SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Sep. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation | Basis of presentation
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These condensed consolidated financial statements should be read along with the Annual Report on Form 10-K filed with the SEC on March 30, 2026 of the Company for the annual period ended December 31, 2025. The consolidated balance sheet as of December 31, 2025 was derived from the audited consolidated financial statements as of and for the year then ended.
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| Principles of consolidation | Principles of consolidation
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP and present the consolidated financial statements of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
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| Going Concern | Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
During the three and nine months ended September 30, 2026 and 2025, the Company incurred losses from operations and had negative cash flow from operations. As of September 30, 2026, the Company had $1,941 in cash and cash equivalents and working capital of $2,973. The Company’s ability to achieve profitability and positive cash flow depends, among other things, on its ability to increase revenue, contain its expenses and maintain compliance with the financial covenants in its outstanding indebtedness agreements.
In 2025, the Company completed several capital raising and debt restructuring transactions, resulting in aggregate net cash proceeds of approximately $90,930 and modifications to its term loan that extended the maturity to October 2027, deferred principal and interest payments, reduced outstanding principal (including partial cancellation and conversion of principal into preferred stock), and established minimum liquidity covenants. On January 30, 2026, the Company also entered into an at-the-market equity offering program under which it may, at its discretion and subject to market conditions, issue and sell up to $50 million of its common stock from time to time. For the nine months ended September 30, 2026, the Company sold shares of common stock for net proceeds of $1,031. Refer to Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding these equity offerings and term loan amendments.
Management has evaluated the conditions and events described above in relation to the Company’s obligations coming due within one year after the date these condensed consolidated financial statements are issued. Management’s plans to address these conditions include the strategic cost realignment, the integration of the Dakota Lithium acquisition, the pursuit of tariff refunds, the use of the at-the-market equity offering program, and the liquidity provisions of the Seventh and Eighth Amendments (each as defined in Note 9), including the ability to pay interest in kind through December 31, 2026 and the modification, deferral, or waiver of certain financial covenant requirements. The Company’s ability to continue as a going concern is also dependent on its ability to raise additional capital through equity offerings, debt financings, or other strategic transactions. There can be no assurance that such financing will be available in sufficient amounts, when and if needed, on acceptable terms or at all.
Although management is pursuing these plans, uncertainties remain regarding their successful implementation and effectiveness, including the Company’s ability to generate sufficient cash flows and obtain additional financing to meet its obligations as they become due. Accordingly, management has concluded that its plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
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| Inventory | Inventory
Inventories (Note 4), which consist of raw materials and finished goods, are stated at the lower of cost (first in, first out) or net realizable value, net of reserves for obsolete inventory. The Company continually analyzes its slow moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, the Company established reserves. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. The Company had a reserve of $740 and $300 as of September 30, 2026 and December 31, 2025, respectively.
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| Finite-Lived Intangible Assets | Finite-Lived Intangible Assets
Intangible assets with finite useful lives are amortized over their estimated useful lives. The Company amortizes finite-lived intangible assets using a method that reflects the pattern in which the economic benefits of the asset are consumed. If that pattern cannot be reliably determined, the Company uses the straight-line method, consistent with ASC 350-30. Amortization expense was $38 and $45 for the three and nine months ended September 30, 2026, respectively. There was no amortization expense for the three and nine months ended September 30, 2025.
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| Impairment | Impairment
Finite-lived intangible assets are reviewed for impairment in accordance with ASC 360-10 whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. Recoverability is assessed by comparing the carrying amount of the asset group to the undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. If the carrying amount is not recoverable, the Company recognizes an impairment loss for the amount by which the carrying amount exceeds fair value. No impairment losses were recognized for the periods presented.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions relate to the measurement of lease right-of-use assets and related lease liabilities, the going concern assessment, asset impairment assessments, and the valuation of assets acquired in business combinations. Actual results could differ from those estimates.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
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| Revenue Recognition | Revenue Recognition
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.
Revenue is recognized when control of the promised goods is transferred to the customer or reseller, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue associated with products holding rights of return is recognized when the Company concludes there is not a risk of significant revenue reversal in the future periods for the expected consideration in the transaction. There are no material instances including discounts and refunds where variable consideration is constrained and not recorded at the initial time of sale. Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment when title and risk of loss pass to the customer.
The Company recognizes revenue from right-to-access license agreements over time as customers receive and consume the benefits of access to its intellectual property. Upfront fees are deferred and recognized on a straight-line basis over the estimated period of benefit. Royalties are recognized when the customer’s underlying sales occur and the related performance obligation has been satisfied, in whole or in part. In accordance with ASC 606, the Company determined that its obligation to provide continued access is satisfied over time. For the Stryten agreement, management determined the recognition period to be five years based on the minimum five-year access requirement and the Company’s right thereafter to terminate the agreement or negotiate revised payment terms if cumulative royalties paid are less than $15 million. The estimated recognition period is reassessed as facts and circumstances change.
Payment terms for distributors and OEMs are typically due within 30-90 days after shipment. The Company may receive payments at the onset of the contract before delivery of goods for customers in the retail channel. In such instances, the Company records a customer deposit liability. The Company recognizes these contract liabilities as sales after the revenue criteria are met. As of September 30, 2026 and December 31, 2025, the contract liability related to the Company’s customer deposits was approximately $242 and $121, respectively.
The Company recognized $121 of the contract liability as of December 31, 2025 during the nine months ended September 30, 2026. During the nine months ended September 30, 2025, the Company recognized $314 of the contract liability that was recorded as a January 1, 2025 beginning balance.
On July 29, 2024, Dragonfly Energy Corp. (“Legacy Dragonfly”), a wholly-owned subsidiary of the Company, and Battle Born Battery Products, LLC (“Battle Born LLC”), a wholly-owned subsidiary of Legacy Dragonfly, entered into a License Agreement (the “License Agreement”) with Stryten Energy LLC (“Stryten”). The $5,000 initial licensing fee is being recognized as revenue on a straight-line basis over five years. The Company has recorded $250 and $750 in revenue related to the License Agreement during the three and nine months ended September 30, 2026, respectively. As of September 30, 2026 and December 31, 2025, the contract liability related to the Company’s deferred revenue was approximately $2,833 and $3,583, respectively.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
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| Disaggregation of Revenue | Disaggregation of Revenue
The following table presents our disaggregated revenues by distribution channel:
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| Grant Income | Grant Income
The Company recognizes grant income when there is reasonable assurance that the Company will comply with the conditions attached to the grant and that the grant will be received. Grants that reimburse qualifying operating expenses are recognized in earnings on a systematic basis in the periods in which the related qualifying costs are recognized. The Company presents such amounts as grant income within other income in the Consolidated Statements of Operations. During the three and nine months ended September 30, 2026, the Company recognized grant income of $408 and $531, respectively.
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| Business Combination | Business Combination
The Company accounts for business combinations using the acquisition method under ASC 805, Business Combinations. Identifiable assets acquired and liabilities assumed are recorded at their fair values on the acquisition date. Goodwill is the amount by which the fair value of the consideration transferred exceeds those net assets. Equity issued as consideration is measured at its fair value on the acquisition date. Determining these fair values requires significant estimates, particularly for intangible assets. Amounts may be provisional for a measurement period of up to one year after the acquisition date. During that period, the Company records adjustments to provisional amounts as new information becomes available about facts and circumstances that existed at the acquisition date. Acquisition-related costs are expensed as incurred. Costs to issue equity securities reduce additional paid-in capital.
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| Goodwill | Goodwill
Goodwill is not amortized. It is assigned to the reporting units expected to benefit from the combination. It is tested for impairment annually and between annual tests if events or changes in circumstances indicate a reporting unit’s fair value may be below its carrying amount. The Company may first assess qualitative factors to decide whether a quantitative test is needed. If a quantitative test is performed and a reporting unit’s carrying amount exceeds its fair value, the Company recognizes an impairment loss equal to the excess. The loss is limited to the goodwill allocated to that reporting unit.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
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| Product Warranty | Product Warranty
The Company offers assurance type warranties from 5 to 10 years on its products. The Company estimates the costs associated with the warranty obligation using historical data of warranty claims and costs incurred to satisfy those claims. The Company estimates, based upon a review of historical warranty claim experience, the costs that may be incurred under its warranties and records a liability in the amount of such estimate at the time a product is sold. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. The Company periodically assesses the adequacy of our recorded warranty liability and adjusts the accrual as claims data and historical experience warrant. The Company has assessed the costs of fulfilling its existing assurance type warranties and has determined that the estimated outstanding warranty obligation at September 30, 2026 and December 31, 2025 to be $901 and $867, respectively. The Company incurred warranty expense of $95 and $293 for the three and nine months ended September 30, 2026, respectively, and incurred warranty expense of $132 and $403 for the three and nine months ended September 30, 2025, respectively.
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| Concentrations | Concentrations
As of September 30, 2026, receivables from Customer A, Customer B, and Customer C comprised approximately 23%, 12%, and 10%, respectively, of accounts receivable. As of December 31, 2025, receivables from Customer A comprised approximately 31% of accounts receivable. There are no other significant accounts receivable concentrations.
Sales from Customer A comprised approximately 22% of the Company’s total revenue for the three months ended September 30, 2026. Sales from Customer A comprised approximately 35% of the Company’s total revenue for the three months ended September 30, 2025. Sales from Customer A comprised approximately 22% of the Company’s total revenue for the nine months ended September 30, 2026. Sales from Customer A comprised approximately 29% of the Company’s total revenue for the nine months ended September 30, 2025.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
Concentrations (Continued)
As of September 30, 2026, payables to Vendor A and Vendor D comprised approximately 33% and 10%, respectively, of accounts payable. As of December 31, 2025, payables to Vendor A, Vendor B, and Vendor C comprised approximately 36%, 16%, and 12%, respectively, of accounts payable.
For the three months ended September 30, 2026, Vendor A accounted for approximately 19% of the Company’s total purchases. For the three months ended September 30, 2025, Vendor A, Vendor F, and Vendor B accounted for approximately 18%, 14%, and 12%, respectively, of the Company’s total purchases. For the nine months ended September 30, 2026, Vendor A and Vendor E accounted for approximately 12% and 10%, respectively, of the Company’s total purchases. For the nine months ended September 30, 2025, Vendor A and Vendor F accounted for approximately 17% and 10%, respectively, of the Company’s total purchases.
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| Stock-Based Compensation |
The Company accounts for stock based compensation arrangements with employees and non-employee consultants using a fair value method which requires the recognition of compensation expense for costs related to all stock based payments, including stock options (Note 14). The fair value method requires the Company to estimate the fair value of stock based payment awards to employees and non-employees on the date of grant using an option pricing model. Stock based compensation costs are based on the fair value of the underlying option calculated using the Black Scholes option pricing model and recognized as expense on a straight line basis over the requisite service period, which is the vesting period. Restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award. The Company measures equity-based compensation awards granted to non-employees at fair value as the awards vest and recognizes the resulting value as compensation expense at each financial reporting period.
Determining the appropriate fair value model and related assumptions requires judgment, including estimating stock price volatility, expected dividend yield, expected term, risk free rate of return, and the estimated fair value of the underlying common stock. Due to the lack of company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the lithium ion battery industry. The Company uses the simplified method, which is the average of the final vesting tranche date and the contractual term, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The risk free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company accounts for forfeitures as they occur.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
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| Income Taxes | Income Taxes
The Company determines its interim income tax provision by applying its estimated annual effective tax rate to year-to-date ordinary income or loss, adjusted for discrete items recognized during the period. For the nine months ended September 30, 2026, the Company recorded no income tax expense or benefit on a pretax loss of $16,550. The effective tax rate differed from the U.S. federal statutory rate primarily because the Company maintains a full valuation allowance against its deferred tax assets, as realization of the related tax benefits is not considered more likely than not. Prepaid income taxes were $359 at September 30, 2026.
The Company evaluated the tax effects of the Dakota Lithium acquisition, including tax-deductible goodwill and temporary differences related to the acquired indefinite-lived trade name, and determined that the resulting effects were immaterial to its condensed consolidated financial statements. The estimated amount of goodwill expected to be deductible for income tax purposes is $372.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBB Act”) was signed into law, modifying certain domestic and international income tax provisions with various effective dates beginning in 2025. The Company evaluated the applicable provisions and determined that the OBBB Act did not materially affect its income tax position as of September 30, 2026.
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| Net Loss per Common Share |
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock.
The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and warrants.
Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss, diluted net loss per share is generally the same as basic net loss per share since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
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| Reclassifications | Reclassifications
Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on previously reported net loss, total assets, total liabilities, stockholders’ equity, or the previously reported net decrease in cash and cash equivalents.
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| Segment Reporting | Segment Reporting
Operating segments are identified (Note 15) as components of the Company for which separate discrete financial information is available and that are regularly reviewed by the Company’s Chief Executive Officer, the chief operating decision maker, to make decisions about resource allocation and assess performance. The Company currently manages its business through two operating and reportable segments.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data)
Note 2 – Summary of Significant Accounting Policies (continued)
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| Recently issued accounting pronouncements: | Recently issued accounting pronouncements:
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires a public entity to disclose additional information about specific expense categories in the notes to the financial statements on an annual and interim basis. It is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. In January 2025, the FASB issued ASU 2025-01 to clarify that all public entities, including non-calendar year-end entities, should adopt the disclosure requirements of ASU 2024-03. The Company is currently evaluating the impact.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient related to the estimation of expected credit losses for certain financial assets measured on an amortized cost basis, including current accounts receivable and current contract assets under FASB Accounting Standards Codification 606 - Revenues from Contracts with Customers. Under the practical expedient, a public entity may assume that current conditions as of the balance sheet date remain unchanged over the remaining life of the financial asset when developing reasonable and supportable forecasts used to estimate expected credit losses. This ASU is effective for the Company on January 1, 2026, with early adoption permitted. The adoption of this new standard did not have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim disclosure requirements and the applicability of Topic 270. This ASU is effective for the Company on January 1, 2028, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The guidance requires issuers to initially measure paid-in-kind (“PIK”) dividends using the PIK dividend rate and calculation basis specified in the preferred stock agreement and applies to preferred stock classified in temporary equity. The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods. Upon adoption on January 1, 2027, the Company will apply the guidance prospectively to PIK dividends recognized on or after that date, including those on its outstanding Series B Preferred Stock (as defined in Note 12). Adoption is not expected to change the Company’s measurement of PIK dividends or materially affect its consolidated financial statements because the Company currently measures those dividends using the contractual rate and calculation basis specified in the Series B Certificate of Designation (as defined in Note 12). Under the prospective approach, previously recognized PIK dividends will not be adjusted.
DRAGONFLY ENERGY HOLDINGS CORP. Notes to Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data) |
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