DFLI.NASDAQDragonfly Energy Holdings CORP

10-Q: Dragonfly Energy Reports Q2 Loss, Faces Going Concern

Sentiment:

Quarterly Report 14 August 2025 4:11 PM

📋All filings for Dragonfly Energy Holdings CORP

Dragonfly Energy Holdings Corp. reported a reduced net loss in Q2 2025, driven by increased OEM sales and licensing revenue, but continues to operate under a going concern warning with significant liquidity and Nasdaq listing challenges.

Delay expectedPrincipal and interest payments on the Term Loan facility have been deferred until April 2026, providing a temporary reprieve from debt obligations.

Capital raiseIn February 2025, the company raised approximately $3.2 million net from the initial closing of a private placement of Series A Convertible Preferred Stock.In April 2025, the company raised an additional $4.2 million net from the second closing of the Series A Convertible Preferred Stock private placement.On July 31, 2025 (subsequent event), the company completed an underwritten public offering of 21,980,000 shares of common stock at $0.25 per share, raising gross proceeds of approximately $5.5 million and net proceeds of $5.035 million.The company has a ChEF Equity Facility with Chardan Capital Markets LLC, allowing it to sell up to $150 million in common stock, and issued $62,846 under this facility during the six months ended June 30, 2025.The company explicitly states it 'may need to raise additional debt and/or equity financings to fund its operations, strategic plans, meet its financial covenants under the Term Loan and repay its outstanding indebtedness under the Term Loan.'

Worse than expectedThe company explicitly states 'significant doubt about the Company's ability to continue as a going concern,' which is a severe indicator of financial distress.Despite revenue growth and reduced net loss, the company continues to report substantial net losses and negative cash flow from operations, indicating an unsustainable financial model without continuous external funding.The company is not in compliance with Nasdaq listing requirements and faces potential delisting, which would significantly impair its ability to raise capital and reduce stock liquidity.Recent capital raises, while necessary for survival, are highly dilutive, with the latest public offering priced at $0.25 per share, indicating a distressed valuation.

Summary

Net sales increased by 23.0% to $16.2 million for Q2 2025, up from $13.2 million in Q2 2024, primarily due to higher OEM battery and accessory sales and licensing revenue.
Gross profit rose by 45.4% to $4.6 million in Q2 2025, compared to $3.2 million in Q2 2024, benefiting from higher unit volume and consumption of lower-priced inventory.
Net loss significantly decreased to $7.0 million for Q2 2025, a 48.4% reduction from $13.6 million in Q2 2024.
Research and development expenses decreased by 54.7% to $0.7 million in Q2 2025, reflecting a strategic shift from solid-state to product development.
General and administrative expenses decreased by 19.0% to $4.6 million in Q2 2025, mainly due to lower legal and professional services.
The company had $2.7 million in cash and cash equivalents and $8.4 million in working capital as of June 30, 2025.
An explicit 'significant doubt about the Company's ability to continue as a going concern' was noted due to historical losses, negative cash flow, and ongoing financial uncertainties.
The company secured multiple waivers for non-compliance with Term Loan covenants, with most financial covenants removed through June 2026, except for a $2.5 million minimum cash requirement.
The Term Loan maturity date was extended by one year to October 2027, and principal and interest payments were deferred until April 2026.
The company completed a public offering on July 31, 2025, raising net proceeds of $5.035 million.
Dragonfly Energy is not in compliance with Nasdaq's minimum Market Value of Listed Securities ($35 million) and minimum bid price ($1.00) requirements, facing potential delisting.
A settlement agreement with LithiumHub was reached for $2.5 million ($0.6 million payable in 2025, $1.9 million in 2026) for a non-exclusive patent license.
An additional $0.29 million tariff underpayment was discovered and reported to CBP, with a payment plan of $0.05 million per week initiated.
The company launched the Battle Born DualFlow Power Pack for the trucking industry as part of its product diversification strategy.

Sentiment

Score: 3

Explanation: The company shows some operational improvements with increased revenue and reduced net loss, but these are overshadowed by severe liquidity issues, an explicit 'going concern' warning, and ongoing Nasdaq listing non-compliance. While recent capital raises provide short-term relief, they are highly dilutive and indicative of financial distress. The long-term outlook remains highly uncertain due to significant debt and the need for continuous external funding.

Positives

Net sales increased by 23.0% in Q2 2025 and 15.1% for the six months ended June 30, 2025, driven by strong OEM sales and new licensing revenue.
Gross profit improved significantly by 45.4% in Q2 2025 and 37.2% for the six months ended June 30, 2025, indicating better cost management and product mix.
Net loss was substantially reduced by 48.4% in Q2 2025 and 42.4% for the six months ended June 30, 2025, reflecting improved operational efficiency.
Research and development expenses decreased by over 50% in Q2 2025, indicating a more focused and potentially efficient R&D strategy on product development.
General and administrative expenses decreased by 19.0% in Q2 2025, primarily due to reduced legal and professional services.
Successful capital raises in February and April 2025, totaling $7.4 million net, and a subsequent public offering in July 2025, raising $5.035 million net, provide much-needed liquidity.
The Term Loan maturity was extended to October 2027, and principal and interest payments deferred to April 2026, providing temporary financial relief.
Warrant liabilities decreased significantly from $5.133 million to $0.322 million, positively impacting the balance sheet.
The company successfully launched a new product, the Battle Born DualFlow Power Pack, targeting the trucking industry, indicating progress in market diversification.

Negatives

The company explicitly states 'significant doubt about the Company's ability to continue as a going concern' due to historical losses and negative cash flow.
Despite reduced net loss, the company continues to incur substantial net losses ($7.0 million in Q2 2025 and $13.8 million YTD Q2 2025).
Cash and cash equivalents decreased from $4.849 million at December 31, 2024, to $2.733 million at June 30, 2025, indicating ongoing cash burn.
Net cash used in operating activities increased to $(7.865) million for the six months ended June 30, 2025, from $(7.411) million in the prior year period.
Total liabilities increased to $87.133 million at June 30, 2025, from $84.618 million at December 31, 2024.
Total stockholders' deficit worsened to $(16.604) million at June 30, 2025, from $(9.404) million at December 31, 2024.
The company is not in compliance with Nasdaq listing requirements (MVLS and Bid Price) and faces potential delisting, which could severely impact liquidity and market confidence.
Recent capital raises, while providing liquidity, are highly dilutive, with the July 2025 public offering priced at $0.25 per share.
The company relies on a limited number of suppliers in China for critical components, posing supply chain risks.
An additional $0.29 million tariff underpayment was discovered, adding to existing liabilities and requiring weekly payments.

Risks

Ability to service outstanding indebtedness and comply with financial covenants, as failure could lead to accelerated payment and severe adverse effects on operations, potentially requiring asset sales, bankruptcy, or dissolution.
Ability to raise additional capital to fund operations, as current financing may not be sufficient, and future financings could be dilutive or on unfavorable terms.
Failure to successfully increase market penetration into target markets, limiting sales growth to existing products and markets.
Loss of any members of the senior management team or other key personnel, impacting strategic execution and operational stability.
Loss of relationships with key suppliers, particularly those in China, which could disrupt production and increase costs.
Ability to protect patents and other intellectual property, which are crucial for competitive advantage.
Failure to successfully optimize solid-state cells or to produce commercially viable solid-state cells in a timely manner or at all, impacting long-term product differentiation.
Changes in applicable laws or regulations, including tariffs, which can increase costs and impact profitability.
Potential adverse effects from economic, business, and/or competitive factors, including economic slowdowns or inflationary pressures.
Reliance on two suppliers for lithium iron phosphate cells and a single supplier for the battery management system, creating supply chain vulnerabilities.
Current dependence on one manufacturing facility, posing risks in case of disruptions.
Potential impact of global and macroeconomic conditions, including geopolitical conflicts, on operations.
Failure to regain compliance with Nasdaq listing requirements (MVLS and Bid Price) by November 10, 2025, leading to delisting and reduced market liquidity.
Inability to convert sufficient debt into equity or raise additional capital to meet the $2.5 million stockholders' equity alternative Nasdaq listing standard.
Need to complete a reverse stock split to meet the Bid Price Requirement, which can be perceived negatively by investors.

Future Outlook

Management expects sales to increase in coming quarters as existing OEM customers expand the number of models incorporating the company's battery systems and as the company enters new markets like trucking and industrials with new product offerings. Direct-to-consumer sales are expected to remain relatively flat through 2025 due to macroeconomic pressures. Cost of Goods Sold is anticipated to increase in conjunction with rising revenue and higher tariffs over the next 12 months. Research and Development expenses are projected to be lower than last year due to a shift in focus from solid-state to product development. General and Administrative and Selling and Marketing expenses, as a percentage of revenue, are expected to remain relatively stable over the next 12 months. The company intends to raise additional capital as needed to fund operations, strategic plans, and meet financial covenants, but cannot guarantee success.

Management Comments

Our increase in sales is a reflection of a slight recovery in the motorized RV market and increased market penetration as compared to prior quarter and prior year.
Although our existing RV OEM customers have only slightly increased their year-over-year production rates, the incorporation of lithium storage systems has accelerated faster than the increase in RV units shipped.
DTC sales remained relatively flat, indicating generally constant consumer sentiment in the space.
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.
As we look toward the production of our solid-state cells, we have signed a Commercial Offtake Agreement with a lithium mining company located in Nevada for the supply of lithium, which we expect will enable us to further manage our cost of goods over time.
We expect our sales to increase in the coming quarters 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.
We expect our Cost of Goods Sold to increase in conjunction with the anticipated increase in revenue along with increased product costs related to higher tariffs over the next 12 months.
We expect Research and Development expenses to be lower than last year as we change our focus from Solid State to Product Development.
We expect General and Administrative Expenses, as a percentage of revenue, to be relatively stable over the next 12 months.
We expected Selling and Marketing Expenses, as a percentage of revenue, to be relatively stable over the next 12 months.
Management concluded that there is significant doubt about our ability to continue as a going concern.

Industry Context

The company operates in the lithium-ion battery market, serving consumer industries like RV, marine, solar, and off-grid residences, and expanding into trucking and industrial sectors. The RV market shows a slight recovery, with accelerated adoption of lithium storage systems despite only slight increases in overall RV production. This contrasts with a prior de-contenting trend. The company's focus on product diversification, such as the Battle Born DualFlow Power Pack for trucking, aligns with broader industry needs for cost-effective electrification solutions. The shift in R&D focus from advanced solid-state chemistry to conventional cell product development reflects a market priority on cost-effective scalability over pure performance. The company faces competition from traditional lead-acid and other lithium-ion battery manufacturers, some with greater resources, and is working to manage supply chain costs amid inflation and tariffs.

Comparison to Industry Standards

The company's increase in OEM sales is attributed to increased market penetration and existing RV OEM customers expanding the number of models that will include the company's battery systems, indicating a positive trend within its specific niche of the RV market, which is experiencing a slight recovery.
The acceleration of lithium storage system incorporation in RVs, faster than the increase in RV units shipped, suggests the company is benefiting from a broader industry trend towards advanced battery solutions, potentially outperforming the general RV market growth rate.
The launch of the Battle Born DualFlow Power Pack for the trucking industry positions the company to compete in a new market segment, offering a hybrid electrification solution that addresses practical and cost-effectiveness needs, which is a key driver for adoption in commercial vehicle sectors.
The company's reliance on two China-based LFP cell manufacturers and a single China-based BMS supplier is a common industry practice for cost efficiency but exposes it to geopolitical and supply chain risks, unlike companies with more diversified or localized supply chains.
The Commercial Offtake Agreement with Ioneer Rhyolite Ridge LLC for lithium supply in Nevada aims to manage cost of goods over time, aligning with a broader industry push for localized and secure raw material sourcing, potentially offering a competitive advantage against peers reliant solely on international markets.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Operating Officer	NA	Dr. Vickram Singh	2025-02-01	Appointment to new role, previously Senior Vice President of Technology.
Board Member	Dr. Karina Montilla Edmonds	NA	2025-05-06	Resignation as part of efforts to reduce expenses and reduce board size.
Board Member	Mr. Jonathan Bellows	NA	2025-05-07	Resignation as part of efforts to reduce expenses and reduce board size.
Board Member	Rick Parod	NA	2025-05-30	Resignation as part of efforts to reduce expenses and reduce board size.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Size Reduction	The Board of Directors approved reducing its size to five members, resulting in the resignations of Dr. Karina Montilla Edmonds, Mr. Jonathan Bellows, and Rick Parod. The Board now has four directors.	2025-05-06	Aims to reduce expenses and streamline governance, but could also reduce diversity of expertise or oversight capacity.

Legal Proceedings

The company agreed to pay LithiumHub a total of $2.5 million ($0.6 million in 2025 and $1.9 million in 2026) in exchange for a non-exclusive license to LithiumHub Technologies, LLC's patent rights related to the Patents-in-Suit. This settled ongoing patent litigation, with no admission of infringement by the company.

Related Party Transactions

On January 26, 2024, the company entered into a convertible promissory note for $1.0 million with Brian Nelson, a board member, which was repaid on February 1, 2024, along with a $50,000 loan fee.
On February 27, 2024, the company entered into another convertible promissory note for $1.7 million with Brian Nelson, a board member, which was repaid on March 1, 2024, along with an $85,000 loan fee.
Effective April 12, 2024, the company amended employment agreements with its Chief Executive Officer, Chief Revenue Officer, and Chief Marketing Officer to allow for annual equity compensation up to specified amounts ($1,532,000 for CEO, $490,000 for CRO, $236,000 for CMO).

Stakeholder Impact

**Shareholders**: Face significant dilution from recent and potential future equity raises (e.g., public offering at $0.25/share). Risk of substantial or total loss of investment due to the 'going concern' uncertainty and potential Nasdaq delisting. Share price volatility is high.
**Employees**: Continued employment is subject to the company's ability to secure funding and maintain operations. Stock-based compensation may be impacted by share price decline and delisting risk.
**Customers**: Continued product availability and support depend on the company's operational continuity. New product launches (e.g., DualFlow Power Pack) could benefit customers in new markets.
**Suppliers**: Ongoing business relationships are contingent on the company's financial stability and ability to make payments. Concentration risk with China-based suppliers remains.
**Creditors (Term Loan Lenders)**: Debt payments have been deferred, and financial covenants waived, indicating a high-risk lending environment. The company's ability to repay the $69.9 million principal and accrued interest is uncertain and dependent on future capital raises or operational improvements.

Next Steps

Regain compliance with Nasdaq's minimum Market Value of Listed Securities ($35 million) and minimum bid price ($1.00) requirements by November 10, 2025.
Restructure a portion of outstanding debt or convert such debt into common stock by mid-August 2025, as required by Nasdaq's compliance plan.
Potentially complete a reverse stock split to meet the Nasdaq Bid Price Requirement.
Continue efforts to increase sales, particularly in new markets like trucking and industrials, with new product offerings.
Manage Cost of Goods Sold in conjunction with anticipated revenue increases and higher tariffs.
Maintain focus on product development while keeping Research and Development expenses lower.
Continue to seek additional debt and/or equity financings to fund operations and strategic plans.
Continue to make weekly payments of $0.05 million for the identified tariff underpayment.

Key Dates

Date	Description
2022-02-02	Company entered into a 124-month lease agreement in Reno, Nevada.
2022-05-13	Employee Stock Purchase Plan (ESPP) adopted by the Board of Directors.
2022-10-07	Term Loan, Guarantee and Security Agreement (Original Term Loan Agreement) dated.
2023-06-20	Underwriters Warrants and Investor Warrants issued in connection with the June 2023 Offering.
2023-07-01	Keystone RV Company shifted from standard installation to optional offering of company's storage solutions.
2023-07-01	Construction of proprietary and patented cell electrode manufacturing pilot line completed.
2023-08-01	Successfully demonstrated ability to produce anode material at scale using dry deposition process.
2023-10-01	Successfully demonstrated ability to produce cathode material using dry deposition process.
2024-01-26	Company entered into a convertible promissory note (January Note) with a board member.
2024-02-01	January Principal Amount and January Loan Fee paid.
2024-02-05	Company granted 24,447 Restricted Stock Units (RSUs).
2024-02-27	Company entered into a convertible promissory note (February Note) with a board member.
2024-03-01	February Principal Amount and February Loan Fee paid.
2024-03-25	Lease commencement date for Reno facility.
2024-03-31	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2024-04-01	Effective date of Fernley Lease Agreement; interest payable to certain SBA-regulated lenders limited to 14.0% per annum.
2024-04-12	Company entered into amendments to employment agreements with CEO, CRO, and CMO; issued 92,923 RSUs to employees and 148,152 RSUs to directors.
2024-04-24	Company issued 27,197 shares of common stock in connection with the ESPP.
2024-04-29	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2024-05-13	Company received May 2024 Waiver and issued May 2024 Penny Warrants.
2024-05-30	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2024-06-01	Rent commencement date for Fernley facility.
2024-06-24	Company granted 2,417 RSUs.
2024-06-28	Company entered into First Amendment to Term Loan and issued June 2024 Penny Warrants.
2024-07-24	Company began paying monthly rent under the Reno lease.
2024-07-29	Legacy Dragonfly and Battle Born LLC entered into License Agreement with Stryten Energy LLC; Second Amendment to Term Loan Agreement entered.
2024-07-31	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2024-08-29	Initial Licensing Fee of $5,000,000 from Stryten paid.
2024-08-30	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2024-09-30	Company entered into Third Amendment to Term Loan and issued September 2024 Penny Warrants.
2024-10-01	Interest on non-SBA regulated portion of Term Loan continued to accrue at adjusted SOFR plus 7.0% cash and 4.5% to 6.5% PIK.
2024-10-31	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2024-11-30	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2024-12-12	Company received written notice from Nasdaq regarding non-compliance with MVLS Requirement.
2024-12-31	Company entered into Fourth Amendment to Term Loan and issued December 2024 Penny Warrants.
2025-01-31	Waiver obtained from Term Loan Lenders for non-compliance with liquidity requirement.
2025-02-01	Dr. Vickram Singh appointed Chief Operating Officer.
2025-02-26	Company entered into Securities Purchase Agreement and Fifth Amendment to Term Loan; issued February 2025 Penny Warrants.
2025-03-01	Company agreed to pay LithiumHub $2.5 million for a non-exclusive license.
2025-04-01	Company granted 3,778 RSUs; interest on all outstanding Term Loan balances became payable entirely in cash.
2025-04-28	Company completed the second closing of the Private Placement, selling 450 shares of Series A Preferred Stock.
2025-05-06	Dr. Karina Montilla Edmonds resigned from the Board.
2025-05-07	Mr. Jonathan Bellows resigned from the Board.
2025-05-08	Company entered into a sixth lease amendment to extend the lease term for R&D lab and engineering office.
2025-05-14	Company received letter from Nasdaq indicating non-compliance with $1.00 minimum bid price requirement.
2025-05-19	Company granted 889 RSUs.
2025-05-30	Rick Parod resigned from the Board.
2025-06-11	Company received additional Nasdaq staff determination letter regarding MVLS non-compliance.
2025-06-23	Private Placement Convertible Preferred Warrants cancelled.
2025-06-24	Hearing with Nasdaq Hearings Panel held.
2025-07-02	Company received notice from Nasdaq granting an exception until November 10, 2025, to regain compliance.
2025-07-18	Milestone for conversion of remaining outstanding Series A Preferred Stock by holder.
2025-07-20	Company entered into a Settlement and Release Agreement with the holder of Series A Preferred Stock, exchanging shares for common stock.
2025-07-30	Company entered into an underwriting agreement for a public offering of common stock.
2025-07-31	Company completed the public offering, raising net proceeds of $5.035 million.
2025-08-01	Base rent for R&D lab and engineering office to be fully abated for four months.
2025-08-11	Date of common stock shares issued and outstanding count (61,724,593 shares).
2025-11-30	Lease for R&D lab and engineering office set to expire.
2026-04-01	Principal and interest payments on Term Loan deferred until this date.
2026-06-30	Financial covenants (except minimum cash) removed through this date.
2026-12-31	Deadline for Second Tranche Earnout Shares milestone ($202.50 VWAP).
2027-10-07	Extended maturity date of the Term Loan.
2027-12-15	Effective date for ASU 2024-03 (Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures) for interim periods.
2028-12-15	Effective date for ASU 2024-03 (Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures) for fiscal years.
2028-12-31	Deadline for Third Tranche Earnout Shares milestone ($292.50 VWAP).
2030-11-30	Extended lease expiration date for R&D lab and engineering office.

Recommendation

strong sell

The company faces an explicit 'going concern' warning from management, indicating severe financial distress and a high probability of business failure without significant, uncertain future funding. It is not in compliance with Nasdaq listing requirements and faces imminent delisting, which would decimate liquidity and investor confidence. While operational metrics show some improvement in revenue and reduced net loss, these are insufficient to offset the fundamental liquidity crisis and massive accumulated deficit. Recent capital raises are highly dilutive, reflecting a desperate need for cash rather than strong growth prospects. The substantial long-term debt burden and reliance on waivers for covenant compliance further highlight the precarious financial position. A seasoned investor would recognize the extremely high risk of capital loss and advise divesting.

Keywords

Lithium-ion batteries, Energy storage, SEC filing, 10-Q, Financial results, Going concern, Nasdaq listing, Capital raise, Debt restructuring, OEM sales, DTC sales, Solid-state battery, Battery management system, Tariffs, Corporate governance

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