DFLI 10-K & 10-Q changes, risk factors and insider trading

An increasing proportion of our revenue has been and is expected to continue to be derived from sales to RV OEMs. Our RV OEM sales have been on a purchase order basis, without firm revenue commitments, and we expect that this will likely continue to be the case. For example, under our Supply Agreement with Keystone RV Company, or Keystone, the largest manufacturer of towable RVs in North America, Keystone has agreed to fulfill certain of its LFP battery requirements exclusively through us for at least one year, with automatic annual renewals. However, although in time we expect Keystone to be significant contributor to our projected growth in RV OEM battery sales, this arrangement may not deliver the anticipated benefits, as there are no firm purchase commitments, sales will continue to be made on a purchase order basis, Keystone is permitted to purchase other LFP batteries from third parties and this arrangement may not be renewed. In addition, in July 2022, we agreed to a strategic investment by THOR Industries, or THOR, which, among other things, contemplates a future, mutually agreed exclusive distribution agreement with THOR in North America. Although we expect that THOR will be a be significant contributor to our projected growth in RV OEM battery sales, this arrangement may not deliver the anticipated benefits and this distribution agreement may, in the future, preclude us from dealing with other large RV OEMs and their associated brands in North America or otherwise could negatively impact our relationships with those RV OEMs to whom we may be permitted to supply our batteries. In July 2023, we were notified by Keystone that, due to weaker demand for its products and their subsequent focus on reducing costs, it would no longer install our storage solutions as standard equipment, but rather return to offering those solutions as an option to dealers and consumers. While Keystone has not moved to a different solution or competitor, as a result in this change in strategy there was a material limiting effect on our revenue in 2023. Increased overall RV OEM sales in the future may not materialize as expected or at all and we may fail to achieve our targeted sales levels. Future RV OEM sales are subject to a number of risks and uncertainties, including the number of RVs that these OEMs manufacture and sell (which can be impacted by a variety of events including those disrupting our OEM customers’ operations due to supply chain disruptions or labor constraints); the degree to which our OEM customers incorporate/design-in our batteries into their RV product lines and renew our supply agreements; the extent to which RV owners, if applicable, opt to purchase our batteries upon initial purchase of their RV or in the aftermarket; and our continued ability to successfully develop and introduce reliable and cost-effective batteries meeting evolving industry standards and customer specifications and preferences. Our failure to adequately address any of these risks may result in lost sales which could have a material adverse effect on our business, financial condition and results of operations.

In addition, our near-term growth depends, in part, on the continued growth of the end markets in which we currently operate. AlthoughAccording to third-party industry data, the total addressableglobal recreational vehicle market forwas RVs,approximately marine$62.9 vesselsbillion in 2024 and off-grid residences is estimatedprojected to reachgrow to $12approximately $168.3 billion by 2025,2033. However, these markets may not grow as expected or at all, and we may be unable to maintain existing customers and/or attract new customers in these markets. Our failure to maintain or expand our share of these growing markets could have a material adverse effect on our business, financial condition and results of operations.

Our success, and our ability to increase sales and operate profitably, depends on our ability to identify target customers and convert these customers into meaningful orders, as well as our continued development of existing customer relationships. Although we have developed a multi-pronged sales and marketing strategy to penetrate our end markets and reach a range of customers, this strategy may not continue to be effective in reaching or converting target customers into orders, or as we expand into additional markets. Recently, we have also dedicated more resources to developing relationships with certain key RV OEMs, such as Keystone, which we aim to convert into collaborations on custom designs and/or long-term contractual arrangements. We may be unable to convert these relationships into meaningful orders or renew these arrangements going forward, which may require us to expend additional cost and management resources to engage other target customers. However, in July 2023, we were notified by Keystone that, due to weaker demand for its products and their subsequent focus on reducing costs, it would no longer install our storage solutions as standard equipment, but rather return to offering those solutions as an option to dealers and consumers. While Keystone has not moved to a different solution or competitor, as a result in this change in strategy there was a material limiting effect on our revenue in 2023 and in 2024.

All of our battery assembly currently takes place at our 390,240 square foot headquarters and manufacturing facility located in Reno, Nevada. We also entered into the Fernley Lease Agreement in April 2024 for use of an approximately 64,000 square foot facility to further increase our capacity to produce our patented dry electrode process. We currently operate three LFP battery production lines, which has been sufficient to meet customer demand. If one or several production lines were to become inoperable for any period of time, we would face delays in meeting orders, which could prevent us from meeting demand or require us to incur unplanned costs, including capital expenditures.

We currently are and may in the future be subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

The uncertainty in global and macroeconomic conditions, including economic, political and social instability, including the Russia-Ukraine conflictconflict, andthe India-Pakistan conflict, Hamas’ attack on Israel,Israel and the Iranian conflict, could reduce consumer spending and disrupt our supply chain which could negatively affect our results of operations.

The global credit and financial markets have recently experienced extreme volatility and disruptions including severely diminished liquidity and credit availability, disruptions in access to bank deposits and lending commitments due to bank failures, declines in economic growth, increases in unemployment rates, supply chain disruptions, heightened interest rates and inflation, stock volatility and uncertainty about economic stability. Such conditions may continue or worsen in the future. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict including Russia’s invasion of Ukraine andUkraine, the conflict conflict between Hamas and Israel,Israel and the Iranian conflict, terrorism or other geopolitical events. Sanctions imposed by the U.S. and other countries in response to such conflicts, including sanctions imposed in connection with the war in UkraineUkraine, the India-Pakistan conflict, and the conflict between Hamas and Israel, the effect of tariffs and/or any resulting trade wars, increasing interest rates, or other factors may also adversely impact the financial markets and the global economy and any economic countermeasures by affected countries and others could exacerbate market and economic instability. For example, in late 2024 and early 2025, the United States, China, and the European Union each announced either new tariffs, non-tariff barriers, or export controls. Any of these risks, ensuing retaliation, or the further deterioration of trade relations between countries could have an adverse impact on our financial condition and results of operations. Additional tariffs or further retaliatory trade measures taken by China or other countries in response could affect the demand for any of our products, impact the competitive position of our products, prevent us from being able to sell products in certain countries or otherwise adversely impact our results of operations. Growing tensions, protectionist trade policies, and tariffs may also lead to a fragmentation of the global economy, a general reduction of international trade in goods and services, and a reduction in the integration of financial markets, any of which could materially and adversely affect our financial condition, or prospects. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.

We will continue to incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and operating results.

We will continue to face increasedsignificant legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private companycompany, and these expenses may increase even more after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges and the listing standards of Nasdaq, impose additional reporting and other obligations on public companies. Compliance with public company requirements is will increase costscostly and make certain activities more time-consuming. A number of those requirements will require us to carry out activities we have not done previously. For example, we willhave createcreated new board committees, enterentered into new insurance policies and adoptadopted new internal controls and disclosure controls and procedures. In addition, we incur expenses associated with SEC reporting requirements will be incurred.requirements. Furthermore, if any issues in complying with those requirements are identified (for example, if management or our independent registered public accounting firm identifies additional material weaknesses in the internal control over financial reporting), we could incur additional costs rectifying those issues, the existence of those issues could adversely affect our reputation or investor perceptions of it and it may be more expensive to obtain director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on our board of directors or as executive officers. In addition, as a public company, we may be subject to stockholder activism, which can lead to substantial costs, distract management and impact the manner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information in this Annual Report and in filings required of a public company, our business and financial condition will becomeis more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be materially adversely affected and even if the claims do not result in litigation or are resolved in our favor, these claims and the time and resources necessary to resolve them could divert the resources of our management and adversely affect our business and results of operations. The additional reporting and other obligations imposed by these rules and regulations willincrease increaseour legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

As of December 31, 2024,2025, we had cash totaling $4.8$18.3 million. Our net loss for the year ended December 31, 20242025 was $40.6$69.9 million and our net loss for the year ended December 31, 20232024 was $13.8$40.6 million. We will need to raise additional funds, including through the issuance of equity, equity-related or debt securities or by obtaining credit from financial institutions to fund, together with our principal sources of liquidity, ongoing costs, such as research and development relating to our solid-state batteries, expansion of our facilities, and new strategic investments. We cannot be certain that additional capital will be available on attractive terms, if at all, when needed, which could be dilutive to stockholders. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing stockholders could experience significant dilution. Any equity securities issued may provide for rights, preferences, or privileges senior to those of common stockholders. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of common stockholders. We intend to use the ChEF Equity Facility and Term Loan and our at-the-market (ATM) facility with Canaccord to provide additional capital to us. However, market conditions and certain restrictions contained in the agreements governing the ChEF Equity Facility, the Term Loan and theATM Series A Preferred Stockfacility may limit our ability to access equity and debt under such agreements.

Failure to service our outstanding debt or comply with the financial covenants in our loan agreement could allow our lenders to accelerate payment payment under our loan agreement, which would have a material adverse effect on our results of obligations and financial position and raise substantial doubt about our ability to continue as a going concern. Additionally, without additional concessions or modifications to our loan agreement and the inherent uncertainty surrounding the realization of projected revenues from new markets, there is substantial doubt about our ability to continue as a going concern. Due to these reasons, thisThis could require us, to among other things, reduce operations, sell off our assets, seek the protection of bankruptcy courts or shut down our operations and dissolve.

For the year ended December 31, 2024,2025, we incurred losses and had a negative cash flow from operations. As of December 31, 2024,2025, we had approximately $4.8$18.3 million in cash and cash equivalents and working capital of $11.1$30.4 million. As of December 31, 2024,2025, we had $86$19.3 million in principal outstanding under our Term Loan Agreement. 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.

In addition, we will need to raise additional debt and/or equity financing to fund our operations and strategic plans and meet our financial covenants. We have historically been able to raise additional capital through issuance of equity and/or debt financing and we intend to use the ChEFATM Equity(as Facilitydefined herein) with Canaccord Genuity, LLC and raise additional capital as needed. However, we cannot guarantee that we will be able to raise additional equity, contain expenses, or increase revenue, and comply with the financial covenants under the Term Loan. If such financings are not available, or if the terms of such financings are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, including by not seeking potential acquisition opportunities, eliminating redundancies, or reducing or delaying our production facility expansions, which may adversely affect our business, operating results, financial condition and prospects. Further, any future debt or equity financings may adversely affect us, including the market price of our common stock and may be dilutive to our current stockholders. Additionally, any convertible or exchangeable securities as well as preferred stock that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock. If we are unable to raise additional capital or service our debt, we may be forced to reduce operations, seek the protection of bankruptcy courts or shut down our operations and dissolve. If we liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

WeIf arewe do not currentlycontinue into compliance withmeet the continued listing requirements for The Nasdaq Capital Market. If we do not regain compliance and continue to meet the continued listing requirements,Market, our securitiescommon stock may be delisted, which could affect the market price and liquidity for our common stock and reduce our ability to raise additional capital.

WeOur intendcommon to monitor our MVLSstock and may,Public ifWarrants appropriate,are considercurrently implementinglisted availablefor optionstrading toon regainThe Nasdaq Capital Market. Continued listing of a security on the Nasdaq Capital Market is conditioned upon compliance with various continued listing standards. In the past, we have received notices from Nasdaq’s Listing Qualifications Department indicating that we had not complied with certain of the Nasdaq Capital Market’s continued listing standards, including compliance with the MVLS$1.00 Requirement.minimum bid price for our common stock (the “Minimum Bid Price”) Ifand market value of listed securities. While we dohave not regainregained compliance withinfor theeach allottedinstance, compliance period, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our securities will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel. Therethere can be no assurance that we will regaincontinue compliance with the MVLS Requirement during the 180-day compliance periodto or maintain compliance with the other Nasdaq listing requirements.requirements, including the Minimum Bid Price, market value of listed securities and stockholder equity standards. A delisting could substantially decrease trading in our common stock, adversely adversely affect the market liquidity of our common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemptionpre-emption of state securities laws, result in a default under the terms of our outstanding indebtedness, adversely affect our its ability to obtain financing on acceptable terms, if at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. Additionally, the market price of our common stock may decline further and stockholders may lose some or all of their investment. There can be no assurance that we will be able to maintain compliance with the continued listing standards of the Nasdaq Capital Market.

Further, we have registered 2,390,226up to $50.0 million of shares of common stock to be issued and sold from time to CCMtime LLCthrough Canaccord Genuity LLC, acting as sales agent, in connection with the ChEF Equity Facility.ATM. Any sales of such shares into the public market could have a significant negative impact on the trading price of our common stock. This impact may be heightened by the fact that sales to CCM LLC will generally be at prices below the then current trading price of our common stock. If the trading price of our common stock does not recover or experiences a further decline, sales of shares of common stock to CCM LLC pursuant to the Purchase AgreementATM may be a less attractive source of capital and/or may not allow us to raise capital at rates that would be possible if the trading price of our common stock were higher.

The exercise of outstanding warrants or conversion of the Series B Preferred Stock to acquire our common stock would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

The exercise of outstanding warrants or conversion of the Series B Preferred Stock to acquire our common stock will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. As of March 27,26, 2025 ,2026, there are currently (i) 1,046,947104,695 shares of common stock issuable upon the exercise of outstanding public warrants at an exercise price of $103.50$180.00 per share (the “Public Warrants”); (ii) 166,82116,083 shares of common stock issuable upon the exercise of outstanding private warrants at an exercise price of $103.50$180.00 per share (the “Private Warrants”); and (iii) 680,473103,947 shares of common stock issuable upon exercise of of outstanding Penny Warrants at an exercise price of $0.01 per share; and(iv) 1,061,685500,000 shares of common stock issuable upon the exercise of of outstanding Pennypre-funded Warrantswarrants at an exercise price of $0.09$0.0001 per share. TheAs $10of WarrantsMarch were26, exercised2026, in full in 2022 andthere are nocurrently 799,835 share longerof outstanding.common stock issuable upon the conversion of the outstanding Series B Preferred Stock.

In addition, the Penny Warrants have price-based anti-dilution protection against certain subsequent equity sales or distributions at below $900.00 $90.00 per share of common stock, subject to exclusions including for issuances upon conversion exercise or exchange of securities outstanding as of October 7, 2022, the closing date of the Business Combination, issuances pursuant to agreements in effect as of the closing date of the Business Combination, issuances pursuant to employee benefit plans and similar arrangements, issuances in joint ventures, strategic arrangements or other non-financing type transactions and issuances pursuant to any public equity offerings. Depending on the nature and price of any equity issuances by us, the number of shares issuable upon the exercise of such Penny Warrants could be increased and the exercise price of the Penny Warrants could be adjusted down. Under the terms of the Penny Warrants, no adjustment will be made in connection with any sale of shares of up to $150.0 million in gross proceeds under the Purchase Agreement (or any replacement thereof) if the sales price is higher than $45.00$450.00 (appropriately adjusted for stock splits, combinations and the like). The Sponsor has agreed that the Private Warrants may not be exercised to the extent the Sponsor and any affiliate of the Sponsor is deemed to beneficially own, or it would cause the Sponsor and such affiliates to be deemed to beneficially own, more than 7.5% of our common stock.

As a public company, we will be required to comply with the requirements of the Sarbanes-Oxley Act, including, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. See “We have identified material weaknesses in our internal control over financial reporting. These material weaknesses could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner” and Part II – Item 9A – Controls and Procedures. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers.

On NovemberDecember 22,18, 2024,2025, we effected a reverse stock split for our issued and outstanding Common Stock at a ratio of 1-for-9.1-for-10. All of our historical share and per share information related to issued and outstanding Common Stock and outstanding options and warrants exercisable for Common Stock included in this prospectus have been adjusted, on a retroactive basis, to reflect the reverse stock splits. See “Corporate Information.”

We are a manufacturer of non-toxic deep cycle lithium-ion batteries that are designedcaters to displace lead acid batteriescustomers in athe numberconsumer ofindustry different storage applications and end markets (including the RV, marine vessel, and solar and off-grid industries,residence industries), and trucking, industrial and energy storage markets, with proprietary, patented and disruptive battery cell manufacturing and non-flammable solid-state cell technology currently under development.

Since 2020, we have sold over 330,000370,000 batteries. For the years ended December 31, 20242025 and 2023,2024, we sold 42,44743,129 and 64,09642,447 batteries, respectively, and had $50.6$58.6 million and $64.4$50.6 million in net sales, respectively. We currently offer aseveral linelines of batteries across our “Battle Born” and “Dragonfly”two brands, each differentiated by size, power and capacity, consisting of seven different models, havingwhich optional featurescome includingwith an option for internal heat for cold temperature operation andor an option for wireless communication using our Dragonfly IntelLigence communicationfeature. capabilities.As a result of changes to our marketing focus and corporate objectives, we our focusing our selling efforts of “Battle Born” branded batteries primarily to OEMs as well as DTC customers.

We currently source the lithium iron phosphateLFP cells incorporated into our batteries from a limited number of carefully selected suppliers that can meet our demanding quality standards and with whom we have developed long-term relationships.

To supplement our battery offerings, we are also a reseller of accessories for battery systems. These include chargers, inverters, monitors, controllers, solar panels,controllers and other system accessories from brands such as Victron Energy, Progressive Dynamics, Magnum Energy and Sterling Power. Power. Pursuant to the Asset Purchase Agreement dated April 22, 2022 by and among us and Thomason Jones and the other parties thereto, we also acquired the assets, including Wakespeed of Thomason Jones, allowing us to include our own alternator regulator in systems that we sell.

As of December 31, 2024,2025, we had cash totaling $4.8$18.3 million. Our net loss for the years ended December 31, 20242025 and December 31, 2023,2024, were $40.6$69.9 million and $13.8$40.6 million, respectively. In addition,the inyear Februaryended December 31, 2025, we completedraised an offeringaggregate of shares$90.9 ofmillion our Series A Preferred Stock which provided us with an additionalin net proceeds in ofconnection $3.2with millionour various financings, as described below. As discussed under “—Liquidity-Liquidity and Capital Resources” below we expect that we will need to raise additional funds, including through the useissuance of the ChEF Equity Facility 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.

On July 29, 2024, Legacy Dragonfly and Battle Born Battery Products, LLC (“Battle Born LLC”), a newly formed wholly-owned subsidiary of Legacy Dragonfly, entered into a License Agreement (the “License Agreement”) with Stryten. Pursuant to the License Agreement, Agreement, Battle Born LLC granted Stryten an exclusive, worldwide license to use certain trademarks relating to Legacy Dragonfly’s lithium-ion lithium-ion battery brand, Battle Born Batteries® (the “Licensed Trademarks”) for business-to-business sales of batteries to customers within the following markets: (i) automative, (ii) marine, (iii) powersports, (iv) lawn and garden, (v) golf cart, and (vi) military military and defense (such industries, the “Stryten Market”). In exchange for the licensing rights, Stryten agreed to pay Battle Born LLC an initial licensing fee of five million dollars ($5,000,000) (the “Initial Licensing Fee”), which was paid on August 29, 2024.

In addition to the initial merger consideration in connection with our business combination,combination in October of 2022, up to 4,444,445444,445 additional shares of common stock (“Earnout Shares”) may be issued based on achieving specified milestones in three tranches:

February 2025 Registered Direct Offering and Concurrent Private Placement andPlacement, Fifth Amendment to Term Loan Agreement and April 2025 Private Placement

On February 26, 2025, we entered into a securities purchase agreement with a single institutional investor, pursuant to which we sold in a registered direct offering (the “Registered Direct Offering”) 18018 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”), at a price of $10,000 $100,000 per share, initially convertible into shares of our common stock, at a conversion price of $2.332$23.32 per share of common stock. The Series A Preferred Stock iswas also convertible by the investor at an adjusted conversion price, subject to the applicable floor price, which is based on a discount to the market price of our common stock as set forth in the certificate of designation for the Series A Preferred Stock. The floor price for the Series A Preferred Stock sold in the Registered Direct Offering is $1.00.price.

Concurrently with the sale of the Series A Preferred Stock in the Registered Direct Offering, in a private placement offering pursuant to the Purchase Agreement (the “Private Placement” and, together with the Registered Direct Offering, the “Offerings”), we sold, at the initial closing of the Private Placement (the “Initial Closing” and, together with the Registered Direct Offering, the “Initial Offerings”), (i) an additional 17017 shares of Series A Preferred Stock at the same offering price as the Series A Preferred Stock offered in the Registered Direct Offering, initially convertible into shares of common stock at a conversion price of $2.332$23.32 per share, and (ii) warrants (the “Private Placement Convertible Preferred Warrants”) to purchase purchase up to an aggregate of 4,000400 shares of Series A Preferred Stock (the “Private Placement Warrant Shares”), with an exercise exercise price of $10,000$100,000 per share of Series A Preferred Stock, and a term as described below. The floor price for the Series A Preferred Stock sold in the Private Placement is $0.424.

The exercise price under each Private Placement Convertible Preferred Warrant willwas be $10,000$100,000 per share of Series A Preferred Stock. Each Private Placement Convertible Preferred Warrant will bewas exercisable for 20020 shares of Series A Preferred Stock in minimum increments of $500,000. The Private Placement Convertible Preferred Warrants will havehad 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 arewere 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 arewas subject to appropriate adjustment in the event of share dividends, share splits, reorganizations or similar events affecting shares of our common stock.

The net proceeds to us from the Initial Offerings,Offerings and the Second Offering, after deducting the placement agent’s fees and expenses and estimated offering expenses, were approximately $3.2 million and $4.2 million, respectively, excluding the net proceeds, if any, from the exercise of the Private Placement Convertible Preferred Warrants.

As a condition precedent to the closing of the Initial Offerings, on February 26, 2025, we entered into the Fifth Amendment (the “Fifth Amendment”) to the Term Loan Agreement with the Term Loan Lenders. Under the Fifth Amendment, the Term Loan Lenders agreed to, among other matters (i) receive no principal or interest payments under the Term Loan Agreement through March 31, 2026, and (ii) remove certain financial covenant tests under the Term Loan, provided that we maintain cash and cash equivalents equal to at least $2.5 million through such date.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 30, 2026, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K.Report.

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 disclaimsdisclaim 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.

Since 2020, we have sold over 382,000391,000 batteries. For the quarters ended MarchJune 31,30, 2026,2026 and MarchJune 31,30, 2025, we sold 5,7839,049 and 10,84512,134 batteries, respectively, and had $9.7$13.2 million and $13.4$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”).

Our decreasesales increased from $9.7 million in the quarter ended March 31, 2026 to $13.2 million in the quarter ended June 30, 2026. Our increase in sales was primarily attributable to RV OEM customers resuming more normal ordering patterns after right sizing inventory levels induring the responseprevious toquarter. a slower-than-anticipated market recovery, as reflected inNevertheless, RVIA shipment data for the quarter,quarter asindicates wella ascontinuing decline, reflecting overall macroeconomic conditions. DTC sales declined dueincreased todespite continued macroeconomic pressures on consumer demand.demand, Inreflecting addition,typical duringseasonality and some recovery from the quarter, we experienced increased negative third-party online commentary regarding some of our products, which may havehad impacted customer sentiment and contributed to variability in demand. In response to such commentary, we have initiated legal proceedings to address what we believe to be false and misleading statements made regarding our products. We expect our sales to continue to increase in the next 12 months as our customers expand the number of models in which they include our battery systems in for the new model year and ouras entrancewe continue to grow into new markets, including trucking and industrials, with new product offerings. The acquisition of the assets associated with the Dakota Lithium brand also expands our product offerings to include other Lithium battery models and accessories, including those that focus on marine, golf cart, and power sports, in addition to RV. Moreover, we expect the focus of the Dakota Lithium brand on retail sales to restore that channel for the Company moving forward , with such assets expected to contribute material revenue beginning in the fourth quarter of 2026. We expect incremental operating cost increases in order to restore Dakota Lithium’s commercial operations ahead of its expected revenue contribution.

During the firstsecond quarter of 2026, we continued to implement our corporate optimization initiative, prioritizing product development to drive near termnear-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. SubsequentWe to first quarter end, wealso 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.

As of MarchJune 31,30, 2026, we had cash totaling $8.6$6.3 million. Our net loss for the quarter ended MarchJune 31,30, 2026 was $6.6$4.4 million and our net loss loss for the quarter ended MarchJune 31,30, 2025 was $6.8$7.0 million. As discussed under “-Liquidity and Capital Resources” below 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 principal sources of liquidity, ongoing costs. If such financings are not available, or if the terms of such financings are less desirable than 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.

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

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 itsour outstanding principal under the Term Loan Agreement.

On October 16, 2025, we entered into an additional underwriting agreement with Canaccord, as representative of the several underwriters (the “Second Offering Underwriters”) named in the underwriting agreement, dated October 17, 2025 (the “Second Offering Underwriting Agreement”), relating to an underwritten public offering (the “Second October 2025 Offering”) of 3,600,000 shares of common stock at a price to the public of $13.50 per share, and (ii) prefunded warrants (the “October 2025 Pre-Funded Warrants”) to purchase up to 500,000 shares of common stock (the “Pre-Funded Warrant Shares”) at a price to the public of $13.50 per October 2025 Pre-Funded Warrant, which represents the per share public offering price for the Shares (as defined below) less the $0.001 per share exercise price for each such Pre-Funded Warrant. During the quarter ended June 30, 2026, the October 2025 Pre-Funded Warrants were exercised in full.

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 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 value of the shares of common stock underlying the Series B Preferred Stock (the “Optional Redemption Price”). The Term Loan Lenders 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.

In January 2026, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Canaccord Genuity Genuity LLC (“Canaccord”) under which we may offer and sell, from time to time, shares of our common stock through an at-the-market 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. AsDuring of Marchthe 31,three months ended June 30, 2026, we have not sold any411,100 shares of our common stock pursuant to the ATM. Subsequent to March 31, 2026, we have sold 379,700 shares of common stockATM for aggregate net proceeds of approximately $0.8 million.million, after deducting sales agent commissions.

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, fleet, and industrial channels, where we can deliver integrated energy storage solutions at scale.

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, hashave 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.

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.

Comparisons for the Threethree months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025

The following table sets forth our results of operations for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025. This data should be read together with our financial statements and related notes included elsewhere in this Quarterly Report, and is qualified in its entirety by reference to such financial statements and related notes.

Net sales decreased by $3.7$3.1 million, or 27.3%,19.0%, to $9.7$13.2 million for the quarterthree months ended MarchJune 31,30, 2026, as compared to $13.4$16.2 million for the the quarterthree months ended MarchJune 31,30, 2025. This decrease was primarily due to lower OEM and DTC sales. RV OEM sales declined as customers rightsized inventory levels in responsedue 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.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.

Cost of goods sold decreased by $1.4$2.8 million, or 15.2%,24.3%, to $8.0$8.8 million for the quarterthree months ended MarchJune 31,30, 2026, as compared to $9.4$11.6 million for the quarterthree months ended MarchJune 31,30, 2025. This decrease was primarily due to lower unit volume of batteries and accessories.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 and higher tariffs but will be slightly offset with some automation initiatives in the second quarter of 2026.revenue.

Gross profit decreased by $2.2$0.3 million, or 56.5%,5.7%, to $1.7$4.3 million for the quarterthree months ended MarchJune 31,30, 2026, as compared to $3.9$4.6 million for the the quarterthree months ended MarchJune 31,30, 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 profit percentage decreasedincreased by 11.8%4.7% to 17.6%33.0% primarily due to $1.1 lowermillion salesin unitIEEPA volumetariff andrefund higherrecognized materialas costsa duereduction to highercost tariffs.of sales.

Research and development expenses remaineddecreased unchangedby at$0.1 $1.0million, or 6.5%, to $0.6 million for the quartersthree months ended MarchJune 31,30, 20262026, andas compared to $0.7 million for the three months ended June 30, 2025. AThis decrease was primarily due to a decrease in wage expense of $0.4$0.1 million, 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.headcount. We expect research and development expenses to remain relatively stable over the next year.

General and administrative expenses declinedstayed bythe $1.9same million,at or 29.5%, from $4.5$4.6 million for the quarterthree months ended MarchJune 31,30, 2026,2026 comparedand toJune $6.4 million for the quarter ended March 31,30, 2025. The reduction was mainly driven by a $1.4 millionA decrease in depreciation and professional fees, which resulted from lower deal costs and litigation expensesfees in the currentamount period.of Rent expense also fell by $0.5$0.2 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 partiallywas offset by aan riseincrease in employee expenses, reflecting increased headcount in engineeringtravel and productother development.operating expenses. 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.levels.

Sales and marketing expenses decreased by $0.5$0.6 million, or 20.5%,23.2%, to $2.0 million for the quarterthree months ended MarchJune 31,30, 2026, as compared to $2.6 $2.5 million for the quarterthree months ended MarchJune 31,30, 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 lowercost headcountreduction 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 beginningimplemented in the second quarter of 2026.

Other expense totaled $0.9$1.5 million for the quarterthree months ended MarchJune 31,30, 2026 as compared to total other expense of $0.9$3.8 million for the quarterthree months ended March 31,June 30, 2025. Other expense of $0.9$1.5 million for the quarterthree months ended MarchJune 31,30, 2026 was comprised primarily of interest expense related to our debt securities. Other expense of $1.5$3.8 million in three months ended June 30, 2025 was comprised primarily of interest expense of $5.5 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$1.7 million.

There was no tax expense recorded for the quarterthree months ended MarchJune 31,30, 2026 or MarchJune 31,30, 2025. Management evaluated the positive and negative evidence 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 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 MarchJune 31,30, 2026.

We generated a net loss of $6.6$4.4 million for the quarterthree months ended MarchJune 31,30, 2026, as compared to net loss of $6.8$7.0 million for the quarterthree months ended March 31,June 30, 2025. As described above, this result was driven by lower sales,sales and lower cost of goods sold, and significantly offset by lower operatinginterest expenses.expense related to our debt securities and recognizing the IEEPA tariff refunds as a cost reduction against cost of sales.

This Quarterly Report includes a non-generally accepted accountaccounting 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.

The table below presents our adjusted EBITDA, reconciled to net loss for the three and six months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025.

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 MarchJune 31,30, 2026, we had cash totaling $8.6$6.3 million. We believe that our cash balance as of MarchJune 31,30, 20252026, combined with our access to the ATM, will fund our operations into the second quarter of 2027.

On January 30, 2026, we entered into the Equity Distribution Agreement with Canaccord under which we may offer and sell, from time to time, shares of our common stock through an ATM for up to $50.0 million in gross proceeds, as described in the “Overview” section above. AsDuring ofthe Marchthree 31,months ended June 30, 2026, we have not sold any411,100 shares of our common stock pursuant to the ATM.ATM for net proceeds of approximately $0.8 million, after deducting sales agent commissions. Subsequent to MarchJune 31,30, 2026, we have sold 379,700124,975 shares of common stock for aggregate net proceeds of approximately $0.8 million.$148,317.

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-timefrom time to time party thereto (such lenders, the “Term Loan Lenders”), the proceeds of which were used used to repay the $45.0 million fixed rate senior notes, and ChEF Equity Facility.

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 Commoncommon Stockstock in connection with such exercise. SubsequentDuring tothe Marchquarter 31,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.