Dragonfly Energy Holdings Corp.

Dragonfly Energy Holdings Corp.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

Note 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 Dragonfly Energy Corp, Battle Born Battery Products, LLC and Dragonfly CellTech, Inc. All significant intercompany transactions and balances are eliminated in consolidation.

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 31, 2025 of the Company for the annual period ended December 31, 2024. The consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated financial statements as of and for the year then ended.

Going Concern

The accompanying 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 nine months ended September 30, 2025 and 2024, the Company incurred losses from operations and had negative cash flow from operations. As of September 30, 2025, the Company had $3,838 in cash and cash equivalents and a working capital of $8,834. The Company’s ability to achieve profitability and positive cash flow depends on its ability to increase revenue, contain its expenses and maintain compliance with the financial covenants in its outstanding indebtedness agreements.

In connection with the Company’s senior secured term loan facility in an aggregate principal amount of $75,000 (as amended, the “Term Loan”), the Company is obligated to comply with certain financial covenants, which include maintaining a maximum senior leverage ratio, minimum liquidity, a springing fixed charge coverage ratio, and maximum capital expenditures**(See Note 6).** Between March 2024 and February 2025, the Company obtained multiple waivers from the Term Loan administrative agent and lenders for noncompliance with the liquidity requirements under the Term Loan.

Going Concern (Continued)

On February 26, 2025, the Company entered into a Securities Purchase agreement (“Purchase Agreement”). The Purchase Agreement called for the Company to authorize a new series of convertible preferred stock of the Company designated as the Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), which shall beconvertible into shares of the Company’s common stock, and sell to each Buyer an aggregate number of shares of Series A Preferred Stock and 20 warrants, to each buyer, that are convertible to common stock. During the nine months ended September 30, 2025, the Company received proceeds of $8,000 less $670 in costs for net proceeds of $7,330 due to the conversion of for the conversion of 800 shares of Series A Preferred Stock for 32,314,615 shares of common stock which the Company has been using for working capital and general corporate purposes. As of September 30, 2025, all Series A Convertible Preferred Stock has been converted into common stock.

In addition to the Purchase Agreement, the Term Loan was amended on February 26, 2025 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 e Company to maintain cash and cash equivalents equal to or greater than $2,500) through June 30, 2026.

On July 30, 2025, the Company completed an equity financing and received net proceeds of $5,495 less $811 in costs, in connection with the issuance of 21,980,000 shares of common stock in an underwritten public offering (the “July 2025 Offering”), which the Company has been using for working capital and other general corporate purposes, including the repayment of indebtedness in the ordinary course.

Subsequent to September 30, 2025, the Company completed two equity financings. On October 6, 2025, the Company received net proceeds of $26,925, net of costs, in connection with the issuance of 23,000,000 shares of common stock. On October 17, 2025, the Company received additional net proceeds of $51,928, net of costs, from the issuance of 36,000,000 shares of common stock and pre-funded warrants to purchase 5,000,000 shares of common stock. The Company intends to use 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 the Company 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, the Company and the lenders entered into an exchange agreement (the “Exchange Agreement”) pursuant to which the Company issued 25,000 shares of Series B Preferred Stock in exchange for $25,000 outstanding principal amount of the Term Loan. Please see Note 13 for more information regarding the aforementioned offerings, term loan amendment, and exchange agreement that occurred in October and November 2025.

As presented above, strategic initiatives were executed in 2025 in order to alleviate the substantial doubt about the Company’s ability to continue as a going concern. These initiatives include multiple capital raises (including those subsequent to September 30, 2025) totalling a net cash increase of $91,218 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. With these strong initiatives, along with continued revenue generation anticipated in the next twelve months and the Company’s ability to maintain covenant compliance with a monthly liquidity minimum of $5,000, management has concluded that the substantial doubt regarding the Company’s ability to continue as a going concern has been mitigated.

In addition, the Company may need to raise additional debt and/or equity financings to fund its operations, strategic plans, meet its financial covenants under the Term Loan and its obligations under the Series B Preferred Stock and repay its outstanding indebtedness under the Term Loan. The Company has historically been able to raise additional capital through issuance of equity and/or debt financings and the Company intends to raise additional capital as needed. However, the Company cannot guarantee that it will be able to raise additional equity, contain expenses, or increase revenue, and comply with the financial covenants under the Term Loan. If the Company is unable to obtain additional funding to support its current or proposed activities and operations and its outstanding indebtedness, it may not be able to continue its operations as currently anticipated, which may require it to suspend or terminate any ongoing development activities, modify its business plan, curtail various aspects of its operations, cease operations, or seek relief under applicable bankruptcy laws. In such event, the Company’s stockholders may lose a substantial portion or even all of their investment.

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 $300 and $188 as of September 30, 2025 and December 31, 2024, respectively.

Assets Held for Sale

Assets held for sale are valued at the lower of the carrying amount or the net realizable value estimated at September 30, 2025. Impairment to carrying amounts are recognized to non-operating expenses in the year ending December 31, 2024. The Assets held for sale, or the disposal group, consists of two research and development pieces of equipment that were not in use yet. Due to the nature of the disposal group being long-lived assets, the disposal group qualifies for the held for sale classification, as defined in ASC 360. Due to the Company shifting its focus from research and development efforts to product development, these assets would be put into service at an undeterminable time in the future and therefore, a search for a potential buyer was conducted. The sale was expected to be completed in the second quarter, but unforeseen circumstances forced the buyer to back out. Due to not being able to locate another buyer, the assets held for sale were reclassified as Property and Equipment as of September 30, 2025.

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.

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, the Company’s 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.

Revenue Recognition (continued)

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 original equipment manufacturers (“OEMs”), are typically due within 30-90 days after shipment. In such instances, the Company records a customer deposit liability. The Company recognizes these contract liabilities as sales after the revenue criteria are met. As of September 30, 2025 and December 31, 2024, the contract liability related to the Company’s customer deposits were approximately $252 and $317, respectively.

During the nine months ended September 30, 2025, the Company recognized $314 of the December 31, 2024 contract liability. During the nine months ended September 30, 2024, the Company recognized $201 of the contract liability that was recorded as a January 1, 2024 beginning balance.

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 (“Stryten”). The $5,000 initial licensing fee is being recognized as revenue on a straight-line basis over five years. The Company has recorded $250 and $750 in revenue related to the license agreement for the three and nine months ended September 30, 2025. As of September 30, 2025 and December 31, 2024, the contract liability related to the Company’s deferred revenue were approximately $3,833 and $4,583, respectively. As of September 30, 2025, the Company had $1,000 in short term deferred revenue and $2,833 in long-term deferred revenue related to the License Agreement.

Disaggregation of Revenue

The following table presents the Company’s disaggregated revenues by distribution channel:

Product Warranty

The Company offers assurance type warranties from 5 to 10 years on its products. The Company estimates the costs associated with the warranty obligation using historical data of warranty claims and costs incurred to satisfy those claims. The Company estimates, based upon a review of historical warranty claim experience, the costs that may be incurred under its warranties and record a liability in the amount of such estimate at the time a product is sold. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liability and adjust the accrual as claims data and historical experience warrants. The Company has assessed the costs of fulfilling its existing assurance type warranties and has determined that the estimated outstanding warranty obligation at September 30, 2025 and December 31, 2024 to be $768 and $514, respectively. The Company incurred warranty expense of $132 and $403 for the three and nine months ended September 30, 2025, respectively, and incurred warranty expense of $114 and $422 for the three and nine months ended September 30, 2024, respectively,

The following table reflects the activity in the Company’s warranty obligation for the nine months ended September 30, 2025:

Concentrations

As of September 30, 2025, receivables from Customer A comprised approximately 52% of accounts receivable. There are no other significant accounts receivable concentration.

For the nine months ended September 30, 2025, sales from Customer A comprised approximately 29% of the Company’s total revenue. For the nine months ended September 30, 2024, sales from Customer A comprised approximately 15% of the Company’s total revenue. For the three months ended September 30, 2025, sales from Customer A comprised approximately 35% of the Company’s total revenue. For the three months ended September 30, 2024, sales from Customer A comprised approximately 16% of the Company’s total revenue.

As of September 30, 2025, payables to Vendor A, Vendor B, and Vendor C comprised approximately 24%,11%, and 20%, respectively, of accounts payables.

For the nine months ended September 30, 2025, Vendor A and Vendor B accounted for approximately 17% and 10%, respectively, of the Company’s total purchases. For the nine months ended September 30, 2024, Vendor D accounted for approximately 11% of the Company’s total purchases. For the three months ended September 30, 2025, Vendor A, Vendor B and Vendor C accounted for approximately 18%,14% and 12%, respectively, of the Company’s total purchases. For the three months ended September 30, 2024, Vendor D and Vendor B accounted for approximately 16% and 13%, respectively, of the Company’s total purchases.

Stock-Based Compensation

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.

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 in 2025.

Net Loss per Common Share

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.

The following table sets forth the number of potential shares of common stock that have been excluded from diluted net loss per share because their effect was anti-dilutive:

Reclassification

Certain amounts in the prior year’s 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, or stockholders’ equity.

Segment Reporting

Operating segments are identified (Note 12) as components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s Chief Executive Officer to make decisions with respect to resource allocation and assessment of performance. Previously, the Company recognized one operating segment. Historically, the Company reported a single operating and reportable segment, as management evaluated the business on a consolidated basis. During the fourth quarter of 2024, the Company reassessed its internal reporting structure and how management monitors operations and makes decisions. As a result of this reassessment, the Company determined that it now manages its business through two distinct operating segments. This change was driven by the development of the Company’s operations and internal decision-making processes, including the introduction of separate performance metrics and discrete financial information for each segment.

Recently issued accounting pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. The Company adopted ASU 2023-09 as of January 1, 2025.

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. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Accordingly, the Company will adopt the standard for the year ending December 31, 2027.

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, amending the manner in which credit losses for accounts receivable and contract assets are determined. For public companies, the guidance introduces a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets. Under this expedient, entities may assume that conditions existing at the balance sheet date will persist for the remaining life of the asset, which simplifies the estimation process by eliminating the need to forecast future economic conditions for these short-term assets. This guidance is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.

Note 3 -FAIR VALUE MEASUREMENTS

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of September 30, 2025:

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, 2024:

Due to Black Scholes calculation being utilized on all fair value measurement of warrant liabilities as of September 30, 2025 and December 31, 2024, the fair value warrant liabilities were transferred from Level 3 to Level 2 as of December 31, 2024. This is due to the observable inputs (such as the Company’s stock price and comparable company volatility calculations) included in the Black Scholes calculation, which makes the fair value measurement of the warrant liabilities more closely aligned with Level 2.

The carrying amounts of accounts receivable and accounts payable are considered Level 1 and approximate fair value as of September 30, 2025 and December 31, 2024 because of the relatively short maturity of these instruments.

The carrying value of the term loan as of September 30, 2025 and December 31, 2024 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.

Note 3 - Fair Value Measurements (continued)

Level 3 Roll forward

Fair value measurements categorized within Level 3 are sensitive to changes in assumptions or methodology used to determine fair value, and such changes could result in a significant increase or decrease in the fair value.

The changes for Level 3 items measured at fair value on recurring basis using significant unobservable inputs are as follows:

There was no Level 3 activity for the three and nine months ended September 30, 2025.

(1)Changes in fair value of warrant liabilities are disclosed separately in the Consolidated Statements of Operations

Note 4 -INVENTORY

Inventory consists of the following:

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 $111 to $309.

On April 12, 2024 the Company entered into a lease agreement, pursuant to which the Company agreed to lease an approximately 64,000 square foot facility (the “Premises”) located in Fernley, Nevada, to be used for general, warehousing, assembly/light manufacturing, painting of products, storage fulfillment, distribution of the Company’s products, and other uses as permitted under the Fernley Lease Agreement (the “Fernley Lease Agreement”). The effective date of the lease is April 1, 2024 (the “Lease Commencement Date”). However, the initial term of the Fernley Lease Agreement (the “Term”) is for a period of sixty (60) months, effective June 1, 2024 (the “Rent Commencement Date”). The base rent for the Premises, payable monthly, was $45 for the first ten months, starting June 1, 2024, and is subject to a three percent (3.0%) increase on the anniversary of the Lease Commencement Date each year. The Company also will be responsible for twenty-five percent (25%) of any operating expenses, taxes and insurance expenses incurred by the Landlord in connection with the building in which the Premises are located (the “Expenses”) as well as utility expenses. The Expenses are subject to recalculation and increase upon the completion of the Initial Improvements (as defined in the Fernley Lease Agreement). The Landlord is responsible for completing the Initial Improvements. The Fernley Lease Agreement also contains customary default provisions allowing the Landlord to terminate the Fernley Lease Agreement if the Company fails to cure certain breaches of its obligations under the Fernley Lease Agreement within a specified period of time upon written notice to the Company. Concurrent with the execution of the Fernley Lease Agreement, the Company paid the Landlord a security deposit of $50.

On May 8, 2025, the Company entered into a sixth lease amendment with its landlord to extend the lease term for an additional sixty-four (64) month period for the research and development lab and engineering office in Reno, Nevada. Under the terms of the amended lease, the base rent due shall be fully abated for the four (4) month period commencing on August 1, 2025, and ending on November 30, 2025. The lease is set to expire on November 30, 2030.

Note 5 - Commitments and Contingencies (continued)

The following table presents the breakout of the operating leases as of:

Assumptions used in determining the Company’s incremental borrowing rate include its implied credit rating and an estimate of secured borrowing rates based on comparable market data.

At September 30, 2025, the future minimum lease payments under these operating leases are as follows:

During the three and nine months ended September 30, 2025, the Company recorded a non-cash impairment of a right-of-use asset of $453 within operating expenses.

All lease costs included in the schedule above are fixed.

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 3-5 years. The leased assets are recognized in property plant & equipment.

The following table presents the breakout of the financing leases as of:

Assumptions used in determining the Company’s incremental borrowing rate include its implied credit rating and an estimate of secured borrowing rates based on comparable market data.

At September 30, 2025, the future minimum lease payments under these financing leases are as follows:

Other Contingencies

In March 2025, the Company agreed to pay LithiumHub a total of $2,500, of which approximately $562 is payable in 2025 and approximately $1,938 is payable in 2026, in exchange for a non-exclusive license in LithiumHub Technologies, LLC’s patent rights related to the Patents-in-Suit. In accordance with the Settlement Agreement, the Company and LithiumHub terminated the ongoing patent litigation between them. The Settlement Agreement includes no admission of infringement by the Company. As of September 30, 2025, the Company recorded an accrued settlement liability of $2,125 which is entirely classified as current. On October 22, 2025, the Company paid in full the $2,125 settlement amount.

Note 6 -LONG TERM DEBT

Term Loan Agreement

As of September 30, 2025, the Company had an outstanding term loan under a Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”), dated October 7, 2022. The Term Loan matures on October 7, 2027 and amortizes at a rate of 5% per annum beginning in October 2024.

Prior to any amendments, the Term Loan accrues 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 7.0% payable in cash, plus an additional 4.5% to 6.5% payable in kind (“PIK”), depending on the Company’s senior leverage ratio. Effective April 1, 2024, interest payable to lenders subject to the regulations of the U.S. Small Business Administration (with $30,846 of principal outstanding as of that date) is limited to 14.0% per annum, excluding default interest permitted under applicable SBA regulations. From October 1, 2024 through March 31, 2025, interest on the non-SBA regulated portion continued to accrue at adjusted SOFR plus 7.0% payable in cash, and 4.5% to 6.5% payable in kind. Beginning April 1, 2025, interest on all outstanding balances was payable entirely in cash, at a rate equal to adjusted SOFR plus a margin ranging from 11.5% to 13.5%, depending on the Company’s senior leverage ratio.

During the nine months ended September 30, 2025 and 2024, the Company recognized interest expense of $11,233 and $10,531, respectively. During the three months ended September 30, 2025 and 2024, the Company recognized interest expense of $3,927 and $3,509, respectively. Amortization of the debt issuance costs amounted to $5,240 and $4,490, respectively, during the nine months ended September 30, 2025 and 2024. Amortization of the debt issuance costs amounted to $2,456 and $2,062, respectively, during the three months ended September 30, 2025 and 2024. As of September 30, 2025, the carrying value of the Term Loan was $45,423, consisting of $69,974 in principal and $27,172 capitalized PIK interest, net of $51,723 in unamortized debt discount. As of December 31, 2024, the carrying value was $29,646, consisting of $69,974 in principal, plus $15,938 in capitalized PIK interest, net of $56,266 in unamortized debt discount.

The obligations under the Term Loan Agreement are secured by a first-priority lien on substantially all of the Company’s assets, including certain mortgaged properties.

Subsequent to the original execution of the Term Loan Agreement, the Company entered into six amendments which modified certain terms of the facility, including, but not limited to, interest rate mechanics, the timing of principal payments, and certain financial and operational covenants. Five of these amendments were in effect as of September 30, 2025 and the Sixth Amendment was entered into on October 20, 2025.

Financial Covenants

Note 6 - Long Term Debt (continued)

In February 2025, in connection with the Purchase Agreement, the Company entered into the Fifth Amendment to the Term Loan Agreement. This amendment extended the Term Loan’s maturity date by one year to October 2027 and deferred all principal and interest payments until April 2026. Additionally, the amendment postponed certain covenant requirements, significantly reducing the likelihood of a breach and the lender’s ability to accelerate repayment based on prior noncompliance, thereby allowing the Company to reclassify the debt as long-term as of December 31, 2024.

At September 30, 2025, the future debt maturities are as follows:

Subsequent to September 30, 2025, the Company entered into the Sixth Amendment to the Term Loan Agreement, for details, refer to Subsequent Event Note 12.

Note 7 -RELATED PARTY

On January 26, 2024 the Company entered into a convertible promissory note (the “January Note”) with a board member in the amount of $1,000, or the January Principal Amount. Upon execution of the January Note and funding of the original principal sum, a payment of $50 (the “January Loan Fee”) was fully earned as of the date of the January Note and was due and payable in full in cash on February 2, 2024. The Company paid the January Principal Amount and the January Loan Fee on February 1, 2024.

On February 27, 2024 the Company entered into a convertible promissory note (the “February Note”) with a board member in the amount of $1,700, or the February Principal Amount. Upon execution of the February Note and funding of the original principal sum, a payment of $85 (the “February Loan Fee”) was fully earned as of the date of the February Note and was due and payable in full in cash on March 1, 2024. The Company paid the February Principal Amount and the February Loan Fee on March 1, 2024.

Effective April 12, 2024, the Company entered into amendments to the employment agreements with its Chief Executive Officer, its Chief Revenue Officer and its Chief Marketing Officer to amend the terms of their annual equity compensation (the “Amended Employee Agreements”). The Amended Employee Agreements allow the Company to issue a combination of cash and equity awards on an annual basis up to a specified amount ($1,532 for the Chief Executive Officer, $490 for the Chief Revenue Officer and $236 for the Chief Marketing Officer), subject to approval and such other terms and conditions imposed by the compensation committee of the board of directors.

Note 8 -WARRANTS

Common Stock Warrants classified as Equity

The following table presents a roll-forward of the Company’s equity warrants from January 1, 2025 to September 30, 2025 and January 1, 2024 to September 30, 2024:

Common Stock Warrants classified as Liability

Term Loan Warrants

On February 26, 2025, the Company entered into the Fifth Amendment to the Term Loan with the lenders in connection with the February 2025 securities purchase agreement (seeNote 9). The Fifth Amendment provided for a one-time issuance the February 2025 Penny Warrants to purchase up to 330,000 shares of the Company’s common stock, at an exercise price of $0.01 per share. The February 2025 Penny Warrants are immediately exercisable upon issuance and will expireten years from the date of issuance.

The February 2025 Penny Warrants were valued utilizing a Black-Scholes model with the following assumptions:

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 Penny Warrants outstanding prior to the merger.

Common Stock Warrants classified as Liability (Continued)

The following table provides the significant inputs to the Black-Scholes method for the fair value of the Penny Warrants:

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:

Common Stock Warrants classified as Liability (Continued)

The following table presents a roll-forward of the Company’s liability classified warrants from January 1, 2025 to September 30, 2025 and January 1, 2024 to September 30, 2024:

Private Placement Convertible Preferred Warrants classified as Liability

In February 2025, in connection with a private placement offering of Series A Convertible Preferred Stock (seeNote 9), the Company issued 20 Private Placement Convertible Preferred Warrants (as defined below). Each warrant entitles the holder to purchase up to 200 shares of Series A Preferred Stock at an exercise price of $10,000 per share. The warrants are exercisable immediately and expire upon the earliest of: (i) 33 months after the shares of common stock issuable upon conversion of Series A Preferred Stock are registered for resale under the Securities Act, (ii) the occurrence of a Change of Control (as defined in the Certificate of Designation), or (iii) the full redemption of Series A Preferred Stock. The number of underlying shares and the exercise price are subject to adjustment in the event of stock splits, combinations, dividends, reclassifications, or other similar events. Upon exercise of the warrants, the Series A Preferred Stock is convertible into common stock at a conversion price that is subject to a floor of $0.424 per share, pursuant to the terms set forth in the Certificate of Designation.

The Company accounts for the Private Placement Convertible Preferred Warrants issued in connection with the initial offering in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the Private Placement Convertible Preferred Warrants do not meet the criteria for equity treatment thereunder, each Private Placement Convertible Preferred Warrant must be recorded as a derivative liability with the initial fair value of approximately $120. This liability is subject to re-measurement at each balance sheet date, with changes recorded in the consolidated statement of operations and comprehensive loss. However, the Company has deemed the fair value at inception as immaterial for initial recognition of the liability and will continue to monitor the change in fair value for subsequent periods. On June 23, 2025, the Company and the holder of the Private Placement Convertible Preferred Warrants agreed to cancel such holder’s warrants to purchase up to an aggregate of 4,000 shares of Series A Preferred Stock, with an exercise price of $10,000 per share of Series A Preferred Stock. As a result, the Private Placement Convertible Preferred Warrants are no longer outstanding. Please see Note 9 for more information as related to the aforementioned initial closing of the Private Placement.

Private Placement Convertible Preferred Warrants classified as Liability (Continued)

The following table presents a roll-forward of the Company’s Private Placement Convertible Preferred Warrants from January 1, 2025 to September 30, 2025:

Note 9 -REDEEMABLE CONVERTIBLE PREFERRED STOCK

In February 2025, the Company entered into the Purchase Agreement with an institutional investor. Pursuant to the Purchase Agreement, the investor agreed to purchase in a registered direct offering (the “Registered Direct Offering”) from the Company 180 shares of Series A Preferred Stock,, at a price of $10,000 per share, initially convertible into shares of common stock of the Company, at a conversion price of $2.332 per share of common stock.

The Company conducted an initial offering (the “Initial Closing”), which included the sale of Series A Preferred Stock through a Registered Direct Offering (the “Registered Direct Offering”) and a Private Placement pursuant to the Purchase Agreement (the “Private Placement”). In the Private Placement, the Company agreed to sell: (i)170 additional shares of Series A Preferred Stock at the same price as in the Registered Direct Offering, with a conversion price of $2.332 per share, and (ii)20 warrants (the “Private Placement Convertible Preferred Warrants”) to purchase up to 4,000 shares of Series A Preferred Stock at $10,000 per share. The Floor Price for the Series A Preferred Stock sold in the Initial Closing was $0.424. These terms are subject to adjustments for corporate events like stock splits.

In total, the Company sold 350 shares of Series A Preferred Stock and 20 Private Placement Convertible Preferred Warrants, raising $3,180 in net proceeds, which will be used for working capital and other general purposes.

On April 28, 2025, the Company completed the second closing of the Private Placement (the “Second Closing”) pursuant to the Purchase Agreement. In connection with the Second Closing, the investor purchased an additional 450 shares of Series A Preferred Stock at a price of $10,000 per share, resulting in net proceeds of $4,150, which the Company received during the second quarter of 2025.

The terms of the Series A Preferred Stock issued in the Second Closing were substantially similar to those issued in the Initial Closing, except that the initial conversion price was set at $0.594 per share, with a Floor Price of $0.10902 per share. The Second Closing shares are convertible into common stock at the option of the holder, subject to certain limitations and adjustments.

Note 9 - Redeemable Convertible Preferred Stock (continued)

While the host contract is considered as an equity-classified instrument, it includes provisions that allow the investor to redeem the instrument for cash or other assets upon the occurrence of events that are not solely within the company’s control. Because of the Series A Preferred Stock containing this redemption feature, it was originally classified as mezzanine equity. From the issuance date through September 30, 2025,800 shares of Series A Preferred Stock were converted into 32,314,615 shares of common stock. As a result, $7,330 (net of offering costs) was reclassified from mezzanine equity to common stock and additional paid-in capital.

At June 30, 2025, the Company did not have a sufficient number of registered shares to fully satisfy the conversion of the remaining 133 Series A Preferred Stock under either the floor conversion price of $0.424, which would have required approximately 3,198,113 shares, or the Alternate Conversion Price of $0.144, which would have required approximately 9,407,670 shares (based on 90% of the lowest VWAP over the 10 trading days prior to June 30, 2025). The impact of the Company not having a sufficient number of registered shares to fully satisfy the conversion of the remaining Series A Preferred Stock would be an immaterial reclass to a derivative liability.

On July 20, 2025, the Company 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, the Company issued and delivered 2,100,000 shares of common stock to the holder and the holder surrendered to the Company 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, the Company’s 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. The Company has 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.

During the nine months ended September 30, 2025, all of the Company’s redeemable preferred stock converted into 32,314,615 shares of common stock in accordance with their respective terms. As of September 30, 2025, no redeemable preferred stock remains outstanding.

On October 20, 2025, the Company entered into a definitive agreement to issue newly-created Series B Preferred Stock, in exchange for an equivalent amount of its senior secured term-loan debt. See Note 13 – Subsequent Events for additional details.

Note 10 -COMMON STOCK

No dividends on common stock had been declared by the Company.

For the nine months ended September 30, 2025 and 2024, the Company had reserved shares of common stock for issuance as follows:

ChEF Equity Facility

The Company and Chardan Capital Markets LLC, a New York limited liability company (“CCM LLC”) entered into a purchase agreement (the “Original Purchase Agreement”) and a Registration Rights Agreement in connection with the merger. Pursuant to the Original Purchase Agreement, the Company has 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 Purchase Agreement (the “ChEF Equity Facility”). In addition, the Company appointed LifeSci Capital, LLC as “qualified independent underwriter” with respect to the transactions contemplated by the Purchase Agreement. Under the terms of the Purchase Agreement with CCM LLC, the Company issued 23,160 shares for aggregate net proceeds to the Company of $63 from the period January 1, 2025 through September 30, 2025. The Company issued 249,488 shares pursuant to the ChEF Equity Facility for aggregate proceeds to the Company of $1,705 from the period of January 1, 2024 through September 30, 2024. In accordance with the anti-dilution provisions of the Penny Warrants with respect to certain sales made by the Company under the ChEF Equity Facility, 20,524 Penny Warrants were issued from the period January 1, 2024 through September 30, 2024. The ChEF Equity Facility expires in December 2025.

July 2025 Public Offering

On July 30, 2025, the Company entered into an underwriting agreement with Canaccord, as representative of the several underwriters named in the certain underwriting agreement, relating to an underwritten public offering of 21,980,000 shares of common stock at a price to the public of $0.25 per share raising proceeds of $4,684 net of offering costs.

October 2025 Public Offering

Refer to Note 13 – Subsequent Events for information regarding the Company’s two October 2025 offerings completed under underwriting agreements with Canaccord, which included the issuance of additional shares of common stock and pre-funded warrants.

Note 11 -STOCK-BASED COMPENSATION

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 273,822 shares of the Company’s common stock were initially available for issuance under the ESPP. The share limit will automatically increase on the first trading day in January of each year by an amount equal to lesser of (1)1% of the total number of outstanding shares of the Company’s common stock on December 31 in the prior year, (2)166,667 shares, or (3) such number as determined by the Company’s board of directors.

Note 11 - Stock-Based Compensation (Continued)

A summary of the Company’s option activity and related information follows:

During the nine months ended September 30, 2025, the Company did not issue any stock options.

Share-based compensation expense for options and RSUs totaling $578 and $759 was recognized in the Company’s consolidated statements of operations for the nine months ended September 30, 2025 and 2024, respectively. Share-based compensation expense for options and RSUs totaling $168 and $256 was recognized in the Company’s consolidated statements of operations for the three months ended September 30, 2025 and 2024, respectively.

Of the $578 of share-based compensation incurred during the nine months ended September 30, 2025, $45 is allocated to cost of goods sold, $36 to research and development, $179 to selling and marketing, and $318 to general and administrative expenses. Of the $759 of share-based compensation incurred during the nine months ended September 30, 2024, $81 is allocated to cost of goods sold, $136 to research and development, $198 to selling and marketing, and $344 to general and administrative expenses.

Of the $168 of share-based compensation incurred during the three months ended September 30, 2025, $11 is allocated to cost of goods sold, $9 to research and development, $55 to selling and marketing, and $93 to general and administrative expenses. Of the $256 of share-based compensation incurred during the three months ended September 30, 2024, $21 is allocated to cost of goods sold, $35 to research and development, $71 to selling and marketing, and $129 to general and administrative expenses.

Restricted Stock Units

On February 5, 2024, the Company granted 24,447 restricted stock units of which 11,111 vested immediately. The fair value of the 24,447 restricted stock units was $95 and an expense of $8 and $48 was recorded as compensation expense during the nine months ended September 30, 2025 and 2024, respectively.

Note 11 - Stock-Based Compensation (Continued)

Restricted Stock Units (continued)

On April 12, 2024, the Company issued a total of 92,923 RSUs to the following employees: (i)63,045 RSUs to the Chief Executive Officer; (ii)20,165 RSUs to the Chief Revenue Officer; and (iii)9,712 RSUs to the Chief Marketing Officer. Each of the RSUs granted will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary of the date of issuance and the following two vesting dates on each subsequent anniversary of the date of issuance, subject to each employees’ continued employment as of each vesting date. The fair value of the 92,923 RSUs was $376 and an expense of $94 and $59 was recorded during the nine months ended September 30, 2025 and 2024, respectively.

On April 12, 2024, the board of directors authorized the issuance of 24,692 RSUs to each director in connection with their service as directors for the year ended December 31, 2023. The RSUs will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary date of their issuance, subject to the directors continued service on with the Company on each vesting date. The fair value of the 148,152 RSUs issued to directors in total was $600 and an expense of $102 and $94 was recorded during the nine months ended September 30, 2025 and 2024, respectively.

On June 24, 2024, the Company granted 2,417 RSUs. The RSUs will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary date of their issuance, subject to the directors continued service on with the Company on each vesting date. The fair value of the 2,417 RSUs was $19 and an expense of $4 and $1 was recorded as compensation expense during the nine months ended September 30, 2025 and 2024, respectively.

On August 19, 2024, the Company granted 81,710 RSUs. The RSUs will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary of the date of issuance and the following two vesting dates on each subsequent anniversary of the date of issuance, subject to each employees’ continued employment as of each vesting date. The fair value of the 81,710 RSUs was $448 and an expense of $89 and $17 was recorded as compensation expense during the nine months ended September 30, 2025 and 2024, respectively.

On August 26, 2024, the Company granted 2,223 RSUs. The RSUs will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary of the date of issuance and the following two vesting dates on each subsequent anniversary of the date of issuance, subject to such employee’s continued employment as of each vesting date. The fair value of the 2,223 RSUs was $12 andno expense was recorded as compensation expense during the nine months ended September 30, 2025 or 2024.

On April 1, 2025 and May 19, 2025, the Company granted 3,778 and 889 RSUs, respectively. The RSUs will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary of the date of issuance and the following two vesting dates on each subsequent anniversary of the date of issuance, subject to each employees’ continued employment as of each vesting date. The fair value of the RSUs was $4 and $1 was recorded as compensation expense during the nine months ended September 30, 2025.

The following table presents the RSU activity for the nine months ended September 30, 2025:

Note 11 - Stock-Based Compensation (continued)

As of September 30, 2025 and 2024 there were 1,168,204 and 928,881 shares, respectively, of unissued authorized and available for future awards under the 2022 Equity Incentive Plan and Employee Stock Purchase Plan.

Employee Stock Purchase Plan

The Company maintains the Dragonfly Energy Corporation, Inc. Employee Stock Purchase Plan (“ESPP”) 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.

On April 24, 2024, the Company issued 27,197 common shares in connection with its Employee Stock Purchase Plan for a total consideration of approximately $112. The ESPP allows employees to purchase shares at a 15% discount to the lesser of the stock price at the beginning or the end of the offering period, which was October 1, 2023, and April 1, 2024, respectively. The discount resulted in an exercise price of $4.14 per share.

During the nine months ended September 30, 2025, the Company issued 87,506 common shares in connection with its Employee Stock Purchase Plan for a total consideration of approximately $73. The ESPP allows employees to purchase shares at a 15% discount to the lesser of the stock price at the beginning or the end of the offering period, which was October 1, 2024 and April 1, 2025, respectively. The discount resulted in an exercise price of $0.83 per share.

Note 12 -REPORTABLE SEGMENTS

The Company hastwo reportable segments: DTC and OEM. The DTC segment pertains to Battle Born, LLC branded batteries which are sold directly to consumers. The OEM segment pertains to Dragonfly branded batteries which are sold to original equipment manufacturers

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 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.

The following table presents the reportable segments information for the nine months ended September 30, 2025:

There were no significant customer revenues from the Company’s DTC segment for the nine months ended September 30, 2025.

Revenues from one customer of the Company’s OEM segment represent approximately $13,021, or 29%, of the Company’s consolidated revenues for the nine months ended September 30, 2025.

The following table presents the reportable segments information for the nine months ended September 30, 2024:

There were no significant customer revenues from the Company’s DTC segment for the nine months ended September 30, 2024.

Revenues from one customer of the Company’s OEM segment represent approximately $5,534, or 15%, of the Company’s consolidated revenues for the nine months ended September 30, 2024.

he following table presents the reportable segments information for the three months ended September 30, 2025:

**DRAGONFLY ENERGY HOLDINGS CORP. **

There were no significant customer revenues from the Company’s DTC segment for the three months ended September 30, 2025.

Revenues from one customer of the Company’s OEM segment represents approximately $5,575, or 35%, of the Company’s consolidated revenues for the three months ended September 30, 2025.

The following table presents the reportable segments information for the three months ended September 30, 2024:

There were no significant customer revenues from the Company’s DTC segment for the three months ended September 30, 2024.

Revenues from one customer of the Company’s OEM segment represent approximately $2,007, or 16%, of the Company’s consolidated revenues for the three months ended September 30, 2024.

Note 13 -SUBSEQUENT EVENTS

On October 6, 2025, the Company entered into the First Offering Underwriting Agreement with Canaccord, as representative of the First Offering Underwriters, relating to the First October 2025 Offering of 20,000,000 shares of common stock, at a price to the public of $1.25 per share. Pursuant to the terms of the First Offering Underwriting Agreement, the Company granted to the First Offering Underwriters a 30-day option to purchase up to an additional 3,000,000 shares of common stock in the First October 2025 Offering at the public price which the First Offering Underwriters exercised. On October 7, 2025, the Company completed the First October 2025 Offering of 23,000,000 shares of common stock raising gross proceeds of approximately $27,025 and net proceeds of $26,925 after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company.

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 9,000,000 shares. The Plan Amendment became effective following its approval by the Company’s stockholders.

On October 16, 2025, the Company entered into the Second Offering Underwriting Agreement with Canaccord, as representative of the Second Offering Underwriters, relating to the Second October 2025 Offering of (i)36,000,000 shares of common stock, at a price to the public of $1.35 per share and (ii) pre-funded warrants to purchase up to 5,000,000 shares of common stock at a price to the public of $1.3499 per pre-funded warrant. On October 17, 2025, the Company completed the Second October 2025 Offering raising gross proceeds of approximately $52,028 and net proceeds of $51,928 after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company.

On October 20, 2025, the Company entered into the Sixth Amendment to the Term Loan Agreement 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 the Company to maintain cash and cash equivalents equal to or greater than $5,000) through December 31, 2026. In connection with the Sixth Amendment, (i) the Company made a prepayment of $45,000 of outstanding indebtedness under the Term Loan Agreement from the net proceeds from the Second October 2025 Offering, (ii) the lenders forgave the repayment of $5,000 of the outstanding principal under the Term Loan Agreement, (iii) the Company paid a fee to the lenders equal to approximately $450 in cash and $450 added to principal outstanding amount of the loan under the Term Loan Agreement; and (iv) the Company agreed to issue 25,000 shares of newly created Series B Preferred Stock of the Company in exchange for $25,000 outstanding principal amount of the Term Loan.

After the prepayments made as part of the First Offering in the amount of $4,000 and the effects of the Sixth Amendment to the Term Loan Agreement, the remaining debt is $18,612.

On November 4, 2025, the Company and the lenders entered into the Exchange Agreement pursuant to which the Company issued 25,000 shares of newly created Series B Preferred Stock in exchange for $25,000 outstanding principal amount of the Term Loan.

On November 4, 2025, the Company filed a Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Restrictions of Series B Convertible Preferred Stock of the Company (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, the Company designated 25,000 shares of preferred stock as Series B Preferred Stock with a stated value of $1,000 per share.

On November 4, 2025, the Company issued 25,000 shares of Series B Preferred Stock to the lenders pursuant to the Exchange Agreement. The Series B Preferred Stock (i) is convertible into shares of common stock at the option of the lenders at a conversion price of $3.15 per share, or an aggregate of 7,936,508 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, the Company has a right to redeem any outstanding shares of the Series B Preferred Stock at its option at the greater of (i) the stated value plus any accrued and unpaid dividends and (ii) the as-converted value of the shares of common stock underlying the Series B Preferred Stock at the time of redemption (the “Optional Redemption Price”). The 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, the Company 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 the Company has 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 the Company to redeem the Series B Preferred Stock at the Optional Redemption Price.