SCHEDULE 13D/A: Dragonfly Energy Insider Denis Phares Boosts Stake and Backs Key Shareholder Proposals for Capital Raise

Denis Phares, a significant shareholder of Dragonfly Energy Holdings Corp., has updated his beneficial ownership to 24.5% and entered into new agreements to support critical shareholder proposals, including capital raise-related share issuances and an increase in authorized shares.

Summary

• Denis Phares, the Reporting Person, beneficially owns 1,781,287 shares of Dragonfly Energy Holdings Corp. Common Stock, representing approximately 24.5% of the outstanding shares.
• This ownership includes 1,645,964 directly held shares and 135,323 shares indirectly held through the Phares 2021 GRAT.
• Phares also holds 63,046 restricted stock units that will vest more than 60 days from the filing date.
• On December 31, 2024, Phares entered into a support agreement to vote in favor of shareholder approval for the issuance of up to 1,400,000 shares underlying penny warrants.
• On February 26, 2025, Phares entered into another support agreement to vote in favor of shareholder approval for the issuance of Common Stock upon conversion of Series A Convertible Preferred Stock (exceeding 1,450,489 shares) and an increase in authorized Common Stock from 250,000,000 to 400,000,000 shares.
• Phares also agreed to vote against any proposals that would breach the terms of the Securities Purchase Agreement or other related transaction documents.

Sentiment

Score: 6

Explanation: The filing indicates a significant insider's continued support for the company and its capital-raising efforts, which is generally positive. However, the implied dilution from new share issuances and the large increase in authorized shares introduce potential negative sentiment regarding future dilution.

Positives

• A significant insider (Denis Phares) is actively supporting key corporate actions, including capital raising efforts, which can signal confidence in the company's strategic direction.
• The support agreements facilitate necessary corporate actions like share issuances and increasing authorized shares, which are crucial for future financing and growth initiatives.

Negatives

• The need for shareholder approval for issuing shares related to penny warrants and Series A Preferred Stock suggests potential dilution for existing shareholders.
• The proposed increase in authorized shares from 250,000,000 to 400,000,000 indicates a significant potential for future dilution if these shares are issued.

Risks

• Shareholder Dilution: The issuance of up to 1,400,000 shares underlying penny warrants and additional shares upon conversion of Series A Preferred Stock will dilute existing shareholders' ownership.
• Future Capital Needs: The need to increase authorized shares and issue new securities suggests ongoing capital requirements, which could lead to further dilution or financial strain if not managed effectively.
• Market Perception: Large increases in authorized shares and new issuances can sometimes be perceived negatively by the market due to concerns about future dilution.

Future Outlook

The document indicates Dragonfly Energy Holdings Corp. is pursuing a capital raise through the issuance of penny warrants and Series A Convertible Preferred Stock, requiring shareholder approval for the associated share issuances and an increase in authorized shares to accommodate future capital needs and growth.

Management Comments

• The Reporting Person agreed to be present at any meeting of shareholders of the Issuer and vote in favor of a proposal to obtain shareholder approval for the issuance of up to 1,400,000 shares of Common Stock underlying penny warrants issued to certain existing securityholders.
• The Reporting Person agreed to vote in favor of the proposals to obtain shareholder approval for (i) the issuance, upon conversion of Series A Convertible Preferred Stock, of the number of shares of Common Stock which would exceed 1,450,489 in accordance with the applicable rules and regulations of the Nasdaq Stock Market and (ii) an increase in the number of authorized shares of Common Stock from 250,000,000 to 400,000,000.
• The Reporting Person also agreed to vote against any proposal that would result in the breach of any representation or warranty under the Securities Purchase Agreement, the Certificate of Designation of Rights and Preferences of Series A Convertible Preferred Stock, or any other of the agreements and instruments entered into or delivered by the Company or any of the holders of Series A Preferred Stock in connection with the transactions contemplated by the Purchase Agreement, all as may be amended from time to time in accordance with the terms thereof, or otherwise result in any of the Company's obligations under the Transaction Documents from being fulfilled.

Industry Context

This filing reflects a common practice for growth-oriented companies, particularly in sectors requiring significant capital investment (like energy storage, which Dragonfly Energy is involved in), to raise funds through equity issuances. The need for shareholder approval for large issuances and increased authorized shares is standard practice to comply with exchange listing rules (e.g., Nasdaq) and facilitate future financing rounds.

Corporate Governance

Related Party Transactions

• Denis Phares, a significant beneficial owner (24.5%), entered into support agreements with Dragonfly Energy Holdings Corp. to vote on specific corporate proposals related to share issuances and authorized capital.

Stakeholder Impact

• Shareholders: Potential for dilution due to the issuance of new shares from penny warrants and Series A Preferred Stock conversion. The increase in authorized shares also signals future potential dilution. However, the capital raise itself could strengthen the company's financial position, benefiting long-term shareholders.
• New Securityholders (Penny Warrants & Series A Preferred Stock): Their investment is supported by a key insider's voting commitment, potentially increasing confidence in the transaction's completion.
• Company (Dragonfly Energy Holdings Corp.): Gains capital and flexibility for future financing and growth initiatives by securing shareholder support for necessary corporate actions.

Next Steps

• Shareholder meeting to vote on proposals for issuing shares underlying penny warrants.
• Shareholder meeting to vote on proposals for issuing shares upon conversion of Series A Convertible Preferred Stock exceeding 1,450,489 shares.
• Shareholder meeting to vote on increasing authorized Common Stock from 250,000,000 to 400,000,000 shares.
• Conversion of Series A Convertible Preferred Stock into Common Stock.

Key Dates

Recommendation

Keywords

Dragonfly Energy Holdings Corp., Denis Phares, Schedule 13D/A, Beneficial Ownership, Common Stock, Shareholder Vote, Capital Raise, Series A Preferred Stock, Penny Warrants, Authorized Shares, Corporate Governance, SEC Filing