Note 9 - REDEEMABLE PREFERRED STOCK

Series B Convertible Preferred Stock

The Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) was issued in connection with the Sixth Amendment to the Term Loan entered into on October 20, 2025, pursuant to which $25.0 million of outstanding principal was exchanged for 25,000 shares of Series B Preferred Stock with an aggregate liquidation preference of $25.0 million. The Series B Preferred Stock is non-voting and carries a base liquidation preference of $1,000 per share, plus accrued and unpaid dividends, senior to the Company’s common stock in a liquidation. Dividends accrue at 10% per annum, with 80% payable in cash and 20% payable in kind and added to the liquidation preference; any unpaid cash dividends may also be paid in kind and added to the liquidation preference.

Each share of Series B Preferred Stock is convertible, at the holder’s option beginning six months after the original issuance date, into shares of the Company’s common stock at a fixed conversion price of $31.50 per share, subject to a minimum aggregate value of $500,000 per conversion (other than a final conversion) and customary beneficial ownership and exchange caps. The Series B Preferred Stock is redeemable at the Company’s option and under certain holder-option and other specified circumstances, generally at a price per share equal to the greater of (i) the liquidation preference (including accrued but unpaid dividends) and (ii) the value on an as-converted basis determined with reference to recent volume-weighted average trading prices of the Company’s common stock.

The Company evaluated the Series B Preferred Stock under ASC 480, Distinguishing Liabilities from Equity, and concluded it is not a liability because it is not mandatorily redeemable and does not otherwise meet the definition of a liability. The host contract was determined to be more akin to debt for purposes of ASC 815, Derivatives and Hedging; the conversion feature is not clearly and closely related to the host but qualifies for the equity classification scope exception because the conversion price is fixed and the instrument is indexed to the Company’s own stock. Because certain redemption rights are not solely within the Company’s control, the Series B Preferred Stock is presented as temporary equity and initially measured at fair value. The carrying amount is being accreted to the redemption value over the expected term, and dividends (cash and paid-in-kind) are recognized as preferred dividends.

For the three and six months ended June 30, 2026, the Company recognized accreted dividends of $493 and $962, respectively, related to the Series B Preferred Stock.

Dragonfly Energy Holdings Corp.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)