Dragonfly Energy Holdings Corp.

Previous wording

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.

Current wording

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 disclaim 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.

Previous wording

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”).

Current wording

Since 2020, we have sold over 391,000 batteries. For the quarters ended June 30, 2026 and June 30, 2025, we sold 9,049 and 12,134 batteries, respectively, and had $13.2 million and $16.2 million in net sales, respectively. For the six months ended June 30, 2026 and June 30, 2025, we sold 14,832 and 22,979 batteries, respectively, and had $22.9 million and $29.6 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”).

Previous wording

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.

Current wording

During the second 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. We also 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. The Company also continued to advance its previously announced facility consolidation during the second quarter. While the consolidation was not fully completed by quarter-end, the Company expects to complete the principal remaining actions during the third quarter.

Previous wording

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.

Current wording

In addition, during the second quarter of 2026, we continued to advance our intellectual property portfolio in support of our solid-state battery development and dry electrode manufacturing platform. In April 2026, we announced that we had received an allowance from the Japan Patent Office for our application titled “Powderized Solid-State Electrolyte and Electroactive Materials,” marking our first patent application allowance in Japan and covering innovations in powderized solid-state electrolyte and electroactive materials, a core component of our solid-state battery development and dry electrode manufacturing platform. In June 2026, we announced that we had received a notice of allowance from the European Patent Office for our patent application titled “Systems and Methods for Dry Powder Coating Layers of an Electrochemical Cell,” which covers key elements of our proprietary dry electrode manufacturing platform, including the use of dry powder coating to form critical layers within an electrochemical cell and processes that can support electrode, separator, and solid-state electrolyte layers. We also announced in June 2026 that we had received a notice of allowance from the United States Patent and Trademark Office for our patent application titled “Powderized Solid-State Electrolyte and Electroactive Materials,” which is directed toward manufacturing processes that support our solid-state battery development efforts.

Previous wording

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.

Current wording

As of June 30, 2026, we had cash totaling $6.3 million. Our net loss for the quarter ended June 30, 2026 was $4.4 million and our net loss for the quarter ended June 30, 2025 was $7.0 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.

Previous wording

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.

Current wording

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 were subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of our common stock.

Previous wording

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.

Current wording

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 our outstanding principal under the Term Loan Agreement.

Previous wording

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.

Current wording

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. During the quarter ended June 30, 2026, the October 2025 Pre-Funded Warrants were exercised in full.

Previous wording

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.

Current wording

On November 4, 2025, we entered into the Exchange Agreement with the Term Loan Lenders pursuant to which 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.

Previous wording

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.

Current wording

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. During the three months ended June 30, 2026, we sold 411,100 shares of common stock pursuant to the ATM for net proceeds of approximately $0.8 million, after deducting sales agent commissions.

Previous wording

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.

Current wording

The demand for our products ultimately depends on demand from consumers in our current end markets. We generate sales through (1) DTC and (2) 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.

Previous wording

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.

Current wording

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, have 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.

Previous wording

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.

Current wording

Our research and development is currently primarily focused on 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.

Previous wording

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.

Current wording

Net sales decreased by $3.1 million, or 19.0%, to $13.2 million for the three months ended June 30, 2026, as compared to $16.2 million for the three months ended June 30, 2025. This decrease was primarily due to lower OEM and DTC sales. RV OEM sales declined due 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, as well as negative third-party online commentary regarding certain of our products, which we believe has adversely affected customer sentiment. We have initiated legal proceedings to address this commentary. 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.

Previous wording

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.

Current wording

Cost of goods sold decreased by $2.8 million, or 24.3%, to $8.8 million for the three months ended June 30, 2026, as compared to $11.6 million for the three months ended June 30, 2025. This decrease was primarily due to lower unit volume of batteries and accessories, along with $1.1 million in IEEPA tariff refund recognized as a reduction to cost of sales and $0.5 million decrease in overhead allocated to cost of goods sold. We expect our cost of goods sold to increase over the next 12 months in conjunction with the anticipated increase in revenue.

Previous wording

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.

Current wording

Gross profit decreased by $0.3 million, or 5.7%, to $4.3 million for the three months ended June 30, 2026, as compared to $4.6 million for the three months ended June 30, 2025. The decrease in gross profit was primarily due to lower unit volume of battery and accessory sales, with an offset from the tariff refund recognized in cost of sales. Gross profit percentage increased by 4.7% to 33.0% primarily due to $1.1 million in IEEPA tariff refund recognized as a reduction to cost of sales.

Previous wording

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.

Current wording

Research and development expenses decreased by $0.1 million, or 6.5%, to $0.6 million for the three months ended June 30, 2026, as compared to $0.7 million for the three months ended June 30, 2025. This decrease was primarily due to a decrease in wage expense of $0.1 million resulting from reduced headcount. We expect research and development expenses to remain relatively stable over the next year.

Previous wording

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.

Current wording

Sales and marketing expenses decreased by $0.6 million, or 23.2%, to $2.0 million for the three months ended June 30, 2026, as compared to $2.6 million for the three months ended June 30, 2025. This decrease was primarily due to lower employee-related costs in the amount of $0.2 million and lower marketing expenses of $0.3 million, both related to cost reduction measures implemented in the second quarter, and lower shipping costs of $0.1 million related to lower sales. We expect our Selling and Marketing Expenses to decrease over the next 12 months due to cost reduction measures implemented in the second quarter of 2026.

Previous wording

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.

Current wording

There was no tax expense recorded for the three months ended June 30, 2026 or June 30, 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 June 30, 2026.

Previous wording

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.

Current wording

We generated a net loss of $4.4 million for the three months ended June 30, 2026, as compared to net loss of $7.0 million for the three months ended June 30, 2025. As described above, this result was driven by lower sales and lower cost of goods sold, and significantly offset by lower interest expense related to our debt securities and recognizing the IEEPA tariff refunds as a cost reduction against cost of sales.

Previous wording

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.

Current wording

General and administrative expenses decreased by $1.9 million, or 17.1%, to $9.1 million for the six months ended June 30, 2026, compared to $11.0 million for the six months ended June 30, 2025. This decrease was primarily due to a decrease in legal and professional services of $1.6 million, lower depreciation expense of $0.5 million and lower rent and other facility related costs in the amount of $0.6 million, partially offset by higher employee related costs in the amount of $0.6 million and higher insurance costs in the amount of $0.2 million. 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.

Previous wording

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.

Current wording

Other expense totaled $2.4 million for the six months ended June 30, 2026 as compared to other expense of $4.6 million for the six months ended June 30, 2025. Other expense for the six months ended June 30, 2026 is comprised of $3.0 million in interest expense related to our debt securities partially offset by a change in fair market value of our warrants in the amount of $0.5 million and other income of $0.1 million. Other expense for the six months ended June 30, 2025 is comprised of $10.1 million in interest expense related to our debt securities partially offset by a change in fair market value of our warrants in the amount of $5.5 million.

Previous wording

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.

Current wording

This Quarterly Report includes a non-generally accepted accounting 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.

Previous wording

The table below presents our adjusted EBITDA, reconciled to net loss for the three months ended March 31, 2026, and March 31, 2025.

Current wording

The table below presents our adjusted EBITDA, reconciled to net loss for the three and six months ended June 30, 2026, and June 30, 2025.

Previous wording

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.

Current wording

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 June 30, 2026, we had cash totaling $6.3 million. We believe that our cash balance as of June 30, 2026, combined with our access to the ATM, will fund our operations into the second quarter of 2027.

Previous wording

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.

Current wording

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. During the three months ended June 30, 2026, we sold 411,100 shares of common stock pursuant to the ATM for net proceeds of approximately $0.8 million, after deducting sales agent commissions. Subsequent to June 30, 2026, we have sold 124,975 shares of common stock for aggregate net proceeds of $148,317.

Previous wording

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.

Current wording

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 from 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.

Previous wording

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.

Current wording

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. During the quarter ended June 30, 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.

Previous wording

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.

Current wording

For the quarter ended June 30, 2026, we incurred losses and had a negative cash flow from operations. As of June 30, 2026, we had approximately $6.3 million in cash and cash equivalents and a working capital of $19.9 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.

Previous wording

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.

Current wording

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 our 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 our 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.

Previous wording

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.

Current wording

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. In performing this evaluation, management considered the Company’s projected operating performance and cash flows, available cash and liquidity, planned cost reductions, expected revenue-generating activities, access to the at-the-market equity offering program, and the additional liquidity flexibility provided by the Seventh Amendment, including the ability to pay interest in kind through December 31, 2026 and the modification and deferral of certain financial covenant requirements. Based on this evaluation, management expects the Company to achieve profitability and generate positive cash flows from operations within the next twelve months and has concluded that the Company is expected to have sufficient liquidity to meet its obligations as they become due over the next twelve months. Accordingly, 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.

Previous wording

Cash Flows for the Three months ended March 31, 2026, and March 31, 2025

Current wording

Cash Flows for the Six months ended June 30, 2026, and June 30, 2025

Previous wording

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.

Current wording

Net cash used in operating activities was $10.6 million for the six months ended June 30, 2026, primarily due to a net loss of $11.0 million with a slight offset of $0.4 million primarily due to the following changes: $4.6 million decrease in accounts payable, $3.9 million increase in inventories, $0.7 million increase in accounts receivable, and $0.3 million increase in prepaid expenses.

Previous wording

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.

Current wording

Net cash used in operating activities was $7.9 million for the six months ended June 30, 2025, primarily due to a net loss of $13.8 million partially offset by $7.3 million of payment in-kind interest accrued on the Term Loan.

Previous wording

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.

Current wording

Net cash used in investing activities was $0.8 million for the six months ended June 30, 2026, as compared to net cash used in investing activities of $1.6 million for the six months ended June 30, 2025. The cash used for the six months ended June 30, 2026 was primarily for payments for the new Battleborn website, along with improvements to the battery production area and renovations to the research and development location. The cash used for the six months ended June 30, 2025 was primarily from capital expenses to support our core battery business.

Previous wording

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.

Current wording

Net cash used by financing activities was $0.6 million for the six months ended June 30, 2026, primarily related to Series B preferred stock dividend payments and repayment of debt, partially offset by proceeds from the ATM, as compared to net cash provided by financing activities of $7.4 million for the six months ended June 30, 2025, primarily related to net proceeds of $7.3 million from the Offerings on February 26, 2025.

Previous wording

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.

Current wording

Our estimated future obligations consist of short-term and long-term operating and financing lease liabilities. As of June 30, 2026, we had $2.4 million in short-term operating and financing lease liabilities and $19.4 million in long-term operating and financing lease liabilities.

Previous wording

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.

Current wording

As disclosed above, we have a Term Loan and as of June 30, 2026, the principal amount outstanding under the Term Loan was $18.9 million.

Previous wording

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.

Current wording

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 (ii) 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.