DFLIW Dragonfly Energy Holdings Corporation

Dragonfly Energy Holdings Corp. (“Dragonfly Energy” or the “Company”) (Nasdaq: DFLI), an industry leader in energy storage and producer of deep cycle lithium-ion storage batteries, today reported its financial and operational results for the second quarter ended June 30, 2023.

Second Quarter 2023 Financial Highlights

• Net Sales were $19.3 million, compared to $21.6 million in Q2 2022
• Gross Profit was $4.1 million, compared to $7.0 million in Q2 2022
• Operating expenses were $(12.5) million, compared to $(7.6) million in Q2 2022
• Net Loss of $(11.7) million, compared to a Net Loss of $(1.5) million in Q2 2022
• Diluted Loss per share was $(0.25) compared to $(0.04) in Q2 2022
• EBITDA of $(7.3) million, compared to $(0.3) million in Q2 2022

Operational and Business Highlights

• Announced completion of U.S. lithium battery cell pilot line and beginning of anode manufacturing at scale, using patented deposition process
• Announced U.S. Patent for innovative battery pack assembly design, enabling flexible custom installation solutions and increased energy density
• Announced partnership with nuCamp, the world’s largest teardrop trailer and small camper manufacturers, to provide full lithium power systems as standard equipment on 2024 model year products
• Dragonfly Energy joined the Russell 2000® Index

“We have achieved a number of important milestones since our last call, with our patent pertaining to preparation and powder film deposition of pre-coated powders and completion of our lithium battery cell pilot program,” said Denis Phares, CEO of Dragonfly Energy. “While the business continues to experience some near-term market headwinds, Dragonfly Energy is executing our plan; growing our market share in our core markets, addressing new growth opportunities, and making significant progress on our cell manufacturing goals. We are excited for what lies ahead and sharing that with you in the coming quarters.”

Second Quarter 2023 Financial and Operating ResultsDragonfly generated net sales of $19.3 million in the second quarter, in line with the Company’s $18.0 to $22.0 million revenue guidance. Our revenue declined by $2.3 million from $21.6 million in the second quarter of 2022 as growth from our OEM customers was offset by declines in our direct-to-consumer (“DTC”) business.

Gross profit in the quarter was $4.1 million, compared to $7.0 million in the second quarter of 2022. The decrease in gross profit was primarily due to the change in revenue mix that included a larger percentage of lower margin OEM sales and a lower percentage of higher margin DTC sales, as well as an increase in material costs.

Second quarter 2023 operating expenses of $(12.5) million, were higher compared to $(7.6) million in the second quarter of 2022. Higher professional services, compliance, and insurance, as well as higher personnel, severance, stock-based compensation, and materials costs drove the increase.

The Company had a net loss of $(11.7) million, or $(0.25) per diluted share in the second quarter of 2023, compared to a net loss of $(1.5) million or $(0.04) per diluted share in the second quarter of 2022. Net income in the second quarter of 2023 was primarily impacted by lower DTC segment sales, increased cost of goods sold, higher operating expenses, and increased other expenses.

Second quarter 2023 EBITDA was $(7.3) million, compared to EBITDA of $(0.3) million in the second quarter of 2022. Second quarter 2023 Adjusted EBITDA, excluding stock-based compensation, costs associated with our offering in June, and the impact of a separation agreement and changes in fair market value of the Company’s warrants was $(5.5) million in the quarter, compared to $0.2 million in the same quarter a year ago.

The Company ended the second quarter of 2023 with $33.0 million in cash. Dragonfly Energy retains strong financial flexibility with access to a $150 million equity line of credit.

Q3 2023 Outlook

The Company continues to face headwinds in its core markets, which are dominated by consumer discretionary spending. The RV industry, in particular, is undergoing more severe unit declines than previously expected, with deliveries expected to fall to volumes not seen in a decade. As a result of this industry weakness, we were informed in July 2023 that our largest RV customer has instituted a de-contenting strategy that ultimately changed our storage offering from a standard installation to a dealer option. While this customer is not moving to a different solution or competitor, we do expect this change in strategy to have a material limiting effect on our revenue throughout the remainder of 2023. In light of this change, we have removed all previously forecasted revenue from this customer for the remainder of the year.

• Net Sales are expected to range between $16.0 - $20.0 million, impacted by overall softer demand from the RV market
• Gross Margin is expected to improve modestly on a sequential basis
• Operating Expenses are expected to be in a range of $(10.0) - $(13.0) million
• Other Income (Expense) is expected be an expense in the range of $(4.0) - $(4.5) million
• Net Losses are expected to be between $(10.0) - $(13.0) million for the quarter, or $(0.21) - $(0.27) per share based on 48.0 million shares outstanding

Webcast InformationThe Dragonfly Energy management team will host a conference call to discuss its first quarter 2023 financial results this afternoon, Monday, August 21, 2023, at 5:00 pm ET. The call can also be accessed live via telephone by dialing (888) 259-6580 or for international callers (416) 764-8624, and referencing Dragonfly Energy. Please log in to the webcast or dial in to the call at least 10 minutes prior to the start of the event. The live webcast of the conference will also be available at https://investors.dragonflyenergy.com/events-and-presentations/default.aspx on the Events and Presentations page on the Investor Relations section of Dragonfly’s website.

About Dragonfly

Dragonfly Energy Holdings Corp. (Nasdaq: DFLI) headquartered in Reno, Nevada, is a leading supplier of deep cycle lithium-ion batteries. Dragonfly Energy’s research and development initiatives are revolutionizing the energy storage industry through innovative technologies and manufacturing processes. Today, Dragonfly Energy’s non-toxic deep cycle lithium-ion batteries are displacing lead-acid batteries across a wide range of end-markets, including RVs, marine vessels, off-grid installations, and other storage applications. Dragonfly Energy is also focused on delivering an energy storage solution to enable a more sustainable and reliable smart grid through the future deployment of the Company’s proprietary and patented solid-state cell technology. To learn more, visit www.dragonflyenergy.com/investors.

Forward-Looking StatementsThis press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical statements of fact and statements regarding the Company’s intent, belief or expectations, including, but not limited to, statements regarding the Company’s guidance for 2023 results of operations and financial position, planned products and services, business strategy and plans, market size and growth opportunities, competitive position and technological and market trends. Some of these forward-looking statements can be identified by the use of forward-looking words, including “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “plan,” “targets,” “projects,” “could,” “would,” “continue,” “forecast” or the negatives of these terms or variations of them or similar expressions.

These forward-looking statements are subject to risks, uncertainties, and other factors (some of which are beyond the Company’s control) which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may impact such forward-looking statements include, but are not limited to: headwinds in the Company’s core markets, including the RV market, the Company’s ability to successfully increase market penetration into target markets; the growth of the addressable markets that the Company intends to target; the Company’s ability to retain members of its senior management team and other key personnel; the Company’s ability to maintain relationships with key suppliers including suppliers in China; the Company’s ability to maintain relationships with key customers; the Company’s ability to access capital as and when needed under its $150 million ChEF Equity Facility; the Company’s ability to protect its patents and other intellectual property; the Company’s ability to successfully optimize solid state cells and to produce commercially viable solid state cells in a timely manner or at all, and to scale to mass production; the Company’s ability to achieve the anticipated benefits of its customer arrangements with THOR Industries and THOR Industries’ affiliated brands (including Keystone RV Company); the impact of the coronavirus disease pandemic, including any mutations or variants thereof and/or the Russian/Ukrainian conflict; the Company’s ability to generate revenue from future product sales and its ability to achieve and maintain profitability; and the Company’s ability to compete with other manufacturers in the industry and its ability to engage target customers and successfully convert these customers into meaningful orders in the future. These and other risks and uncertainties are described more fully in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and in the Company’s subsequent filings with the SEC available at www.sec.gov.

If any of these risks materialize or any of the Company’s assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently does not know or that it currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. All forward-looking statements contained in this press release speak only as of the date they were made. Except to the extent required by law, the Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

Investor Relations:Sioban Hickie, ICR, Inc.DragonflyIR@icrinc.com

		Dragonfly Energy Holdings Corp.
		Unaudited Condensed Interim Consolidated Statements of Operations
		(U.S. Dollars in Thousands, except share and per share data)
						Three Months Ended
						June 30, 2023				June 30, 2022
		Net Sales				$	19,274			$	21,622
		Cost of Goods Sold					15,176				14,594
		Gross Profit					4,098				7,028
		Operating Expenses
			Research and development				1,067				859
			General and administrative				7,614				3,816
			Selling and marketing				3,808				2,881
		Total Operating Expenses					12,489				7,556
			Loss From Operations				(8,391	)			(528	)
		Other (Expense) Income
			Interest expense				(4,113	)			(1,228	)
			Change in fair market value of warrant liability				804				-
				Total Other (Expense) Income			(3,309	)			(1,228	)
		Loss Before Taxes					(11,700	)			(1,756	)
		Income Tax (Benefit) Expense					-				(287	)
		Net Loss				$	(11,700	)		$	(1,469	)
		Loss Per Share‑ Basic				$	(0.25	)		$	(0.04	)
		Loss Per Share‑ Diluted				$	(0.25	)		$	(0.04	)
		Weighted Average Number of Shares‑ Basic					47,418,269				36,616,430
		Weighted Average Number of Shares‑ Diluted					47,418,269				36,616,430

		Dragonfly Energy Holdings Corp.
		Unaudited Condensed Interim Consolidated Statements of Operations
		(U.S. Dollars in Thousands, except share and per share data)
						Six Months Ended
						June 30, 2023				June 30, 2022
		Net Sales				$	38,065			$	39,925
		Cost of Goods Sold					29,224				27,402
		Gross Profit					8,841				12,523
		Operating Expenses
			Research and development				1,947				1,198
			General and administrative				17,109				7,442
			Selling and marketing				7,992				5,973
		Total Operating Expenses					27,048				14,613
			Loss From Operations				(18,207	)			(2,090	)
		Other (Expense) Income
			Interest expense				(7,928	)			(2,491	)
			Change in fair market value of warrant liability				19,327				-
				Total Other (Expense) Income			11,399				(2,491	)
		Loss Before Taxes					(6,808	)			(4,581	)
		Income Tax (Benefit) Expense					-				(814	)
		Net Loss				$	(6,808	)		$	(3,767	)
		Loss Per Share- Basic				$	(0.15	)		$	(0.10	)
		Loss Per Share- Diluted				$	(0.15	)		$	(0.10	)
		Weighted Average Number of Shares- Basic					46,263,591				36,579,990
		Weighted Average Number of Shares- Diluted					46,263,591				36,579,990

Dragonfly Energy Holdings Corp.
Unaudited Condensed Consolidated Balance Sheets
(U.S. Dollars in Thousands, except share and per share data)
				June 30, 2023				December 31, 2022
Current Assets
	Cash			$	32,952			$	17,781
	Accounts receivable, net of allowance for credit losses				2,172				1,444
	Inventory				44,198				49,846
	Prepaid expenses				1,199				1,624
	Prepaid inventory				2,942				2,002
	Prepaid income tax				529				525
	Other current assets				239				267
	Total Current Assets				84,231				73,489
Property and Equipment
	Machinery and equipment				15,932				10,214
	Office furniture and equipment				275				275
	Leasehold improvements				1,727				1,709
	Vehicle				33				195
	Total				17,967				12,393
	Less accumulated depreciation and amortization				(2,180	)			(1,633	)
	Property and Equipment, Net				15,787				10,760
	Operating lease right of use asset				3,912				4,513
	Total Assets			$	103,930			$	88,762
Current Liabilities
	Accounts payable			$	19,990			$	13,475
	Accrued payroll and other liabilities				9,758				6,295
	Customer deposits				152				238
	Uncertain tax position liability				128				128
	Notes payable, current portion, net of deferred financing fees				22,372				19,242
	Operating lease liability, current portion				1,239				1,188
	Total Current Liabilities				53,639				40,566
Long‑Term Liabilities
	Warrant liabilities				14,637				32,831
	Accrued expenses, long-term				551				492
	Operating lease liability, net of current portion				2,890				3,541
	Total Long‑Term Liabilities				18,078				36,864
Total Liabilities					71,717				77,430
Equity
	Common stock, 170,000,000 shares at $0.0001 par value, authorized, 58,504,541 and 43,272,728 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively				6				4
	Preferred stock, 5,000,000 shares at $0.0001 par value, authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively				-				-
Additional paid in capital					66,148				38,461
Retained deficit					(33,941	)			(27,133	)
Total Equity					32,213				11,332
Total Liabilities and Shareholders' Equity				$	103,930			$	88,762

		Dragonfly Energy Holdings Corp.
		Unaudited Condensed Consolidated Statement of Cash Flows
		(U.S. Dollars in Thousands)
						Six Months Ended
						June 30, 2023				June 30, 2022
		Cash Flows From Operating Activities
		Net Loss				$	(6,808	)		$	(3,767	)
		Adjustments to Reconcile Net Loss to Net Cash
		Used in Operating Activities
			Stock based compensation				5,441				719
			Amortization of debt discount				620				1,196
			Change in fair market value of warrant liability				(19,327	)			-
			Deferred tax liability				-				(819	)
			Non‑cash interest expense (paid‑in-kind)				2,510				-
			Provision for doubtful accounts				93				-
			Depreciation and amortization				593				389
			Loss on disposal of property and equipment				116				62
		Changes in Assets and Liabilities
			Accounts receivable				(821	)			(3,876	)
			Inventories				5,648				(15,141	)
			Prepaid expenses				425				(1,236	)
			Prepaid inventory				(940	)			4,308
			Other current assets				28				(1,962	)
			Other assets				601				551
			Income taxes payable				(4	)			(973	)
			Accounts payable and accrued expenses				6,272				820
			Customer deposits				(86	)			(183	)
		Total Adjustments					1,169				(16,145	)
		Net Cash Used in Operating Activities					(5,639	)			(19,912	)
		Cash Flows From Investing Activities
			Purchase of property and equipment				(2,571	)			(4,819	)
			Net Cash Used in Investing Activities				(2,571	)			(4,819	)
		Cash Flows From Financing Activities
			Proceeds from public offering, net				21,640				-
			Proceeds from public offering (ATM), net				671				-
			Proceeds from note payable, related party				1,000				-
			Repayment of note payable, related party				(1,000	)			-
			Proceeds from exercise of public warrants				747				-
			Proceeds from exercise of options				323				200
			Net Cash Provided by Financing Activities				23,381				200
		Net Increase (Decrease) in Cash					15,171				(24,531	)
		Beginning cash					17,781				28,630
		Ending cash				$	32,952			$	4,099

Use of Non-GAAP Financial Measures

The Company provides non-GAAP financial measures including EBITDA and Adjusted EBITDA as a supplement to GAAP financial information to enhance the overall understanding of the Company’s financial performance and to assist investors in evaluating the Company’s results of operations, period over period. Adjusted non-GAAP measures exclude significant unusual items. Investors should consider these non-GAAP measures as a supplement to, and not a substitute for financial information prepared on a GAAP basis.

Adjusted EBITDAAdjusted EBITDA is considered a non-GAAP financial measure under the rules of the SEC because it excludes certain amounts included in net loss calculated in accordance with GAAP. Specifically, the Company calculates Adjusted EBITDA by GAAP net loss adjusted to exclude stock-based compensation expense, business combination related expenses and other one-time, non-recurring items.

The Company has included Adjusted EBITDA because it is a key measure used by Dragonfly’s management team to evaluate its operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses. As such, the Company believes Adjusted EBITDA is helpful in highlighting trends in the ongoing core operating results of the business.

Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of net loss or other results as reported under GAAP. Some of these limitations are:

	●	Adjusted EBITDA does not reflect the Company’s cash expenditures, future requirements for capital expenditures, or contractual commitments;
	●	Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company’s working capital needs;
	●	Adjusted EBITDA does not reflect the Company’s tax expense or the cash requirements to pay taxes;
	●	although amortization and depreciation are non-cash charges, the assets being amortized and depreciated will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;
	●	Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items for which the Company may adjust in historical periods; and
	●	other companies in the industry may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.

Reconciliations of Non-GAAP Financial Measures

EBITDA and Adjusted EBITDAThe following table presents reconciliations of EBITDA and Adjusted EBITDA to the most directly comparable GAAP financial measure for each of the periods indicated.

		Dragonfly Energy Holdings Corp.
		Reconciliation of GAAP to Non-GAAP Measures (Unaudited)
		(U.S. Dollars in Thousands)
							Three Months Ended								Six Months Ended
							June 30, 2023				June 30, 2022				June 30, 2023				June 30, 2022
		Net Loss					$	(11,700	)		$	(1,469	)		$	(6,808	)		$	(3,767	)
			Interest Expense					4,113				1,228				7,928				2,491
			Taxes					-				(287	)			-				(814	)
			Depreciation and Amortization					296				272				593				389
		EBITDA					$	(7,291	)		$	(256	)		$	1,713			$	(1,701	)
		Adjusted for:
			Stock Based Compensation(1)					954				431				5,441				719
			Separation Agreement(2)					720				-				720				-
			June Offering Costs(3)					904				-				904				-
			Promissory Note Forgiveness(4)					-				-				-				469
			Change in fair market value of warrant liability(5)					(804	)			-				(19,327	)			-
		Adjusted EBITDA					$	(5,517	)		$	175			$	(10,549	)		$	(513	)
			(1) Stock-Based Compensation is comprised of costs associated with option and RSU grants made to our employees, consultants and board members.
			(2) Separation Agreement is comprised of $720 in cash severance associated with the separation agreement dated April 26, 2023 between us and our former Chief Legal Officer.
			(3) June Offering Costs is comprised of fees and expenses, including legal, accounting, and other expenses associated with our secondary offering.
			(4) Promissory Note Foregiveness is comprised of the loan that was forgiven, prior to the Business Combination, in connection with the promissory note, with a maturity date of March 1, 2026, between us and John Marchetti, our former Chief Financial Officer.
			(5) Change in fair market value of warrant liability represents the change in fair value January 1, 2023 through June 30, 2023.

Source: Dragonfly Energy Holdings Corp.