuance costs | ( | ) | ||
| Total carrying amount | ||||
| Less: Current portion of debt | ( | ) | ||
| Total long-term debt | $ | |||
| (1) |
Note 7 - RELATED PARTY
On
March 15, 2026, the Company’s executive leadership team agreed to reduce their salaries by approximately 20% for the remainder
of fiscal 2026, effective April 1, 2026. The adjusted salaries are as follows: Dr. Phares - $
In lieu of cash compensation, the executives were granted stock options under the Company’s 2022 Plan at an exercise price of $ per share: Dr. Phares - shares; Mr. Seaburg - shares; Mr. Bourns - shares; and Dr. Singh shares. The options vest in three equal annual installments beginning April 1, 2026, subject to continued service and the terms of the Plan.
Additionally,
each non-employee director agreed to a comparable 20% reduction in cash compensation for the remainder of fiscal 2026. In lieu thereof,
the directors were granted and aggregated of
Note 8 - WARRANTS
Common Stock Warrants classified as Equity
Public Warrants
The Company’s Public Warrants are classified as equity and as of March 31, 2026 and December 31, 2025, there were Public Warrants issued and outstanding.
During the three months ended March 31, 2026 and 2025, public warrants were exercised.
The following table presents a roll-forward of the Company’s equity warrants from January 1, 2026 to March 31, 2026:
| Public Warrants | Underwriters’ Warrants | Pre-Funded Underwriters’ Warrants | ||||||||||
| Warrants Outstanding, January 1, 2026 | ||||||||||||
| Exercise of warrants | ||||||||||||
| Warrants issued | ||||||||||||
| Underwriters’ Warrants Outstanding, March 31, 2026 | ||||||||||||
| 17 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
Note 8 - Warrants (Continued)
Common Stock Warrants classified as Liability
Private Placement Warrants
There were private warrants outstanding as of March 31, 2026 and December 31, 2025, respectively. The Company accounts for the Private Warrants issued in connection with the Initial Public Offering in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the private warrants do not meet the criteria for equity treatment thereunder, each private warrant must be recorded as a liability. This liability is subject to re-measurement at each balance sheet date.
With each such re-measurement, the warrant liabilities will be adjusted to its current fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date.
The Private Placement Warrants are classified as Level 2 within the fair value hierarchy. Although these instruments are not actively traded, they are valued based on observable inputs, including the market price of the Company’s publicly traded warrants. The Company used a Black-Scholes model to estimate the fair value of the Private Placement Warrants, applying a discount to the value of the Public Warrants to account for the difference in remaining life. Because the valuation primarily relies on observable market data with limited adjustments, the Company determined that classification within Level 2 is appropriate.
Term Loan Warrants
In
connection with the entry into the Term Loan Agreement on October 7, 2022, and as a required term and condition thereof,
On
February 26, 2025, the Company entered into the Fifth Amendment to the Term Loan with the Term Loan Lenders in connection with the February
2025 securities purchase agreement (see Note 8). The Fifth Amendment provided for a one-time issuance the February 2025 Penny
Warrants to purchase up to
During the three months ended March 31, 2026, Original Penny Warrant holders exercised warrants on a cashless basis, with the Company agreeing to issue shares of Common Stock in connection with such exercise.
| May
2024 penny warrants | June
2024 penny warrants | September
2024 penny warrants | December
2024 penny warrants | February
2025 penny warrants | ||||||||||||||||
| Stock price | $ | $ | $ | $ | $ | |||||||||||||||
| Strike price | $ | $ | $ | $ | $ | |||||||||||||||
| Term | years | years | years | years | years | |||||||||||||||
| Volatility | % | % | % | % | % | |||||||||||||||
| Risk-free rate | % | % | % | % | % | |||||||||||||||
The Company concluded the Penny Warrants are not considered indexed to the Company’s Common Stock and to be accounted for as liabilities under ASC 815. As such, the estimated fair value is recognized as a liability each reporting period, with changes in the fair value recognized within income each period. There were no Term Loan Warrants outstanding prior to the merger.
| 18 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
Note 8 - Warrants (continued)
Common Stock Warrants classified as Liability (Continued)
Term Loan Warrants (continued)
As
of | As
of December 31, 2025 | |||||||
| Common stock price | $ | $ | ||||||
| Exercise price | ||||||||
| Dividend yield | % | % | ||||||
| Term | - | - | ||||||
| Volatility | % | % | ||||||
| Risk-free rate | % - | % | % - | % | ||||
| Fair value | $ | $ | ||||||
The following table provides the significant inputs to the Black-Scholes method for the fair value of the Investor Warrants issued in the June 2023 Offering:
As
of | As
of December 31, 2025 | |||||||
| Common stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Dividend yield | % | % | ||||||
| Term | ||||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Fair value | $ | $ | ||||||
| Private Warrants | Term
Loan Warrants | Investor
Warrants | ||||||||||
| Warrants Outstanding, January 1, 2026 | ||||||||||||
| Exercise of warrants | ( | ) | ||||||||||
| Warrants issued | ||||||||||||
| Warrants Outstanding, March 31, 2026 | ||||||||||||
| 19 |
DRAGONFLY ENERGY HOLDINGS CORP.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
NOTE 9 - REDEEMABLE PREFERRED STOCK
Series B Convertible Preferred Stock
The
Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) was issued in connection with the Sixth
Amendment to the Term Loan entered into on October 20, 2025, pursuant to which $
Each
share of Series B Preferred Stock is convertible, at the holder’s option beginning six months after the original issuance date,
into shares of the Company’s common stock at a fixed conversion price of $
The Company evaluated the Series B Preferred Stock under ASC 480, Distinguishing Liabilities from Equity, and concluded it is not a liability because it is not mandatorily redeemable and does not otherwise meet the definition of a liability. The host contract was determined to be more akin to debt for purposes of ASC 815, Derivatives and Hedging; the conversion feature is not clearly and closely related to the host but qualifies for the equity classification scope exception because the conversion price is fixed and the instrument is indexed to the Company’s own stock. Because certain redemption rights are not solely within the Company’s control, the Series B Preferred Stock is presented as temporary equity and initially measured at fair value. The carrying amount is being accreted to the redemption value over the expected term, and dividends (cash and paid-in-kind) are recognized as preferred dividends.
For
the three months ended March 31, 2026, the Company recognized accreted dividends of $
Note 10 - COMMON STOCK
Common stockholders are entitled to dividends if and when declared by the Board of Directors subject to the rights of the preferred stockholders. No dividends on common stock had been declared by the Company.
On
January 30, 2026, the Company entered into an Equity Distribution Agreement with Canaccord Genuity LLC, as lead agent and representative
of the other sales agents, establishing an at-the-market offering program under which the Company may, from time to time and at its discretion,
offer and sell up to $
For the three months ended March 31, 2026 and 2025, the Company had reserved shares of common stock for issuance as follows:
| March 31, 2026 | March 31, 2025 | |||||||
| Options issued and outstanding | ||||||||
| Common stock outstanding | ||||||||
| Warrants outstanding | ||||||||
| Earnout shares | ||||||||
| Series A Preferred Stock outstanding | ||||||||
| Shares available for future issuance | ||||||||
| Total | ||||||||
| 20 |
Dragonfly Energy Holdings Corp.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
On October 15, 2025 at the 2025 Annual Meeting of Stockholders (the “Annual Meeting”) of the Company, the Company’s stockholders approved an amendment (the “Plan Amendment”) to the Company’s 2022 Equity Incentive Plan (the “2022 Plan”) increasing the number of shares available for issuance under the 2022 Plan by shares. The Plan Amendment became effective following its approval by the Company’s stockholders.
The Company maintains the Dragonfly Energy Holdings Corp. Employee Stock Purchase Plan (the “ESPP”) which is designed to allow eligible employees and the eligible employees of the Company’s participating subsidiaries to purchase shares of the Company’s common stock, at semi-annual intervals, with their accumulated payroll deductions. A total of shares of the Company’s common stock were initially available for issuance under the ESPP. .
The Company maintains the Dragonfly Energy Corporation, Inc. Employee Stock Purchase Plan which permits eligible employees to purchase shares at not less than 85% of the market value of the Company’s common stock on the offering date or the purchase date of the applicable offering period, whichever is lower. The plan was adopted by the Company’s Board of Directors on May 13, 2022.
During the three months ended March 31, 2026 and 2025, the Company did not issue any shares of common stock under the ESPP.
| Number
of Options | Weighted-Average Exercise Price | Weighted-Average Grant Date Fair Value | Weighted-Average
Remaining Contractual Life (in years) | Aggregate intrinsic value | ||||||||||||||||
| Balances, January 1, 2026 | $ | $ | $ | |||||||||||||||||
| Options granted | ||||||||||||||||||||
| Options forfeited | ( | ) | - | |||||||||||||||||
| Options expired | ( | ) | - | |||||||||||||||||
| Balances, March 31, 2026 | $ | $ | $ | |||||||||||||||||
| At March 31, 2026 | ||||||||||||||||||||
| Vested and Exercisable | $ | $ | ||||||||||||||||||
| Vested and expected to vest | $ | $ | ||||||||||||||||||
During the three months ended March 31, 2026, the Company issued stock options. During the three months ended March 31, 2025, the Company did t issue any stock options.
Share-based compensation expense for options and RSUs totaling $ and $ was recognized in the Company’s consolidated statements of operations for the three months ended March 31, 2026 and 2025, respectively.
| 21 |
Dragonfly Energy Holdings Corp.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
Note 11 - Stock-Based Compensation (continued)
Of the $ of share-based compensation incurred during the three months ended March 31, 2026, $ is allocated to cost of goods sold, $ to research and development, $ to selling and marketing, and $ to general and administrative expenses. Of the $ of share-based compensation incurred during the three months ended March 31, 2025, $is allocated to cost of goods sold, $ to research and development, $ to selling and marketing, and $ to general and administrative expenses.
The valuation methodology used to determine the fair value of the options issued during the year was the Black Scholes option pricing model. The Black Scholes model requires the use of a number of assumptions including volatility of the stock price, the fair value of the underlying stock, the average risk free interest rate, and the weighted average expected life of the options. The expected term was estimated using the simplified method due to lack of sufficient history of option exercises.
| March 31, 2026 | ||||
| Weighted average fair value of options granted | $ | |||
| Risk-free interest rate | % | |||
| Volatility | % | |||
| Expected life (years) | ||||
| Dividend yield | % | |||
Restricted Stock Units
The following table presents the restricted stock units activity for the three months ended March 31, 2026:
| Number of Shares | Weighted-Average Fair Market Value | |||||||
| Unvested shares, January 1, 2026 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Unvested shares, March 31, 2026 | $ | |||||||
As of March 31, 2026 and 2025 there were and shares, respectively, of unissued authorized and available for future awards under the 2022 Equity Incentive Plan and Employee Stock Purchase Plan.
Note 12 - REPORTABLE SEGMENTS
The
Company has
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance for all of its reportable segments based on both segment gross and net profit or loss from operations.
For the DTC and OEM, the Chief Operating Decision Maker (“CODM”) uses both segment gross and net profit and loss from operations to allocate resources (including employees, property, and financial or capital resources) for each segment predominantly in the annual budget and forecasting process.
Assets information for the reported segments is not disclosed as it is not used by the Chief Operating Decision Maker CODM in evaluating the performance of, or making decisions about, the reported segments.
The Company’s reportable segments are strategic business units that offer different branded products. They are managed separately because each segment requires different technology and marketing strategies.
The Company’s CODM is the Chief Executive Officer.
| 22 |
Dragonfly Energy Holdings Corp.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
Note 12 - Reportable Segments (continued)
The following table presents the reportable segments information for the three months ended March 31, 2026:
| DTC | OEM | Other | Total | |||||||||||||
| Net Sales | $ | $ | $ | (1) | $ | |||||||||||
| Reconciliation of Net Sales | ||||||||||||||||
| Reconciling items | ||||||||||||||||
| Consolidated Net Sales | $ | |||||||||||||||
| Direct material | ||||||||||||||||
| Direct labor | ||||||||||||||||
| Direct overhead and depreciation | ||||||||||||||||
| Total Cost of Goods Sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Research & development | (2) | |||||||||||||||
| Credit card & amazon transaction fees | ||||||||||||||||
| Other general & administrative | (3) | |||||||||||||||
| Shipping | ||||||||||||||||
| Sales and marketing stock compensation | ||||||||||||||||
| Sales and marketing wages | ||||||||||||||||
| Marketing spend | ||||||||||||||||
| Rent | ||||||||||||||||
| Unallocated sales and marketing stock compensation | (4) | |||||||||||||||
| Unallocated sales and marketing wages | (4) | |||||||||||||||
| Other sales & marketing | (4) | |||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ||||||||||||
| Change in FMV of warrant liability | ||||||||||||||||
| Total Other Income (Expense) | ( | )(5) | ( | ) | ||||||||||||
| Net Loss Before Taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income Tax Benefit | ||||||||||||||||
| Net Income (Loss) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Reconciliation of net loss | ||||||||||||||||
| Reconciling items | ||||||||||||||||
| Consolidated net loss | $ | ( | ) | |||||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) |
There were no significant customer revenues from the Company’s DTC segment for the three months ended March 31, 2026.
Revenues
from one customer of the Company’s OEM segment represents approximately $
| 23 |
Dragonfly Energy Holdings Corp.
Notes to UNAUDITED CONDENSED Consolidated Financial Statements
(in thousands, except share and per share data)
Note 12 - Reportable Segments (continued)
The following table presents the reportable segments information for the three months ended March 31, 2025:
| DTC | OEM | Other | Total | |||||||||||||
| Net Sales | $ | $ | $ | (1) | $ | |||||||||||
| Reconciliation of Net Sales | ||||||||||||||||
| Reconciling items | ||||||||||||||||
| Consolidated Net Sales | $ | |||||||||||||||
| Direct material | ||||||||||||||||
| Direct labor | ||||||||||||||||
| Direct overhead and depreciation | ||||||||||||||||
| Total Cost of Goods Sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Research & development | (2) | |||||||||||||||
| Sales tax adjustment | ||||||||||||||||
| Credit card & amazon transaction fees | ||||||||||||||||
| Other general & administrative | (3) | |||||||||||||||
| Shipping | ||||||||||||||||
| Sales and marketing stock compensation | ||||||||||||||||
| Sales and marketing wages | ||||||||||||||||
| Marketing spend | ||||||||||||||||
| Rent | ||||||||||||||||
| Unallocated sales and marketing stock compensation | (4) | |||||||||||||||
| Unallocated sales and marketing wages | (4) | |||||||||||||||
| Other sales & marketing | (4) | |||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||||||
| Interest expense, net | ( | ) | ( | ) | ||||||||||||
| Change in FMV of warrant liability | ||||||||||||||||
| Total Other Income (Expense) | ( | )(5) | ( | ) | ||||||||||||
| Net Loss Before Taxes | ( | ) | ( | ) | ||||||||||||
| Income Tax Benefit | ||||||||||||||||
| Net Income (Loss) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Reconciliation of net loss | ||||||||||||||||
| Reconciling items | ||||||||||||||||
| Consolidated net loss | $ | ( | ) | |||||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) |
There were no significant customer revenues from the Company’s DTC segment for the three months ended March 31, 2025.
Revenues
from one customer of the Company’s OEM segment represents approximately $
Note 13 - SUBSEQUENT EVENTS
Subsequent to March 31, 2026, the remaining outstanding penny warrants of warrants were exercised in full on a cashless basis, resulting in the issuance of shares of common stock.
Subsequent to March 31, 2026, the Company issued and
sold approximately shares of common stock under the Equity Distribution Agreement with Canaccord Genuity LLC, resulting in additional
net cash proceeds of approximately $
| 24 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to Dragonfly Energy Holdings Corp., a Nevada corporation. References to “Legacy Dragonfly” refer to Dragonfly Energy Corp., a Nevada corporation and one of our wholly-owned subsidiaries. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report and with our audited consolidated financial statements (and notes thereto) for the year ended December 31, 2025 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2026 (the “Annual Report”), particularly those under “Risk Factors.” This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.
Cautionary Note Regarding Forward Looking-Statements
This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future.
| 25 |
There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
| ● | our ability to service our outstanding indebtedness and comply with the financial covenants in our loan agreement, the failure of which could allow our lenders to accelerate payment under our loan agreement, which would have a material adverse effect on our ability to operate and could require us, among other things, to reduce operations, sell off our assets, seek the protection of bankruptcy courts or shut down our operations and dissolve; |
| ● | the potential impact of the conversion and the terms of our outstanding Series B Convertible Stock (the “Series B Preferred Stock”) on the market price of our common stock and our ability to redeem and make dividend payments with respect to our Series B Preferred Stock; |
| ● | our ability to raise additional capital to fund our operations; |
| ● | our ability to successfully increase market penetration into target markets; |
| ● | our ability to maintain the listing of our common stock and public warrants on the Nasdaq Capital Market; |
| ● | the addressable markets that we intend to target do not grow as expected; |
| ● | the potential for events or circumstances that result in our failure to timely achieve the anticipated benefits of our customer arrangements, including with Stevens Transport; |
| ● | our ability to generate revenue from future product sales in our existing markets or new markets that we enter, including the trucking and industrials markets, and our ability to achieve and maintain profitability; |
| ● | the loss of any members of our senior management team or other key personnel; |
| ● | the loss of any relationships with key suppliers, including suppliers in China; |
| ● | the loss of any relationships with key customers; |
| ● | our ability to protect our patents and other intellectual property; |
| ● | our ability to engage target customers and successfully retain these customers for future orders; |
| ● | the failure to successfully optimize solid-state cells or to produce commercially viable solid-state cells in a timely manner or at all, or to scale to mass production; |
| ● | the failure to produce lithium battery cells in the United States in a timely manner or at all, or to scale to mass production; |
| ● | the outcome of pending litigation and potential product liability claims; |
| ● | the failure to timely achieve the anticipated benefits of our licensing arrangement with Stryten Energy LLC (“Stryten”); |
| ● | changes in applicable laws or regulations, including changes in the rates of tariffs or any adjustments to the amounts payable by us to customs as a result of improperly identifying the applicable tariff rate payable on our products; |
| ● | the possibility that we may be adversely affected by other economic, business and/or competitive factors (including an economic slowdown or inflationary pressures); |
| ● | our ability to sell the desired amounts of shares of common stock at desired prices under our committed equity facility; |
| ● | the accuracy of our projections and estimates regarding our expenses, capital requirements, cash utilization, and need for additional financing; |
| ● | developments relating to our competitors and our industry; |
| ● | the reliance on two suppliers for our lithium iron phosphate cells and a single supplier for the manufacture of our battery management system; |
| ● | our current dependence on one manufacturing facility; and |
| ● | the potential impact of global and macroeconomic conditions, including economic, political and social instability, including the Russia-Ukraine conflict, the India-Pakistan conflict, Hamas’ attack on Israel and the Iranian conflict, and their effects on our operations. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements. Please see “Part I-Item 1A-Risk Factors” of our Annual Report and in this Quarterly Report for additional risks which could adversely impact our business and financial performance.
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Quarterly Report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.
| 26 |
Overview
Our Business
We are a manufacturer of non-toxic deep cycle lithium-ion batteries that caters to customers in the consumer industry (including the recreational vehicle (“RV”), marine vessel, solar and off-grid residence industries), and trucking, industrial and energy storage markets, with proprietary, patented and disruptive battery cell manufacturing and non-flammable solid-state cell technology currently under development.
Since 2020, we have sold over 382,000 batteries. For the quarters ended March 31, 2026, and March 31, 2025, we sold 5,783 and 10,845 batteries, respectively, and had $9.7 million and $13.4 million in net sales, respectively. We currently offer several lines of batteries across our two brands, each differentiated by size, power and capacity, consisting of seven different models, which come with an option for internal heat for cold temperature operation or an option for wireless communication using our Dragonfly IntelLigence feature. As a result of changes to our marketing focus and corporate objectives, we are focusing our selling efforts of “Battle Born” branded batteries primarily to original equipment manufacturers (“OEMs”) as well as directly to consumers (“DTC”).
Our decrease in sales was primarily attributable to RV OEM customers right sizing inventory levels in response to a slower-than-anticipated market recovery, as reflected in RVIA shipment data for the quarter, as well as overall macroeconomic conditions. DTC sales declined due to macroeconomic pressures on consumer demand. In addition, during the quarter, we experienced increased negative third-party online commentary regarding some of our products, which may have impacted customer sentiment and contributed to variability in demand. We expect our sales to increase in the next 12 months as our customers expand the number of models they include our battery systems in for the new model year and our entrance into new markets, trucking and industrials, with new product offerings.
During the first quarter of 2026, we continued to implement our corporate optimization initiative, prioritizing product development to drive near term revenue and profit. For instance, this strategic shift is accelerating our development of purpose-built solutions for the trucking and industrial markets, resulting in the recent launch of our Battle Born DualFlow Power Pack, a practical, cost-effective hybrid electrification solution for the trucking industry. Subsequent to first quarter end, we received a purchase order from Stevens Transport valued in excess of $3 million for approximately 500 trucks, representing one of the largest single-fleet deployments of our heavy-duty trucking solutions to date and spanning our full product portfolio.
In addition, in April 2026, we announced we have received an allowance from the Japan Patent Office for our application titled “Powderized Solid-State Electrolyte and Electroactive Materials.” This marks our first patent application allowance in Japan and covers innovations in powderized solid-state electrolyte and electroactive materials, a core component of our solid-state battery development and dry electrode manufacturing platform.
We currently source the lithium iron phosphate (“LFP”) cells incorporated into our batteries from a limited number of carefully selected suppliers that can meet our demanding quality standards and with whom we have developed long-term relationships.
To supplement our battery offerings, we are also a reseller of accessories for battery systems. These include chargers, inverters, monitors, controllers and other system accessories from brands such as Victron Energy, Progressive Dynamics, Magnum Energy and Sterling Power. Pursuant to the Asset Purchase Agreement dated April 22, 2022 by and among us and Thomason Jones Company, LLC (“Thomason Jones”) and the other parties thereto, we also acquired the assets, including the Wakespeed Offshore brand (“Wakespeed”) of Thomason Jones, allowing us to include our own alternator regulator in systems that we sell.
In addition to our conventional LFP batteries, we have been developing proprietary dry electrode cell manufacturing processes and solid-state cell technology. We believe that our solid-state technology design allows for a much safer, more efficient battery cell that we believe will be a key differentiator in the energy storage market.
In July 2023, we completed the construction of our proprietary and patented cell electrode manufacturing pilot line. Our patented dry deposition process is chemistry agnostic - meaning it can produce battery cells across a variety of chemistries - and is less capital intensive, uses less energy, and can produce cells in a smaller manufacturing footprint, leading to a lower total cost of manufacturing. In August 2023, we successfully demonstrated the ability to produce anode material at scale using this manufacturing process and did the same with cathode material in October 2023. We have since produced sample cells using PFAS-free binders and automotive-grade electrode loadings and C-rates, and are now working on the design and deployment of scaled-up coating equipment that can be applied to a GWh-scale factory, reflecting the shift in industry priorities from cell performance to cost-effective scalability.
| 27 |
As of March 31, 2026, we had cash totaling $8.6 million. Our net loss for the quarter ended March 31, 2026 was $6.6 million and our net loss for the quarter ended March 31, 2025 was $6.8 million. As discussed under “-Liquidity and Capital Resources” below we expect that we will need to raise additional funds, including through the use of the ATM (as defined below) and the issuance of equity, equity-related or debt securities or by obtaining additional credit from financial institutions to fund, together with our principal sources of liquidity, ongoing costs. If such financings are not available, or if the terms of such financings are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, including not seeking potential acquisition opportunities, eliminating redundancies, or reducing or delaying our production facility expansions, reduce operations, sell off our assets, seek the protection of bankruptcy courts or shut down our operations and dissolve.
License Agreement with Stryten
On July 29, 2024, Legacy Dragonfly and Battle Born Battery Products, LLC (“Battle Born LLC”), a wholly-owned subsidiary of Legacy Dragonfly, entered into a License Agreement (the “License Agreement”) with Stryten. Pursuant to the License Agreement, Battle Born LLC granted Stryten an exclusive, worldwide license to use certain trademarks relating to Legacy Dragonfly’s lithium-ion battery brand, Battle Born Batteries® (the “Licensed Trademarks”) for business-to-business sales of batteries to customers within the following markets: (i) automative, (ii) marine, (iii) powersports, (iv) lawn and garden, (v) golf cart, and (vi) military and defense (such industries, the “Stryten Market”). In exchange for the licensing rights, Stryten agreed to pay Battle Born LLC an initial licensing fee of five million dollars ($5,000,000) (the “Initial Licensing Fee”), which was paid on August 29, 2024.
The License Agreement provides for mid-single digit royalty payments based on net sales using the Licensed Trademarks, with a tiered structure reaching up to twenty-five million dollars ($25,000,000), at which point Stryten will be required to pay a nominal annual license fee. Additional fees will apply for battery design and contract manufacturing services outside of the License Agreement. The License Agreement is perpetual in term, unless terminated by: (i) Battle Born LLC if Stryten fails to pay the royalty payments required by the License Agreement and such royalty payments remain unpaid thirty (30) days after notice of such overdue payments (provided that Battle Born LLC uses reasonable efforts to discuss such overdue payments with Stryten), or (ii) either party (x) if the other party materially breaches the License Agreement and fails to cure such material breach within thirty (30) days of notice of such breach, (y) upon the occurrence of certain bankruptcy-related events, or (z) under certain circumstances, if the aggregate royalty payments received by Battle Born LLC under the License Agreement are less than fifteen million dollars ($15,000,000) after five (5) years.
Earnout Merger Consideration
In addition to the initial merger consideration in connection with our business combination in October of 2022, up to 444,445 additional shares of common stock (“Earnout Shares”) may be issued based on achieving specified milestones in three tranches:
| 1. | First Tranche (166,667 shares): Issuable if 2023 total audited revenue is at least $250 million and audited operating income is at least $35 million. This milestone was not achieved for 2023. |
| 2. | Second Tranche (138,889 shares): Issuable if the volume-weighted average trading price of common stock reaches $2,025.00 over any 20 trading days within a 30-day period, on or before December 31, 2026. |
| 3. | Third Tranche (138,889 shares): Issuable if the volume-weighted average trading price of common stock reaches $2,925.00 over any 20 trading days within a 30-day period, on or before December 31, 2028. |
If a change of control occurs during the second or third earnout periods, unachieved milestones will be automatically deemed satisfied if the share price at the time of the transaction meets or exceeds $2,025.00 for the second period or $2,925.00 for the third period.
February 2025 Registered Direct Offering and Concurrent Private Placement, Fifth Amendment to Term Loan Agreement and April 2025 Private Placement
On February 26, 2025, we entered into a securities purchase agreement with a single institutional investor, pursuant to which we sold in a registered direct offering (the “Registered Direct Offering”) 18 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”), at a price of $100,000 per share, initially convertible into shares of our common stock, at a conversion price of $23.32 per share of common stock. The Series A Preferred Stock was also convertible by the investor at an adjusted conversion price, subject to the applicable floor price.
| 28 |
Concurrently with the sale of the Series A Preferred Stock in the Registered Direct Offering, in a private placement offering pursuant to the Purchase Agreement (the “Private Placement” and, together with the Registered Direct Offering, the “Offerings”), we sold, at the initial closing of the Private Placement (the “Initial Closing” and, together with the Registered Direct Offering, the “Initial Offerings”), (i) an additional 17 shares of Series A Preferred Stock at the same offering price as the Series A Preferred Stock offered in the Registered Direct Offering, initially convertible into shares of common stock at a conversion price of $23.32 per share, and (ii) warrants (the “Private Placement Convertible Preferred Warrants”) to purchase up to an aggregate of 400 shares of Series A Preferred Stock (the “Private Placement Warrant Shares”), with an exercise price of $100,000 per share of Series A Preferred Stock, and a term as described below.
The exercise price under each Private Placement Convertible Preferred Warrant was $100,000 per share of Series A Preferred Stock. Each Private Placement Convertible Preferred Warrant was exercisable for 20 shares of Series A Preferred Stock in minimum increments of $500,000. The Private Placement Convertible Preferred Warrants had a term beginning on the issuance date and ending on or prior to the earlier of (i) the thirty-three (33) month anniversary of the date the shares of common stock issued or issuable upon the conversion of the Series A Preferred Stock issued in the concurrent Private Placement were registered for resale (“Registration Effectiveness”) pursuant to an effective registration statement under the Securities Act of 1933, as amended, (the “Securities Act”) (such date, the “Registration Effectiveness Date”) and (ii) (A) the consummation of a Change of Control (as defined in the certificate of designation) and (B) the consummation of a redemption of the then outstanding Series A Preferred Stock in full. The exercise price and number of shares of Series A Preferred Stock issuable upon exercise was subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of our common stock.
On April 28, 2025, pursuant to the Purchase Agreement, we sold to the Purchaser, in the second closing of the Private Placement (the “Second Closing”) 45 Preferred Shares at a price of $100,000 per share, initially convertible into shares of common stock at a conversion price of $5.95 per share, subject to adjustment.
The net proceeds to us from the Initial Offerings and the Second Offering, after deducting the placement agent’s fees and expenses and estimated offering expenses, were approximately $3.2 million and $4.2 million, respectively, excluding the net proceeds, if any, from the exercise of the Private Placement Convertible Preferred Warrants.
As a condition precedent to the closing of the Initial Offerings, on February 26, 2025, we entered into the Fifth Amendment (the “Fifth Amendment”) to the Term Loan Agreement with the Term Loan Lenders. Under the Fifth Amendment, the Term Loan Lenders agreed to, among other matters (i) receive no principal or interest payments under the Term Loan Agreement through March 31, 2026, and (ii) remove certain financial covenant tests under the Term Loan, provided that we maintain cash and cash equivalents equal to at least $2.5 million through such date.
On June 23, 2025, we and the holder of Private Placement Convertible Preferred Warrants agreed to cancel such holder’s Private Placement Convertible Preferred Warrants to purchase up to an aggregate of 400 shares of Series A Preferred Stock, with an exercise price of $100,000 per share of Series A Preferred Stock. As a result, the Private Placement Convertible Preferred Warrants are no longer outstanding.
On July 20, 2025, we entered into a Settlement and Release Agreement (the “Release Agreement”) with the holder of the outstanding shares of Series A Preferred Stock. Pursuant to the terms of the Release Agreement, we issued and delivered 210,000 shares of common stock to the holder and the holder surrendered to us all of the outstanding shares of Series A Preferred Stock. In addition, under the Release Agreement, upon the issuance of the shares of common stock, our obligations under the Purchase Agreement, the Certificate of Designation governing the Series A Preferred Stock and the other agreements entered into in connection with the offering of the Series A Preferred Stock were satisfied in full and the Purchase Agreement and the other agreements were deemed terminated and any remaining shares of Series A Preferred Stock that were outstanding or deemed to be outstanding were deemed cancelled and no longer outstanding. We have no further obligation to issue any shares of common stock or Series A Preferred Stock to the holder under the Purchase Agreement or otherwise. Under the Release Agreement, each party also provided a full release to the other party.
| 29 |
July 2025 Offering
On July 30, 2025, we entered into an underwriting agreement with Canaccord Genuity LLC (“Canaccord”), as representative of the several underwriters named in the certain underwriting agreement, relating to an underwritten public offering (the “July 2025 Public Offering”) of 2,198,000 shares of common stock, at a price to the public of $2.50 per share. On July 31, 2025, we completed the July 2025 Public Offering raising gross proceeds of approximately $5.5 million and net proceeds of $4.7 million after deducting underwriting discounts and commissions and other estimated offering expenses payable by us.
October 2025 Offerings
On October 6, 2025, we entered into an underwriting agreement with Canaccord, as representative of the several underwriters (the “First Offering Underwriters”) named in the underwriting agreement dated October 6, 2025, relating to an underwritten public offering (the “First October 2025 Offering”) of 2,000,000 shares of common stock at a price to the public of $12.50 per share, which includes the First Offering Underwriters’ option to purchase an additional 300,000 shares of common stock, at a public offering price of $12.50 per share. On October 8, 2025, we completed the First October 2025 Offering, including the full exercise of the additional 300,000 shares of common stock, raising gross proceeds of approximately $28.8 million and net proceeds of $26.9 million after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. On October 8, 2025 upon a request from our Term Loan Lenders under the term loan agreement, we repaid $4.0 million of principal to satisfy a portion of its outstanding principal under the Term Loan Agreement.
On October 16, 2025, we entered into an additional underwriting agreement with Canaccord, as representative of the several underwriters (the “Second Offering Underwriters”) named in the underwriting agreement, dated October 17, 2025 (the “Second Offering Underwriting Agreement”), relating to an underwritten public offering (the “Second October 2025 Offering”) of 3,600,000 shares of common stock at a price to the public of $13.50 per share, and (ii) prefunded warrants (the “October 2025 Pre-Funded Warrants”) to purchase up to 500,000 shares of common stock (the “Pre-Funded Warrant Shares”) at a price to the public of $13.50 per October 2025 Pre-Funded Warrant, which represents the per share public offering price for the Shares (as defined below) less the $0.001 per share exercise price for each such Pre-Funded Warrant.
Sixth Amendment to Term Loan, Series B Preferred Stock Issuance and 2025 Debt Restructuring
On October 20, 2025, we entered into the Sixth Amendment to the Term Loan Agreement with the Term Loan Lenders to, among other matters, (i) adjust the fixed interest rate of the remaining outstanding principal amount under the Term Loan Agreement to a fixed interest rate of 12% per annum, payable monthly commencing December 31, 2025 that will mature in October 2027, and (ii) waive any applicable financial covenants (except for a financial covenant requiring us to maintain cash and cash equivalents equal to or greater than $5.0 million) through December 31, 2026. In connection with the Sixth Amendment, (i) we made a prepayment of $45.0 million of outstanding indebtedness under the Term Loan Agreement from the net proceeds from the Second October 2025 Offering (the “Loan Prepayment”), (ii) the Term Loan Lenders forgave the repayment of $5.0 million of the outstanding principal under the Term Loan Agreement, (iii) we paid a fee to the Term Loan Lenders equal to approximately $450,000 in cash and $450,000 added to principal outstanding amount of the loan under the Term Loan Agreement; and (iv) we issued 25,000 shares of Series B Preferred Stock in exchange for $25.0 million outstanding principal amount of the Term Loan. The remaining outstanding principal amount under the Term Loan Agreement of approximately $19.0 million, after the repayment and forgiveness disclosed above, will have a fixed interest rate of 12% per annum, payable monthly commencing December 31, 2025 and will mature in October 2027. In addition, certain covenants under the Term Loan Agreement have been waived through December 31, 2026, and we have agreed to a minimum liquidity covenant of $5.0 million calculated on a monthly basis.
On November 4, 2025, we filed a Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Restrictions of Series B Convertible Preferred Stock (the “Series B Certificate of Designation”) with the Secretary of State of the State of Nevada to establish the rights, privileges, preferences, and restrictions of the Series B Preferred Stock. As set forth in the Certificate of Designation, we designated 25,000 shares of preferred stock as Series B Preferred Stock with a stated value of $1,000 per share. The Series B Preferred Stock is convertible into shares of common stock at the option of the Term Lenders at a conversion price of $31.50 per share, or an aggregate of 793,651 shares of common stock.
| 30 |
On November 4, 2025, we entered into the Exchange Agreement with the Term Loan Lenders pursuant to we issued 25,000 shares of newly created Series B Preferred Stock in exchange for $25.0 million outstanding principal amount of the Term Loan. The Series B Preferred Stock (i) is convertible into shares of common stock at the option of the Term Loan Lenders at a conversion price of $31.50 per share, or an aggregate of 793,651 shares of common stock, (ii) has a dividend of 8% per annum payable quarterly in cash and (iii) has a dividend of 2% per annum payable quarterly in kind (“PIK Dividends”), which includes the aggregate amount of all paid PIK Dividends and any accrued and unpaid PIK Dividends on the applicable dividend date. In addition, we have a right to redeem any outstanding shares of the Series B Preferred Stock at our option at the greater of (i) the stated value plus any outstanding dividends and (ii) the as-converted value of the shares of common stock underlying the Series B Preferred Stock (the “Optional Redemption Price”). The Term Loan Lenders have also agreed not to convert any shares of the Series B Preferred Stock for a period of six months following the issuance of the Series B Preferred Stock. In connection with any future equity offerings, we will be required to use 50% of the net proceeds from such offering to redeem outstanding shares of the Series B Preferred Stock at the Optional Redemption Price. In the event we have not redeemed the outstanding shares of Series B Preferred Stock by October 7, 2027 or upon the occurrence of a Non-Payment Event (as defined in the Series B Certificate of Designation), the holders will have the right to require us to redeem the Series B Preferred Stock at the Optional Redemption Price.
Equity Distribution Agreement
In January 2026, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”) under which we may offer and sell, from time to time, shares of our common stock through an at-the-market equity offering program (the “ATM”) for up to $50.0 million in gross proceeds. Subject to the terms and conditions of the Equity Distribution Agreement, Canaccord will use commercially reasonable efforts to sell shares of our common stock from time to time based upon our instructions, including any price, time or size limits specified by us. We are not obligated to sell any shares of common stock under the Equity Distribution Agreement. We will pay Canaccord a commission of 3.0% of the aggregate gross proceeds from each sale of shares of common stock and will reimburse Canaccord for certain specified expenses. As of March 31, 2026, we have not sold any shares of our common stock pursuant to the ATM. Subsequent to March 31, 2026, we have sold 379,700 shares of common stock for aggregate net proceeds of approximately $0.8 million.
Key Factors Affecting Our Operating Results
Our financial position and results of operations depend to a significant extent on the following factors:
End Market Consumers
The demand for our products ultimately depends on demand from consumers in our current end markets. We generate sales through (1) DTC and (2) through OEMs, particularly in the RV market. As our business has evolved, our growth strategy has increasingly shifted toward OEM, fleet, and industrial channels, where we can deliver integrated energy storage solutions at scale.
An increasing proportion of our sales has been and is expected to continue to be derived from sales to RV OEMs, driven by continued efforts to develop and expand sales to RV OEMs with whom we have longstanding relationships. Our RV OEM sales have been on a purchase order basis, without firm revenue commitments, and we expect that this will likely continue to be the case. Therefore, future RV OEM sales will be subject to risks and uncertainties, including the number of RVs these OEMs manufacture and sell, which in turn may be driven by the expectations these OEMs have around end market consumer demand.
| 31 |
Demand from end market consumers is impacted by a number of factors, including travel restrictions, fuel costs and energy demands (including an increasing trend towards the use of green energy), as well as overall macro-economic conditions and inflation. Sales of our batteries have benefited from the increased adoption of the RV lifestyle, the demand for and inclusion of additional appliances and electronics in RVs, and the accelerating trend of solar power adoption among RV customers. However, macro-economic conditions and increased competition from imported battery packs have led to a decrease in direct to consumer sales. We have focused on product diversification, including the introduction of batteries equipped with our Dragonfly IntelLigence technology and the expansion of complementary system components that support integrated power solutions across our end markets. We expect that direct to consumer sales will remain relatively flat through 2026. However, we expect growth among our existing RV OEM customers to be driven by expanded adoption of our products across additional models and configurations, as well as increased system content per unit, rather than solely by changes in overall RV shipment volumes. In addition, we anticipate increased revenue from continued expansion within existing customer relationships across other end markets, including industrial and commercial energy storage applications and the heavy-duty trucking market, where fleet customers have begun to adopt our systems and expand deployments following initial pilot programs.
Supply
We currently rely on two carefully selected cell manufacturers located in China, and a single supplier, also located in China, to manufacture our proprietary battery management system. Our close working relationships with our China-based LFP cell suppliers, reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts) and order and receive delivery of cells in anticipation of required demand, has helped us moderate increased supply-related costs associated with inflation, currency fluctuations and U.S. government tariffs imposed on our imported battery cells and to avoid potential shipment delays. To mitigate against potential adverse production events, we opted to build our inventory of key components, such as battery cells. However, as many of the supply chain challenges and delays that were prevalent over the last several years have eased, we are actively working down our inventory to more appropriate safety stock levels.
As a result of our battery chemistry and active steps we have taken to manage our inventory levels, we have not been subject to the shortages or price impacts that have been present for manufacturers of nickel manganese cobalt and nickel cobalt aluminum batteries. As we look toward the production of our solid-state cells, we have signed a Commercial Offtake Agreement with a lithium mining company located in Nevada for the supply of lithium, which we expect will enable us to further manage our cost of goods over time.
Product and Customer Mix
Our product sales consist of sales of numerous models of LFP batteries, along with accessories for battery systems (individually or bundled). These products are sold to different customer types (e.g., consumers, OEMs and distributors) and at different prices and involve varying levels of costs. In any particular period, changes in the mix and volume of particular products sold and the prices of those products relative to other products will impact our average selling price and our cost of goods sold. Despite our work to moderate increased supply-related costs, the price of our products may also increase as a result of increases in the cost of components due to inflation, currency fluctuations and tariffs. OEM sales typically result in lower average selling prices and related margins, which could result in margin erosion, negatively impact our growth or require us to raise our prices. However, this reduction is typically offset by the benefits of increased sales volumes. Sales of third-party sourced accessories typically have lower related margin. We expect accessory sales to increase as we further develop full-system design expertise and product offerings and consumers increasingly demand more sophisticated systems, rather than simple drop-in replacements. In addition to the impacts attributable to the general sales mix across our products and accessories, our results of operations are impacted by the relative margins of products sold. As we continue to introduce new products at varying price points, our overall gross margin may vary from period to period as a result of changes in product and customer mix.
Production Capacity
All of our battery assembly currently takes place at our 390,240 square foot headquarters and manufacturing facility located in Reno, Nevada. We currently operate four LFP battery production lines. Consistent with our operating history, we plan to continue to automate additional aspects of our battery production lines. Our existing facility has the capacity to add up to four additional LFP battery production lines and construct and operate a pilot production line for our solid-state cells, all designed to maximize the capacity of our manufacturing facility. Although our automation efforts are expected to reduce our costs of goods, we may not fully recognize the anticipated savings when planned and could experience additional costs or disruptions to our production activities. We have also focused on optimizing our manufacturing efficiency and throughput, enabling us to increase our production capacity without the need for increased headcount.
| 32 |
Competition
We compete with traditional lead-acid battery manufacturers and lithium-ion battery manufacturers, who primarily either import their products or components or manufacture products under a private label. As we continue to expand into new markets, develop new products and move towards production of our own conventional LFP cells and, in the longer term, solid state cells, we will experience competition with a wider range of companies. These competitors may have greater resources than we do and may be able to devote greater resources to the development of their current and future technologies. Our competitors may be able to source materials and components at lower costs, which may require us to evaluate measures to reduce our own costs, lower the price of our products or increase sales volumes in order to maintain our expected levels of profitability.
Research and Development
Our research and development is currently primarily focused on the scaling our proprietary dry electrode process for domestic production of full LFP cells. Although we have reallocated resources from the advanced manufacturing of solid-state lithium-ion batteries in order to focus on conventional cells, we expect to return to the solid-state chemistry as capital becomes more available for these longer term projects.
Components of Results of Operations
Net Sales
Net sales are primarily generated from the sale of our LFP batteries to OEMs and directly to consumers, as well as chargers and other accessories, either individually or bundled, and recognition of deferred licensing revenue.
Cost of Goods Sold
Cost of goods sold includes the cost of cells and other components of our LFP batteries, labor and overhead, logistics and freight costs, and depreciation of manufacturing equipment.
Gross Profit
Gross profit, calculated as net sales less cost of goods sold, may vary between periods and is primarily affected by various factors including average selling prices, product costs, product mix and customer mix.
Operating Expenses
Research and development
Research and development costs include personnel-related expenses for scientists, experienced engineers and technicians as well as the material and supplies to support the development of new products and our solid-state technology.
General and administrative
General and administrative costs include personnel-related expenses attributable to our executive, finance, human resources, and engineering and product development organizations, certain facility and information technology costs, and fees for professional services.
| 33 |
Selling and marketing
Selling and marketing costs include outbound freight, personnel-related expenses, as well as trade show, industry event, marketing, customer support, and other indirect costs. We expect to continue to make the necessary sales and marketing investments to enable the execution of our strategy, which includes expanding into additional end markets.
Total Other Expense
Other expense consists primarily of debt extinguishment, interest expense, the change in fair value of the warrant liability and amortization of debt issuance costs.
Results of Operations
Comparisons for the Three months ended March 31, 2026, and March 31, 2025
The following table sets forth our results of operations for the three months ended March 31, 2026 and March 31, 2025. This data should be read together with our financial statements and related notes included elsewhere in this Quarterly Report, and is qualified in its entirety by reference to such financial statements and related notes.
| Three months ended March 31, | ||||||||||||||||
| 2026 | % Net Sales | 2025 | % Net Sales | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net Sales | $ | 9,704 | 100.0 | $ | 13,356 | 100.0 | ||||||||||
| Cost of Goods Sold | 7,994 | 82.4 | 9,428 | 70.6 | ||||||||||||
| Gross profit | 1,710 | 17.6 | 3,928 | 29.4 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | 980 | 10.1 | 1,000 | 7.5 | ||||||||||||
| General and administrative | 4,482 | 46.2 | 6,357 | 47.6 | ||||||||||||
| Sales and marketing | 1,975 | 20.4 | 2,485 | 18.6 | ||||||||||||
| Total Operating expenses | 7,437 | 76.6 | 9,842 | 73.7 | ||||||||||||
| Loss From Operations | (5,727 | ) | (59.0 | ) | (5,914 | ) | (44.3 | ) | ||||||||
| Other Expense | ||||||||||||||||
| Interest expense, net | (1,465 | ) | (15.1 | ) | (4,701 | ) | (35.2 | ) | ||||||||
| Other income | 61 | 0.6 | - | - | ||||||||||||
| Change in fair market value of warrant liability | 506 | 5.2 | 3,818 | 28.6 | ||||||||||||
| Total Other Expense | (898 | ) | (9.3 | ) | (883 | ) | (6.6 | ) | ||||||||
| Loss Before Taxes | (6,625 | ) | (68.3 | ) | (6,797 | ) | (50.9 | ) | ||||||||
| Income Tax Benefit | - | - | - | - | ||||||||||||
| Net Loss | $ | (6,625 | ) | (68.3 | ) | $ | (6,797 | ) | (50.9 | ) | ||||||
| Less: Preferred Stock Dividends | $ | (1,095 | ) | (11.3 | ) | $ | - | - | ||||||||
| Net Loss Attributable to Common Shareholders | $ | (7,720 | ) | (79.6 | ) | $ | (6,797 | ) | (50.9 | ) | ||||||
| 34 |
| Three months ended March 31, | ||||||||||||||||
| 2026 | % Net Sales | 2025 | % Net Sales | |||||||||||||
| (in thousands) | ||||||||||||||||
| DTC | $ | 3,702 | 38.1 | $ | 5,015 | 37.5 | ||||||||||
| OEM | 5,752 | 59.3 | 8,091 | 60.6 | ||||||||||||
| Licensing Revenue | 250 | 2.6 | 250 | 1.9 | ||||||||||||
| Net Sales | $ | 9,704 | 100.0 | $ | 13,356 | 100.0 | ||||||||||
Net Sales
Net sales decreased by $3.7 million, or 27.3%, to $9.7 million for the quarter ended March 31, 2026, as compared to $13.4 million for the quarter ended March 31, 2025. This decrease was primarily due to lower OEM and DTC sales. RV OEM sales declined as customers rightsized inventory levels in response to a slower-than-anticipated market recovery, as reflected in RVIA shipment data for the quarter, as well as overall macroeconomic conditions. DTC sales declined due to macroeconomic pressures on consumer demand. We expect our sales to increase in the next 12 months as our customers expand the number of models they include our battery systems in for the new model year and our entrance into new markets, trucking and industrials, with new product offerings.
Cost of Goods Sold
Cost of goods sold decreased by $1.4 million, or 15.2%, to $8.0 million for the quarter ended March 31, 2026, as compared to $9.4 million for the quarter ended March 31, 2025. This decrease was primarily due to lower unit volume of batteries and accessories. We expect our cost of goods sold to increase over the next 12 months in conjunction with the anticipated increase in revenue and higher tariffs but will be slightly offset with some automation initiatives in the second quarter of 2026.
Gross Profit
Gross profit decreased by $2.2 million, or 56.5%, to $1.7 million for the quarter ended March 31, 2026, as compared to $3.9 million for the quarter ended March 31, 2025. The decrease in gross profit was primarily due to lower unit volume of battery and accessory sales. Gross Profit percentage decreased by 11.8% to 17.6% primarily due to lower sales unit volume and higher material costs due to higher tariffs.
Research and Development Expenses
Research and development expenses remained unchanged at $1.0 million for the quarters ended March 31, 2026 and 2025. A decrease in wage expense of $0.4 million, resulting from reduced headcount, was offset by an increase in depreciation expense due to a prior period correction, leading to overall unchanged research and development expenses. We expect research and development expenses to remain relatively stable over the next year.
General and Administrative Expenses
General and administrative expenses declined by $1.9 million, or 29.5%, from $4.5 million for the quarter ended March 31, 2026, compared to $6.4 million for the quarter ended March 31, 2025. The reduction was mainly driven by a $1.4 million decrease in professional fees, which resulted from lower deal costs and litigation expenses in the current period. Rent expense also fell by $0.5 million due to the impairment of two leases in the last quarter of 2025. Additionally, depreciation decreased by $0.5 million, primarily because the prior year included a catch-up adjustment related to tenant improvements under the lease. These cost reductions were partially offset by a rise in employee expenses, reflecting increased headcount in engineering and product development. Looking forward, we anticipate that general and administrative expenses as a percentage of revenue will decrease over the next 12 months. This expectation is based on targeted cost reduction measures which have been implemented, including further reductions in professional fees, continued optimization of lease agreements, and ongoing evaluation of staffing levels beginning in the second quarter of 2026.
| 35 |
Selling and Marketing Expenses
Sales and marketing expenses decreased by $0.5 million, or 20.5%, to $2.0 million for the quarter ended March 31, 2026, as compared to $2.5 million for the quarter ended March 31, 2025. This decrease was primarily due to lower employee-related costs in the amount of $0.2 million related to lower headcount and lower shipping costs related to lower sales. We expect our Selling and Marketing Expenses to decrease over the next 12 months due to cost reduction measures beginning in the second quarter of 2026.
Total Other Income (Expense)
Other expense totaled $0.9 million for the quarter ended March 31, 2026 as compared to other expense of $0.9 million for the quarter ended March 31, 2025. Other expense of $0.9 million for the quarter ended March 31, 2026 was comprised primarily of interest expense of $1.5 million related to our debt securities partially offset by a change in fair market value of warrant liability in the amount of $0.5 million and other income in the amount of $0.1 million. The $0.9 million of other expense for the quarter ended March 31, 2025 was comprised primarily of interest expense of $4.7 million related to our debt securities offset by a change in fair market value of warrant liability in the amount of $3.8 million.
Income Tax (Benefit) Expense
There was no tax expense recorded for the quarter ended March 31, 2026 or March 31, 2025. Management evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and determined that it is more likely than not that we will not recognize the benefits of the deferred tax assets primarily due to us entering into a 3-year cumulative loss position. As a result, a full valuation allowance totaling $37.7 million was recorded as of the year ended December 31, 2025 and is unchanged as of March 31, 2026.
Net Loss
We generated a net loss of $6.6 million for the quarter ended March 31, 2026, as compared to net loss of $6.8 million for the quarter ended March 31, 2025. As described above, this result was driven by lower sales, lower cost of goods sold, and lower operating expenses.
Critical Accounting Estimates
Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. We base our estimates on historical experience, known trends and events, and other factors we believe to be reasonable under the circumstances. These estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources, and actual results may differ from these estimates under different assumptions or conditions. On a recurring basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in an estimate, if any, are reflected in the consolidated financial statements prospectively from the date of the change in the estimate.
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that involve a significant degree of estimation uncertainty at the time the estimate is made; and (2) changes in the estimate that are reasonably likely to occur from period to period, or the use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our board of directors. In addition to the estimates described below, there are other items within our financial statements that require estimation, but that we do not consider critical under the definition above. Changes in estimates used in these and other items could have a material impact on our financial statements.
We believe that the following accounting estimates are the most critical to the judgments and assumptions used in the preparation of our financial statements because they involve significant estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition and results of operations.
| 36 |
Inventory Valuation
We maintain reserves for excess and obsolete inventory and for inventory that is carried at amounts in excess of its estimated realizable value. These reserves are inherently judgmental and involve significant estimates regarding expected future demand, product life cycles, pricing, and the recoverability of costs through future sales. In estimating these reserves, we consider factors such as recent sales experience, forecasted demand, the aging of inventories and specific identification of items that may be obsolete or slow-moving.
Changes in these assumptions, including adverse changes in customer demand, technological developments, or pricing pressures, could result in materially different reserve levels and related cost of goods sold in future periods. For example, a decrease in expected demand or sales prices, or an increase in the aging of inventory, could require us to increase our reserves, which would negatively affect our gross margin. Conversely, if actual demand is higher than currently estimated, our reserves could prove to be overstated, resulting in lower cost of goods sold in future periods.
Warrants
We issue warrants to purchase our common stock in connection with certain financing and other transactions. We apply the relevant guidance in ASC 480 and ASC 815 in determining whether warrants should be classified as liabilities or equity. Warrants that are classified as liabilities are initially recorded at fair value and remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.
The fair value of liability-classified warrants involves significant judgment, as it is based on valuation models that incorporate various inputs, including our common stock price, expected stock price volatility, expected term, risk-free interest rates and, as applicable, other market-based or contractual features. These inputs are subject to estimation uncertainty and can change over time in response to our operating performance, changes in our capital structure, market conditions or other factors.
Because changes in these inputs directly affect the fair value of the warrants, they can result in material volatility in our reported earnings from period to period. For example, an increase in the price or volatility of our common stock generally increases the fair value of liability-classified warrants and may result in a loss recognized in our statement of operations, whereas decreases in stock price or volatility may result in a gain.
Income Taxes
We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities and for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
We recognize the financial statement effect of an uncertain tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Recognized tax positions are measured at the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We also establish a valuation allowance to reduce deferred tax assets to an amount that is more likely than not to be realized.
The assessment of the realizability of deferred tax assets and the recognition and measurement of uncertain tax positions involve significant judgment and estimation, including projections of future taxable income, the timing and character of that income, the reversal of existing temporary differences, the outcome of tax examinations and the interpretation of tax laws and regulations in multiple jurisdictions. Our projections of future taxable income are inherently uncertain and subject to change due to changes in our business, our industry, and the overall economic environment.
| 37 |
If actual results differ from our estimates, or if we adjust our estimates in future periods, we may need to increase or decrease our valuation allowance or adjust our uncertain tax positions, which could have a material impact on our effective tax rate, income tax expense and results of operations. For example, evidence of sustained profitability in one or more jurisdictions could result in a reduction of the valuation allowance and a related decrease in income tax expense, whereas evidence of sustained losses or unfavorable changes in tax law could result in an increase in the valuation allowance and higher income tax expense.
Leases
We recognize right-of-use assets and lease liabilities for our operating leases based on the present value of lease payments over the expected lease term. Because our leases generally do not provide an implicit rate, we estimate an incremental borrowing rate to determine the present value of lease payments. Our incremental borrowing rate is derived from market data, including current borrowing rates available to us for similar terms and collateral, as well as broader market interest rate information. We also make judgments regarding the lease term, including renewal and termination options, when it is reasonably certain that such options will be exercised.
These estimates are subjective and can significantly affect the measurement of our right-of-use assets, lease liabilities and related lease cost recognized in the statement of operations. Changes in our assessment of the incremental borrowing rate, or our expectations about exercising renewal or termination options, could result in material changes to the recorded lease liabilities and right-of-use assets and affect the pattern of lease expense recognition over time.
License Arrangement
We have entered into license arrangements under which we receive upfront compensation. We recognize this compensation as revenue over a five-year period, which we believe reflects the pattern in which control of the licensed rights and related services is transferred and the period over which we expect to realize the economic benefits of the arrangement.
The determination of the appropriate recognition pattern involves significant judgment, including our assessment of the nature and timing of performance obligations, the expected duration and level of customer engagement, and the likelihood of renewal or modification of the arrangement. These factors are inherently uncertain and may change over time as we gain more experience with the arrangements or as customer behavior evolves.
If our expectations regarding the timing or amount of the benefits to be provided under these arrangements change, or if we modify or renew the arrangements on terms different from those originally anticipated, we may be required to adjust the recognition pattern, which could result in a material increase or decrease in revenue in one or more reporting periods.
| 38 |
Non-GAAP Financial Measures
This Quarterly Report includes a non-generally accepted account principles within the United States (“U.S. GAAP”) measure that we use to supplement our results presented in accordance with U.S. GAAP. Earnings before interest tax and amortization (“EBITDA”) is defined as earnings before interest and other income (expenses), income taxes, and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA adjusted for stock-based compensation, change in fair market value of warrant liabilities, non-recurring costs associated with strategic financing, reverse stock split, litigation and loss on settlement. Adjusted EBITDA is a performance measure that we believe is useful to investors and analysts because it illustrates the underlying financial and business trends relating to our core, recurring results of operations and enhances comparability between periods.
Adjusted EBITDA is not a recognized measure under U.S. GAAP and is not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Investors should exercise caution in comparing our non-GAAP measure to any similarly titled measure used by other companies. This non-GAAP measure excludes certain items required by U.S. GAAP and should not be considered as an alternative to information reported in accordance with U.S. GAAP.
The table below presents our adjusted EBITDA, reconciled to net loss for the three months ended March 31, 2026, and March 31, 2025.
| Three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (in thousands) | ||||||||
| Net Loss Attributable to Common Shareholders | $ | (7,720 | ) | $ | (6,797 | ) | ||
| Interest Expense | 1,465 | 4,701 | ||||||
| Depreciation and Amortization | 794 | 859 | ||||||
| EBITDA | (5,461 | ) | (1,237 | ) | ||||
| Adjusted for: | ||||||||
| Stock-Based Compensation(1) | 100 | 220 | ||||||
| Change in fair market value of warrant liability (2) | (506 | ) | (3,818 | ) | ||||
| Series B Preferred Stock Dividend | 1,095 | - | ||||||
| Non-Recurring/One-Time Expenses: | ||||||||
| Litigation Expenses (3) | 39 | 543 | ||||||
| Preferred Stock Financing Expenses | - | 631 | ||||||
| At-the Market (ATM) set up Expenses(4) | 139 | - | ||||||
| Loss on Impairment of Asset(5) | 6 | - | ||||||
| Expenses related to Debt Restructure(6) | 36 | - | ||||||
| Reverse Stock Split | - | 15 | ||||||
| Adjusted EBITDA | $ | (4,552 | ) | $ | (3,646 | ) | ||
| (1) | Stock-Based Compensation is comprised of costs associated with option and RSU grants made to our employees, consultants and board members. |
| (2) | Change in fair market value of warrant liabilities represents the change in fair value for the three months ended March 31, 2026 and March 31, 2025. |
| (3) | In 2026, Litigation Fees includes fees and expenses related to the Berdner et al case. In 2025, Litigation Fees includes legal fees and expenses and settlement related to the International Trade Commission ‘ITC’ Lithium Hub patent infringement case and other. |
| (4) | At-the-Market (ATM) set up expenses are for the equity distribution agreement with Canaccord Genuity, LLC. |
| (5) | Loss on Impairment of Asset is costs related to the prior year impairment of our previous main office. |
| (6) | Debt Restructure expenses including legal and professional service. |
| 39 |
Liquidity and Capital Resources
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities. As of March 31, 2026, we had cash totaling $8.6 million. We believe that our cash balance as of March 31, 2025 will fund our operations into the second quarter of 2027.
On January 30, 2026, we entered into the Equity Distribution Agreement with Canaccord under which we may offer and sell, from time to time, shares of our common stock through an ATM for up to $50.0 million in gross proceeds, as described in the “Overview” section above. As of March 31, 2026, we have not sold any shares of our common stock pursuant to the ATM. Subsequent to March 31, 2026, we have sold 379,700 shares of common stock for aggregate net proceeds of approximately $0.8 million.
We expect that we will need to raise additional funds, including through the use of the ATM and the issuance of equity, equity-related or debt securities or by obtaining additional credit from financial institutions to fund, together with our principal sources of liquidity, ongoing costs, such as research and development relating to our solid-state batteries, expansion of our facilities, and new strategic investments. If such financings are not available, or if the terms of such financings are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, including by not seeking potential acquisition opportunities, eliminating redundancies, or reducing or delaying our production facility expansions, reduce operations, sell off our assets, seek the protection of bankruptcy courts or shut down our operations and dissolve. Further, any future debt or equity financings may be dilutive to our current stockholders.
Financing Obligations and Requirements
On November 24, 2021, we issued $45.0 million of fixed rate senior notes, secured by among other things, a security interest in our intellectual property. As part of the Business Combination, we entered into a senior secured term loan facility in an aggregate principal amount of $75 million (the “Term Loan”) pursuant to the Term Loan, Guarantee and Security Agreement (the “Original Term Loan Agreement” and, as amended, the “Term Loan Agreement”) by and among, us, Legacy Dragonfly, Alter Domus (US) LLC, as the Agent to the lenders time-to-time party thereto (such lenders, the “Term Loan Lenders”), the proceeds of which were used to repay the $45.0 million fixed rate senior notes, and ChEF Equity Facility.
As described in the “Overview” section above, under the Sixth Amendment, we (i) prepaid $45.0 million of principal using proceeds from the Second October 2025 Offering, (ii) exchanged $25.0 million of principal for redeemable Series B Preferred Stock (convertible at $31.50 per share, with 8% cash and 2% “in kind” dividends), which is redeemable in October 2027 unless otherwise converted by the holder, and (iii) had $5.0 million of principal forgiven by the Term Loan Lenders. Following these transactions, approximately $19.4 million of principal remained outstanding under the Term Loan, bearing 12% interest payable monthly and maturing in October 2027. We paid $0.9 million in fees (half in cash, half added to principal) and obtained covenant waivers through December 2026, subject to maintaining $5.0 million of minimum liquidity.
The Sixth Amendment significantly improved our liquidity by reducing total debt from $93.1 million to approximately $19.4 million and deferring near-term cash interest requirements through the preferred stock exchange and covenant waivers.
The Term Loan proceeds were used to: (i) support the Business Combination, (ii) prepay the fixed rate senior notes at closing of the Business Combination, (iii) pay fees and expenses in connection with the foregoing, (iv) to provide additional growth capital and (v) for other general/corporate purposes. The Term Loan will mature on October 7, 2027, or the Maturity Date, and will be subject to quarterly amortization of 5% per annum beginning 24 months after issuance. The definitive documents for the Term Loan incorporate certain mandatory prepayment events and certain affirmative and negative covenants and exceptions hereto. The financial covenants for the Term Loan include a maximum senior leverage ratio covenant, a minimum liquidity covenant, a springing fixed charge coverage ratio covenant, and a maximum capital expenditures covenant. In accordance with U.S. GAAP, we reclassified our notes payable from a long-term liability to a current liability. The Term Loan accrues interest as follows: (i) until April 1, 2024, at a per annum rate equal to adjusted secured overnight financing rate (“SOFR”) plus 7% payable in cash plus an amount ranging from 4.5% to 6.5%, depending on our senior leverage ratio; (ii) effective April 1, 2024 and thereafter, interest payable to certain lenders subject to regulations of the U.S. Small Business Administration (“SBA”) with outstanding principal on that date of $30,846 will be limited to 14.0% per annum (except for default interest permitted under SBA regulations, as applicable); and (iii) the other outstanding principal will accrue interest from April 1, 2024 thereafter until October 1, 2024, at a per annum rate equal to adjusted SOFR plus 7% payable in cash plus an amount ranging from 4.5% to 6.5%, depending on the senior leverage ratio of the consolidated company, and at all times thereafter, at a per annum rate equal to adjusted SOFR plus a margin ranging from 11.5% to 13.5%, depending on our senior leverage ratio.
| 40 |
The Term Loan is secured by substantially all assets of the Company, Battle Born LLC and Legacy Dragonfly, and we pledged our equity interests in Battle Born LLC and Legacy Dragonfly as additional collateral. In connection with the Business Combination, the Term Loan Lenders also received penny warrants and $10 warrants. The $10 warrants were exercised in full on October 10, 2022. During the quarter ended March 31, 2026, 70,267 penny warrants were exercised on a cashless basis, with the Company agreeing to issue 69,985 shares of Common Stock in connection with such exercise. Subsequent to March 31, 2026, the remaining outstanding penny warrants were exercised in full on a cashless basis, resulting in the issuance of 103,390 shares of common stock.
In 2024, we identified an underpayment of tariffs to U.S. Customs and Border Protection (“CBP”) in the amount of approximately $1.66 million in the aggregate, related to the improper classification and valuation of certain of the products used in our batteries. We have reported the underpayment to CBP. In June 2025, after a comprehensive review of this tariff calculation, an additional $0.29 million was discovered and also reported to CBP and a payment plan of $0.05 million per week was put into place. As of March 31, 2026, the entire balance of the reported tariff underpayment has been paid in full; however, we have recorded an estimated liability of approximately $0.3 million on our balance sheet related to interest that may have accrued on the underpayment. The amount and timing of any such interest obligation have not yet been confirmed by CBP, and the actual amount payable, if any, may differ from the current estimate.
Going Concern
For the quarter ended March 31, 2026, we incurred losses and had a negative cash flow from operations. As of March 31, 2025, we had approximately $8.6 million in cash and cash equivalents and a working capital of $23.4 million. Our ability to achieve profitability and positive cash flow depends on our ability to increase revenue, contain our expenses and maintain compliance with the financial covenants in our outstanding indebtedness agreements.
On February 26, 2025, the Term Loan was amended to (i) extend the maturity date by one (1) year to October 2027, (ii) defer all principal and interest payments to April 2026 and (iii) remove any applicable financial covenants (except for a financial covenant requiring us to maintain cash and cash equivalents equal to or greater than $2,500) through June 30, 2026.
In addition, investors received warrants to purchase up to 4,000 shares of Series A Preferred Stock at $10,000 per share, potentially providing up to $40 million in future capital, however, these warrants were cancelled on June 23, 2025.
On July 30, 2025, we received proceeds of $5,495 less $811 in costs, which we have been using for working capital and other general corporate purposes, including the repayment of indebtedness in the ordinary course. Investors received an aggregate of 2,198,000 shares of common stock.
On October 6, 2025, we received proceeds of $26,925, net of costs, in connection with the issuance of 2,300,000 shares of common stock and option to purchase 300,000 shares of common stock. On October 17, 2025, we received additional proceeds of $51,928, net of costs, from the issuance of 3,600,000 shares of common stock and 500,000 pre-funded warrants to purchase shares of common stock. We used the aggregate net proceeds for working capital and other general corporate purposes, including the repayment of indebtedness in the ordinary course of business. Additionally, on October 20, 2025, the Term Loan was restructured and we entered into the Sixth Amendment (the “Sixth Amendment”) with the Term Loan lenders, which included new interest payment terms, $45,000 prepayment in October, and $5,000 debt cancellation. Lastly, as part of the restructuring, on November 4, 2025, we and the lenders entered into an exchange agreement (the “Exchange Agreement”) pursuant to which we issued 25,000 shares of Series B Preferred Stock in exchange for $25,000 outstanding principal amount of the Term Loan.
| 41 |
On January 30, 2026, we entered into an Equity Distribution Agreement with Canaccord Genuity LLC, as lead agent and representative of the other sales agents, establishing an at-the-market equity offering program under which we may, at our discretion, offer and sell from time to time up to $50 million of its common stock. While we are not obligated to issue any shares under the agreement and retain full control over the timing, amount, pricing, and terms of any sales effected through the lead agent, this agreement provides us with a flexible, readily accessible source of capital to support its liquidity needs, subject to customary closing conditions, a 3% sales commission and reimbursement of specified expenses payable to the agents, and standard indemnification and contribution provisions.
As presented above, strategic initiatives were executed in 2025 and early 2026 in order to alleviate the substantial doubt regarding our ability to continue as a going concern. These initiatives include multiple capital raises totaling a net cash increase of $90.9 million and Term Loan restructuring to reduce principal and interest owed, including a significant principal paydown, partial debt cancellation, and partial principal conversion into preferred shares, along with the at-the-market equity offering program entered into January 2026. Management has evaluated the conditions and events described above in relation to our obligations coming due within one year after the date these condensed consolidated financial statements are issued. Based on this evaluation and the capital raising and debt restructuring activities completed in 2025 and early 2026, including access to the at-the-market equity offering program, management has concluded that although substantial doubt was initially raised, its plans have alleviated substantial doubt about the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements are issued.
In addition, we may need to raise additional debt and/or equity financing to fund our operations, strategic plans, meet our financial covenants under the Term Loan and our redemption obligations under the Series B Preferred Stock and repay our outstanding indebtedness under the Term Loan. We have historically been able to raise additional capital through issuance of equity and/or debt financing and we intend to raise additional capital as needed. However, we cannot guarantee that we will be able to raise additional equity, contain expenses, or increase revenue, and comply with the financial covenants under the Term Loan.
Cash Flows for the Three months ended March 31, 2026, and March 31, 2025
| Three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (in thousands) | ||||||||
| Net Cash (used in)/provided by: | ||||||||
| Operating Activities | $ | (8,784 | ) | $ | (4,500 | ) | ||
| Investing activities | $ | (279 | ) | $ | (778 | ) | ||
| Financing activities | $ | (570 | ) | $ | 3,232 | |||
Operating Activities
Net cash used in operating activities was $8.8 million for the three months ended March 31, 2026, primarily due to a net loss of $6.6 million, $0.6 million decrease in operating lease liabilities, and a decrease in accounts payable of $2.9 million, partially offset by $1.2 million increase in accounts receivable.
Net cash used in operating activities was $4.5 million for the three months ended March 31, 2025, primarily due to a net loss of $6.8 million and $0.7 million decrease in operating lease liabilities, partially offset by $3.4 million increase in accounts payable.
Investing Activities
Net cash used in investing activities was $0.3 million for the three months ended March 31, 2026, as compared to net cash used in investing activities of $0.8 million for the three months ended March 31, 2025. The cash used for the three months ended March 31, 2026 was primarily for payments of improvements to the battery production area and renovations to the research and development location. The cash used for the three months ended March 31, 2025 was primarily for payments of building improvements for the new warehouse.
| 42 |
Financing Activities
Net cash used by financing activities was $0.6 million for the three months ended March 31, 2026, primarily related to Series B preferred stock dividend payments and repayment of debt, as compared to net cash provided by financing activities of $3.3 million for the three months ended March 31, 2025, primarily related to net proceeds of $3.2 million from the Offerings on February 26, 2025.
Contractual Obligations
Our estimated future obligations consist of short-term and long-term operating and financing lease liabilities. As of March 31, 2026, we had $2.5 million in short-term operating and financing lease liabilities and $20.0 million in long-term operating and financing lease liabilities.
As disclosed above, we have a Term Loan and as of March 31, 2026, the principal amount outstanding under the Term Loan was $19.1 million.
Additionally, we are required to pay to the holders of the Series B Preferred Stock dividends, which will accrue at 10% per annum, commencing from the Initial Issuance Date, payable (i) 80% in cash and (i) 20% “in kind” and added the Liquidation Preference of such holder’s Series B Preferred Stock. Such dividends are payable quarterly in arrears on the first trading day of each fiscal quarter commencing on the first trading day of the initial fiscal quarter after the date of issuance. Upon the occurrence of certain events, the dividend rate may automatically increase, as described in the Certificate of Designation. Additionally, in connection with any future equity offerings, we are required to use 50% of the net proceeds from such offering to redeem outstanding shares of the Series B Preferred Stock at the Optional Redemption Price. In the event we have not redeemed the outstanding shares of Series B Preferred Stock by October 7, 2027 or upon the occurrence of a Non-Payment Event (as defined in the Certificate of Designation), the holders will have the right to require us to redeem the Series B Preferred Stock at the Optional Redemption Price.
We and Chardan Capital Markets LLC, a New York limited liability company (“CCM LLC”) entered into a purchase agreement (as amended, the “ChEF Purchase Agreement”) and a Registration Rights Agreement in connection with our merger in October 2022 (the “Business Combination”). Pursuant to the Original Purchase Agreement, we had the right to sell to CCM LLC an amount of shares of common stock, up to a maximum aggregate purchase price of $150 million, pursuant to the terms of the ChEF Purchase Agreement (the “ChEF Equity Facility”), subject to certain restrictions set forth in the Term Loan Agreement (as defined below). The ChEF Purchase Agreement terminated in December 2025.As part of the expiration, the remainder of the Commitment Fee, pursuant to the purchase agreement, of $891 is due and payable to Chardan Capital Markets. This amount was expensed in fiscal year ending December 31, 2025 and remains accrued in current liabilities, specifically ‘Accrued payroll and other liabilities’, on the balance sheet as of March 31, 2026.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and implementation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2026. Based on that evaluation, management concluded that as of March 31, 2026, we did maintain effective disclosure controls and procedures.
Changes in Internal Control over Financial Reporting
No changes in our internal control over financial reporting (as defined by Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended March 31, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 43 |
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
“Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 30, 2026 includes a discussion of our legal proceedings.
Other than as set forth below, there have been no material updates to the legal proceedings previously disclosed in our Annual Report on Form 10-K.
On February 13, 2026, a putative consumer class action captioned Berdner et al v. Dragonfly Energy Holdings Corp. d/b/a Battle Born, was filed against the Company in the Superior Court of the State of California, County of Sonoma, Case No. 26CV01247. We were served with the complaint on March 31, 2026. The case was removed to Northern District of California on April 30, 2026. The plaintiffs purport to represent four classes of purchasers of certain “Battle Born” branded 100 amp-hour 12V LiFePo4 batteries. They allege that the products share a uniform design defect related to the positive terminal connection that can result in overheating, premature failure, and safety risk. The complaint asserts violations of various state consumer protection statutes, breach of express and implied warranties (including under California law), and false advertising, and seeks damages, restitution, injunctive relief, punitive damages, and attorneys’ fees.
We believe that the claims are without merit and intend to vigorously defend this matter. No trial date has been set as of the date of this report. We are unable at this time to reasonably estimate a range of possible loss or determine whether an adverse outcome is probable; accordingly, no liability has been recorded related to this matter as of the date of this report.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 30, 2026, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.
There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
| 44 |
ITEM 5. OTHER INFORMATION
| (a) | None. |
| (b) | None. |
| (c) | During the fiscal quarter ended March 31, 2026, none of our
directors or “officers” (as defined in Rule 16a-1(f) under the Exchange Act) |
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
| # | Portions of schedules and exhibits to the agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request. |
| 45 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dragonfly Energy Holdings Corp. | ||
| Date: May 14, 2026 | By: | /s/ Denis Phares |
| Denis Phares | ||
| Chief Executive Officer, President and Interim Chief Financial Officer | ||
| (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
| 46 |