Dakota Lithium Acquisition |
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Sep. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dakota Lithium Acquisition | Note 6 - Dakota Lithium Acquisition
Acquisition of Dakota Lithium
On July 31, 2026 (the “Acquisition Date”), Legacy Dragonfly, a wholly-owned subsidiary of the Company, bought substantially all of the operating assets of the Dakota Lithium business. The seller was Clean Liquidation, LLC, acting as assignee for the benefit of creditors of Clean Republic SODO, LLC. The purchase was made under an asset purchase agreement (the “Asset Purchase Agreement”) and a related securities receipt agreement (the “Securities Receipt Agreement”), both dated July 31, 2026. Dakota Lithium designs and sells lithium battery products under the Dakota Lithium brand. The Company bought the business to expand its branded consumer and specialty battery portfolio, add an established customer base and product designs, and achieve sourcing and operating synergies. The Company obtained control of the business on the Acquisition Date, when title to the purchased assets passed and it took possession of them.
The Company accounted for the transaction as a business combination using the acquisition method under ASC 805, Business Combinations. Under that method, identifiable assets acquired and liabilities assumed are recorded at their fair values as of the Acquisition Date.
Consideration transferred
The Asset Purchase Agreement states a purchase price of $4,000. That amount assumed a negotiated value of $ per share. For accounting purposes, the shares are measured at their fair value on the Acquisition Date. The fair value of the consideration transferred was:
The shares were issued to recipients designated by the seller, including the seller’s secured lender, in exchange for the purchased assets and the release of the lender’s liens on those assets. The shares are subject to two separate restrictions on sale, and ASC 820 treats them differently. First, the shares are unregistered restricted securities that may be resold only pursuant to an exemption from registration, such as Rule 144. This restriction transfers to any holder of the shares, so it is a characteristic of the security and is considered in measuring fair value (ASC 820-10-35-36B and 820-10-55-52). Second, the shares are subject to a contractual lock-up that lasts 12 months from the Acquisition Date. A contractual sale restriction is a characteristic of the holder rather than of the security, so it is excluded from the fair value measurement (ASC 820-10-35-36B and 820-10-55-52A). Accordingly, the fair value of the shares was measured using the $ closing price of the Company’s common stock on the Acquisition Date, without adjustment. A discount for the six-month Rule 144 holding period was evaluated and determined to be immaterial. No discount was applied for the 12-month contractual lock-up, because a contractual sale restriction is not considered in measuring fair value (ASC 820-10-35-36B). The arrangement includes no contingent consideration.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Preliminary allocation of consideration
The table below shows the preliminary fair values of the assets acquired at the Acquisition Date:
Note 6 - Dakota Lithium Acquisition (CONTINUED)
The acquired intangible assets have weighted-average useful lives as follows: trade name, 20 years; customer relationships, 6 years.
Goodwill is the amount by which the consideration transferred exceeds the fair value of the identifiable net assets acquired. It mainly reflects the assembled workforce, which is not recognized separately, and expected synergies from integrating Dakota Lithium’s products, customers and vendor relationships into the Company’s existing operations. The estimated amount of goodwill expected to be deductible for income tax purposes is $372.
The purchase price allocation is preliminary. The Company is still finalizing the valuations of the acquired intangible assets, inventory and equipment, the identification of liabilities assumed, and the related deferred income taxes. These amounts may change as additional information is obtained during the measurement period, which ends no later than July 31, 2027.
Transactions recognized separately and acquisition-related costs
The Company’s post-acquisition arrangements with retained employees and a contractor are accounted for as post-combination compensation and are not part of the consideration transferred. Acquisition-related costs totaled $121 and were expensed as incurred in general and administrative.
Results of operations and supplemental pro forma information (unaudited)
Dakota Lithium’s results have been included in the condensed consolidated financial statements since the Acquisition Date. Following the acquisition, Dakota Lithium’s operations were integrated into the Company’s existing operations. As a result, determining the net income or loss attributable separately to Dakota Lithium from the Acquisition Date through September 30, 2026 is impracticable. Revenue of $81 and gross margin of $66 attributable to Dakota Lithium are included in the condensed consolidated financial statements for the period from the Acquisition Date through September 30, 2026.
The unaudited supplemental pro forma information below shows the Company’s combined results as if the acquisition had occurred on January 1, 2025:
The unaudited pro forma amounts present the combined historical revenue and net loss of the Company and the acquired business as if the acquisition had occurred on January 1, 2025. Acquisition-related pro forma adjustments have been omitted because their effects were not material. These amounts do not necessarily reflect the results that would have occurred had the acquisition taken place on that date or the Company’s future results.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
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