UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
☒ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from _______ to _______
Commission
file number 001-40730
DRAGONFLY
ENERGY HOLDINGS CORP.
(Exact
name of registrant as specified in its charter)
(Address of Principal Executive Offices) (Zip Code)
(775)622-3448
Registrant’s
telephone number, including area code
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.0001 per share DFLI The Nasdaq Capital Market
Securities
registered pursuant to Section 12(g) of the Act: None.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Emerging growth company ☒
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The
aggregate market value of voting stock held by non-affiliates of the Registrant on June 30, 2024, based on the closing price of $7.61
for shares of the registrant’s common stock as reported by the Nasdaq Capital Market, was approximately $37.5 million.
As
of March 27, 2025, there were 7,589,642 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.
Documents
incorporated by reference:
None.
TABLE
OF CONTENTS
Page
Part I 1
Item 1. Business 1
Item 1A. Risk Factors 16
Item 1B. Unresolved Staff Comments 38
Item 1C. Cybersecurity 38
Item 2. Properties 38
Item 3. Legal Proceedings 38
Item 4. Mine Safety Disclosures 38
Item 6. [Reserved] 39
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 54
Item 8. Financial Statements and Supplementary Data 54
Item 9A. Controls and Procedures 54
Item 9B. Other Information 55
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections 55
Part III 56
Item 10. Directors, Executive Officers and Corporate Governance 56
Item 11. Executive Compensation 60
Item 14. Principal Accountant Fees and Services 69
Item 15. Exhibit and Financial Statement Schedules 70
SIGNATURES 75
On
November 22, 2024, we effected a 1-for-9 reverse stock split of our outstanding shares of common stock. Unless specifically provided
otherwise herein, all share and per share information in this Annual Report on Form 10-K has been adjusted to reflect the reverse stock
split.
i
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our
beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve
known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance
or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking
statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can
identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,”
“assume,” “should,” “indicate,” “would,” “believe,” “contemplate,”
“expect,” “seek,” “estimate,” “continue,” “plan,” “point to,”
“project,” “predict,” “could,” “intend,” “target,” “potential”
and other similar words and expressions of the future.
There
are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking
statement made by us. These factors include, but are not limited to:
● our ability to raise additional capital to fund our operations;
● our ability to successfully increase market penetration into target markets;
● the addressable markets that we intend to target do not grow as expected;
● the loss of any members of our senior management team or other key personnel;
● the loss of any relationships with key customers;
● our ability to protect our patents and other intellectual property;
● developments relating to our competitors and our industry;
● our current dependence on one manufacturing facility; and
The
foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or
risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements.
Please see “Part I—Item 1A—Risk Factors” for additional risks which could adversely impact our business
and financial performance.
All
forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue
reliance on any forward looking statements, which speak only as of the date of this report or the date of the document incorporated by
reference into this report. We have no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking
statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections
in good faith and believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will
result or be achieved or accomplished.
ii
Part
I
Item
1. Business
All
references in this report to “Dragonfly,” the “Company,” “we,” “us,” or “our”
mean Dragonfly Energy Holdings Corp. and its subsidiaries unless stated otherwise or the context otherwise indicates.
Overview
We
are a manufacturer of non-toxic deep cycle lithium-ion batteries that caters to customers in the consumer industry (including the recreational
vehicle (“RV”), marine vessel, solar and off-grid residence industries), and trucking, industrial and energy storage
markets, with proprietary, patented and disruptive battery cell manufacturing and non-flammable solid-state cell technology currently
under development. Our goal is to develop technology to deliver environmentally impactful solutions for energy storage to everyone globally.
We believe that the innovative design of our lithium-ion batteries is ideally suited for the demands of modern customers who rely on
consumer electronics, connected devices and smart appliances that require continuous, reliable electricity, regardless of location.
Our
deep cycle lithium iron phosphate (“LFP”) batteries provide numerous advantages compared to incumbent products, such
as lead-acid batteries. LFP batteries are non-toxic and environmentally friendly, do not rely on scarce or controversial metals and are
a highly cost-effective storage solution. LFP batteries use lithium iron phosphate (“LiFePO4”) as the cathode material
for lithium-ion cells rather than nickel or cobalt. Although the energy density of LFP batteries is lower, they have a longer cycle life
and experience a slower rate of capacity loss. LFP is also intrinsically safer than sulfide gases due to its thermal and chemical stability,
meaning our LFP batteries are less flammable than alternative products. As we develop our proprietary solid-state cell technology, we
believe our use of LFP will continue to provide significant advantages over the lithium-ion technology in development by most other companies
that still incorporate less stable components in their chemistries (such as sulfide gases, which are chemically unstable and form hydrogen
sulfide when exposed to air).
We
have a dual-brand strategy for battery products, Dragonfly Energy (“Dragonfly Energy”) and Battle Born Batteries (“Battle
Born”). Battle Born branded products are primarily sold direct-to-consumers (“DTC”), while the Dragonfly
Energy brand is primarily sold to original equipment manufacturers (“OEMs”). However, with the growing popularity
and brand recognition of Battle Born, these batteries have become increasingly popular with our OEM customers. Based on the extensive
research and optimization undertaken by our team, we have developed a line of products with features including a proprietary battery
management system and an internal battery heating feature for cold temperatures, and we have recently launched our unique battery communication
system. We currently source the LFP cells incorporated into our batteries from a limited number of carefully selected suppliers that
can meet our demanding quality standards and with whom we have developed long-term relationships.
Reflecting
the strength of our DTC brand, we signed a brand licensing contract in July of 2024 with Stryten Energy for the Battle Born brand to
be deployed in B2B sales within Stryten’s target market. The contract is expected to bring $30 million of licensing revenues within
a seven year period. Additionally, we signed a contract manufacturing agreement that allows for us to assemble battery packs to be sold
by Stryten under the Battle Born label. Both licensing and contract manufacturing revenues from these contracts are expected to come
in throughout 2025, and we believe will represent a significant portion of our total revenues beginning in 2026.
Founded
as an aftermarket-focused company, we initially targeted direct-to-consumer (DTC) sales within the recreational vehicle (RV) market.
Since our inception in 2020, we have successfully sold over 330,000 batteries. For the fiscal years ended December 31, 2024, and December
31, 2023, we sold 42,447 and 64,906 batteries, respectively, generating revenues of $50.6 million and $64.5 million for each year.
Our
innovative battery products have disrupted the traditional lead-acid battery markets. The strong DTC demand, combined with our efforts
to educate and market to original equipment manufacturers (OEMs), has facilitated significant penetration into the OEM sector. Historically,
we have driven total sales growth through several strategies:
3. OEM Partnerships: Supplying batteries to RV OEMs.
5. Accessory Sales: Reselling accessories for our battery systems.
Our
valued RV OEM partners currently include industry leaders such as Airstream, Tiffin Motorhomes, Forest River, nuCamp RV, Triple E RV,
REV Group, Keystone, and THOR Industries (“THOR”). Notably, THOR has made a strategic investment in our business,
which we believe underscores our strong industry relationships.
For
the year ended December 31, 2024, we experienced a period of sustained market correction characterized by ongoing inflation and historically
high interest rates, which posed challenges to our DTC markets. While there were small increases in retail registrations and wholesale
shipments within the RV industry, much of this growth was concentrated in the price-sensitive entry-level segment. These entry-level
RVs typically do not incorporate our battery products, resulting in a decline in our overall sales due to the limited growth in segments
aligned with our offerings.
However,
we did observe increased OEM adoption of our products outside the entry-level segment, marked by the acquisition of new customers and
enhanced market share within existing customer product lines. As a result, a higher proportion of our revenue was generated through the
OEM channel compared to the DTC market.
We
successfully entered into two significant distribution agreements with Keystone Automotive Group (a division of LKQ) and Meyer Distribution.
These partnerships are expected to expand our reach within the RV and marine dealer networks and support continued growth in our DTC
channels.
In
2024, RV dealers continued to optimize their inventory levels, resulting in relatively flat sales after a substantial 36% correction
in 2023. The industry’s pivot towards entry-level RVs, which do not typically utilize our batteries, contributed to the decline
in total revenue for the year ended December 31, 2024, compared to the prior year.
Based
on our ongoing discussions with customers and current unit forecast projections, we anticipate an increase in revenue within the RV market
for 2025. We remain committed to expanding our market presence, leveraging strategic partnerships, and driving innovation to sustain
our growth trajectory.
We
currently offer several lines of batteries across our two brands, each differentiated by size, power and capacity, consisting of seven
different models, which come with an option for internal heat for cold temperature operation or an option for wireless communication
using our Dragonfly IntelLigence feature. To supplement our battery offerings, we are also a reseller of accessories for battery systems.
These include chargers, inverters, monitors, controllers and other system accessories from brands such as Victron Energy, Progressive
Dynamics, Magnum Energy and Sterling Power.
Our
battery packs are designed and assembled in-house in the United States. In November 2024, we relocated from our 99,000 square foot facility
in Reno, Nevada to our new 390,240 square foot facility also in Reno, Nevada, which has allowed us to increase our production capacity
and gives us the ability to increase sales to existing customers and penetrate new markets. Our 390,240 square foot facility provides
a streamlined, partially autonomous production process for our current batteries, which comprises module assembly and battery assembly,
with the availability to expand the number of lines to handle increased volumes and the additional battery modules we intend to introduce
in the near future. We also entered into a lease for use of an approximately 64,000 square foot facility to further increase our capacity
to produce our patented dry electrode process (the “Fernley Lease Agreement”).
Through
our Battle Born Batteries and Wakespeed brands, we operate in three primary consumer end markets: RVs, marine vessels, and off-grid storage
systems. We are strategically expanding into additional markets, with a focus on trucking – including heavy-duty trucks and work
trucks – and industrial markets – including oil and gas and industrial solar integration. Within our core markets, we focus
on displacing lead-acid batteries with our technologically advanced and greener lithium-ion solutions. Our Battle Born Batteries portfolio
is designed to provide customers with a reliable, long-lasting, and highly efficient off-grid power source.
We
continue to leverage our proven sales and marketing strategy to efficiently penetrate our target end markets. We prioritize customer
education through various channels, highlighting the distinct advantages of lithium-ion batteries over traditional lead-acid alternatives.
Tradeshows, rallies, and industry events serve as key platforms for direct customer engagement, featuring product demonstrations, educational
seminars, and opportunities for interaction with knowledgeable sales and technical experts. We further amplify our reach through a robust
social media program, strategically partnering with content creators and industry influencers to disseminate product benefits to targeted
audiences. Additionally, we cultivate relationships with industry publications to secure editorial coverage that informs and educates
potential customers. We also employ a targeted pay-per-click (“PPC”) advertising campaigns across various platforms,
including search engines, social media, and connected TV to efficiently convert high-intent customers at the bottom of the purchase funnel.
Drawing
upon our success in collaborating with RV and marine OEMs, we have begun expanding into the heavy-duty trucking market. We are leveraging
our expertise in designing and supporting lithium-ion storage systems to tailor solutions meeting specific requirements for fleets. These
solutions have been adopted as factory options, demonstrating their value proposition for truck fleets seeking to:
This
strategic approach has resulted in successful pilot programs with fleets representing over 15% of the North American heavy-duty trucking
market, and has already resulted in several new arrangements, including Stevens Transport and Highway Transport.
In
the Fall of 2024, a partnership with Alegacy – a packager of natural gas compression equipment – led to a successful demonstration
of an uninterruptible battery powered vapor recovery unit (VRU) that exhibited methane leakage mitigation in a large (greater than 3000
hp) gas compression unit. We believe that this successful demonstration will pave the way for the aftermarket and OEM deployments of
these lithium battery powered VRUs, beginning in 2025. The opportunity leverages our expertise in combining alternator charging and battery
cycling, as well as our Class 1 Div 2 battery classification, which allows our battery systems to be deployed in the vicinity of oil
& gas pipelines.
To
augment our core lithium-ion battery pack business, we rely on our research and development department. The team has successfully developed
innovative manufacturing processes for dry-electrode manufacturing of lithium-ion cells, and continues development efforts relating to
next-generation solid-state technology. Since our inception, we have built a comprehensive patent portfolio around our proprietary dry-electrode
battery manufacturing process, which eliminates the use of harmful solvents and energy-intensive drying ovens compared to traditional
methods. This translates to significant environmental and cost benefits, including reduced energy consumption, smaller space requirements,
and a lower carbon footprint.
Moreover,
our solid-state technology in development removes the need for a liquid electrolyte, thereby addressing safety concerns related to flammability.
Our unique competitive edge lies in the combination of solid-state technology with its scalable dry-electrode manufacturing process.
This enables the rapid production of cells having an intercalation anode (like graphite or silicon), unlike many competitors reliant
on less stable lithium metal anodes. We believe this design offers superior cyclability and safety, serving as a key differentiator in
the energy storage market. Furthermore, internal production of both conventional and solid-state cells streamlines our supply chain and
enables vertical integration, ultimately driving down production costs.
Industry
Background
For
decades, lead-acid batteries have been the dominant player in power and energy markets worldwide. Since the introduction of the absorbed
glass mat (“AGM”) lead-acid battery in the mid-1970s, the technological advancements in lead-acid battery technology
have been limited. LFP batteries have numerous advantages over the incumbent lead-acid batteries used in today’s markets:
End
Markets
Current
Markets
According
to a Frost and Sullivan report commissioned by us in 2021 (“Frost & Sullivan”), the total addressable market (“TAM”)
of our three current end markets was estimated to be approximately $12 billion by 2025.
Addressable
Adjacent Markets
Our
addressable markets are areas with significant growth potential that we will be positioned to penetrate as customers turn towards LFP
and other lithium-ion batteries as replacements for traditional lead-acid batteries. As these medium- and long-term markets mature, we
intend to deploy our solid-state technology, once developed, while concurrently continuing to further displace the incumbent lead-acid
technology.
Our
Competitive Strengths
We
believe that we possess the largest share in the markets we operate in due to our following business strengths, which distinguish us
in this competitive landscape and position us to capitalize on the anticipated continued growth in the energy storage market:
Our
Growth Strategy
We
intend to leverage our competitive strengths, technology leadership and market share position to pursue our growth strategy through the
following:
Our
Products and Technology
Chemistry
Comparison
Lead-acid
batteries were the first form of rechargeable battery to be developed and modified across different platforms for a variety of uses,
from powering small electronics to use for energy storage in back-up power supplies in cell phone towers. Since the development in the
1970s of AGM lead-acid batteries, a form of sealed lead-acid battery that enables operation in any position, there has been limited innovation
in lead-acid battery technology. The push to develop longer-lasting, lower-cost, more environmentally-friendly and faster-charging batteries
has led to the development of lithium-ion batteries and, within the lithium-ion battery market, different chemistries.
There
are several dominant battery chemistries in the lithium-ion market that can be used for different purposes. Two widely adopted chemistries
found in the market today are nickel manganese cobalt (“NMC”), and nickel cobalt aluminum (“NCA”).
The higher energy density and shorter cycle life found in NMC and NCA batteries are suitable for markets where fast charging and high
energy density are required, such as electric vehicle (“EV”) powertrains and consumer electronics. LFP batteries are
best suited for energy storage markets where long life and affordability are paramount, such as RV, marine vessel, off-grid storage,
onboard tools, material handling, utility-grade storage, telecom, rail and data center markets.
NMC
batteries are highly dependent on two metals that present significant constraints — nickel, which is facing an industry-wide
shortage, and cobalt, a large percentage of which comes from conflict-ridden countries. According to an article by McKinsey & Company
titled “Lithium and Cobalt: A tale of two commodities”, global forecasts for cobalt show supply shortages arising
as early as 2022, slowing down NMC battery growth. Both of these elements are also subject to commodity price fluctuations, making NMC
and NCA batteries less cost-effective than LFP batteries. LFP batteries do not contain these elements and materials can be sourced domestically,
and are therefore not subject to these shortages, geopolitical concerns or commodity price fluctuations. In fact, LFP batteries have
no toxic elements, offering a much safer environmental alternative. The temperature threshold for thermal runaway (i.e., lithium-ion
battery overheating that can result in an internal chemical reaction) is higher for LFP batteries as compared to NMC and NCA batteries,
making LFP batteries less flammable and safer.
LFP
batteries have a useful life of approximately 10 to 15 years compared to one to two years for lead-acid batteries, and typically charge
up to five times faster. LFP batteries are also not constrained by weight (having the same energy capacity at one-fifth of the weight)
or temperature (having the ability to generate power even in low temperatures and to not swell or heat up when charging or discharging)
and are generally maintenance free.
In
the electric vehicle market, the race to provide the highest energy density facilitating frequent, rapid acceleration, greatest range
and fastest charging battery — all while competing on cost — is where many new battery companies
are prioritizing their efforts. Success in the electric vehicle market requires use of chemistries capable of optimization to these requirements.
In our targeted stationary storage markets, the ideal solution requires a safe, long-lasting battery in terms of discharge/charge cycles
with a focus on providing a steady power stream. LFP batteries are better suited for the stationary storage market compared to NMC and
NCA batteries, as LFP batteries are safer and have a significantly longer life cycle making them more cost-effective. The market for
utility grade storage, particularly for clean energy projects, and the related adoption of lithium-ion batteries (including LFP batteries)
is expected to increase as the fully loaded cost of energy (production and storage) approaches cost parity with inexpensive fossil fuel
energy provided through the electric grid. Compared to NMC and NCA batteries, LFP batteries are at or much closer to grid parity.
Dry
Electrode Cell Manufacturing Technology
Since
our inception, we have been developing proprietary dry-electrode manufacturing processes for which we have issued patents and pending
patent applications, where appropriate. Dry-electrode manufacturing eliminates the use of toxic and expensive solvents and energy-intensive
drying ovens in the cell manufacturing process. This in turn reduces the energy usage, space requirements, carbon footprint, and overall
cost as compared to conventional slurry-based methods. Furthermore, the manufacturing technology is chemistry agnostic – meaning
it can produce battery cells across a variety of different chemistries and application use cases. In 2023, we completed the construction
of our dry-electrode manufacturing pilot line, demonstrated the ability to produce Anode and Cathode electrode tapes at scale using this
manufacturing process. We have developed sample cells for prospective customers across a variety of chemistries and end-markets and are
designing equipment for scaled production of full cells.
Solid-State
Cells
LFP
batteries are not without their disadvantages. While less flammable than other chemistries, the existence of a flammable liquid electrolyte
still poses safety risks. Like all liquid-based lithium-ion batteries, LFP batteries have a potential to produce solid lithium dendrites,
icicle-like formations which can pierce the physical separators in LFP batteries, which are necessary in LFP batteries to separate the
positively charged liquid electrolyte from the negatively charged liquid electrolyte, and which, over time, will degrade the performance
of LFP batteries and potentially result in fire-related risks. The next phase in the development of lithium-ion batteries is solid-state
cell development, which contains a solid, rather than a liquid, electrolyte, eliminating many of the current disadvantages to LFP batteries
while increasing the safety of the battery cells. We believe that the development of our solid-state technology will provide us with
a unique competitive advantage.
Compared
to current lithium-ion technology, where lithium-ions cross a liquid electrolyte barrier between a battery’s anode (negative electrode)
and cathode (positive electrode), solid-state batteries aim to use a solid electrolyte to regulate the lithium-ions. As a battery charges
and discharges, an electrochemical reaction occurs creating a flow of electrical energy between the cathode, electrolyte and anode as
the electrodes lose and reacquire electrons. In addition to the use of non-toxic electrode components, the removal of a liquid electrolyte
will eliminate the risk of fire, making solid-state cells inherently safe. The move to a non-liquid electrolyte also means that solid-state
batteries will be, on average, smaller and lighter than existing lithium-ion batteries. The process for manufacturing our solid-state
cells is described below under “— Research and Development”.
Our
Products
We
provide various industries with clean, reliable, and efficient power solutions through our comprehensive product portfolio. These products
and solutions are sold to both OEMs and retail customers.
Our
lead product line is Battle Born Batteries product line, respected for its exceptional performance and durability. When compared to traditional
lead-acid options, Battle Born Batteries deliver two to three times the power in the same physical space, one-fifth the weight for equal
usable power, and up to five times faster charging. Additionally, these batteries have extended lifespans of 3,000-5,000 cycles, translating
to ten to fifteen years of reliable use under typical conditions. This longevity is backed by our 10-year warranty, showcasing our commitment
to quality. The Battle Born Batteries product line currently features various sizes and configurations including models with proprietary
built-in heating for cold weather charging and Dragonfly IntelLigenceTM, a communication technology that unlocks real-time monitoring,
instant notifications, various protocol integration and superior battery protection. A focus on safety is central to our products, and
all Battle Born Battery products utilize LiFePO4 chemistry, the safest lithium-ion chemistry available on the market. Additionally, our
battery products undergo rigorous testing under stringent industry standards like UL Standard 2054, IEC 62133, UN 38.3 and IP65 to ensure
safety and reliability.
Looking
beyond batteries, we also offer a diverse range of power products.
Additionally,
as a distributor of leading brands like Victron, Schneider, and REDARC, we act as a one-stop shop for full system integration, catering
to both OEMs and retail customers. Our complete offering allows customers to benefit from clean and sustainable power, extended lifespans,
reduced costs, increased efficiency, and seamless integration - all backed by expert service and support.
Battery
Management System
Our
proprietary battery management system is developed and tested in-house. It offers a complete solution for monitoring and controlling
our complex battery systems and is designed to protect battery cells from damage in various scenarios. We believe our battery management
system is industry-leading for a number of reasons:
● it enables batteries to recharge even if completely drained;
Battery
Communication System
We
have developed a complete communication system branded Dragonfly IntelLigence, for which a U.S. non-provisional patent application and
an international PCT patent application have been filed, to be used with Dragonfly Energy OEM systems and Battle Born batteries and bundles.
This communication system will enable end customers to monitor each battery in real time, providing information on energy input and output
and current or voltage imbalances. The communication system will be able to communicate with up to 24 batteries in a bank at one time
and aggregate the data received from these batteries into a central system such as a phone or tablet. We began offering the Dragonfly
IntelLigence product line to OEMs in the third quarter of 2024, and to retail consumers in the fourth quarter of 2024.
Alternator
Regulation
Charging
batteries in a vehicle, such as a boat or RV, often requires pulling electrical current off of the vehicle’s alternator. Alternator
regulation is important to ensure that the alternator does not get unduly stressed during the current delivery to the batteries, and
that the current delivery remains within the operating limits of the onboard battery bank. The acquisition of the assets of Wakespeed
has allowed us to deliver our own proprietary solution to alternator regulation while also leveraging an established brand name. Wakespeed
is especially popular in the marine industry, and our ability to offer this complete solution sets the stage for further penetration
into marine markets.
Product
Pipeline
Beyond
our current battery modules, we have several LFP products in development that will enable us to access additional end markets.
Research
and Development
Our
research and development team has built up its efforts to support two main initiatives – (1) scale up of our patented dry electrode
process for cell manufacturing and (2) the advanced manufacturing of solid-state lithium-ion batteries. We believe the dry electrode
process can be leveraged to help us vertically integrate from a pack supplier to a cell supplier – positioning ourselves for long-term
competitiveness in the given geopolitical, economic, and technological landscapes. Our innovations in dry electrode processing result
in reduced manufacturing costs, CO2 equivalents, and factory footprint while eliminating the need for solvents like N-Methyl-2-pyrrolidone
(“NMP”). A third-party assessment conducted by Sphere Energy confirming these benefits has been completed in the first
quarter of 2024 relating to cost effectiveness and sustainability of our dry electrode battery manufacturing process (the “Sphere
Energy Assessment”).
The
Sphere Energy Assessment concluded that our dry electrode battery manufacturing process resulted in a 9% reduced carbon footprint of
cell manufacturing with no toxic NMP solvent required, resulting in a significantly more sustainable process. This sustainability advantage
is further augmented by a 71% reduction in energy usage during electrode manufacturing using our process (spray drying, coating, calendaring)
compared to standard cell manufacturing operations (slurry casting, drying, calendaring). By removing the need for large and expensive
drying ovens, our manufacturing process requires 22% less square footage. The culmination of these advantages results in a 25% reduction
in emissions from energy use, making our manufacturing process more sustainable and much more environmentally friendly as compared to
conventional manufacturing methods.
In
addition to the energy savings, the cost assessment found our process to be highly cost-effective with an estimated 5% savings (depending
on cell chemistry) on process-related costs compared to conventional methods. Importantly, these savings were calculated without the
additional cost benefits provided by domestically manufacturing battery cells such as Inflation Reduction Act tax credits (issued by
the IRS), tariffs, and shipping.
The
dry electrode battery manufacturing process we employ uses a patented spray coating technology to adhere the anode and cathode electrodes,
eliminating the need for large, energy-intensive equipment such as slurry coaters, conveyor dryers, and NMP processing equipment. This
process is chemistry agnostic, allowing for the various applications, such as electric vehicles, consumer electronics, and energy storage,
which is expected to enable us to expand into new markets and to achieve our goal of domestically producing nonflammable all-solid-state
battery cells.
We
have successfully produced anode and cathode electrode reels at scale using the dry electrode process and are now qualifying prototype
cells for the core business and potential partners. When compared to slurry cast electrode tapes, which is the conventional manufacturing
method, electrode tapes produced using the dry electrode process match or surpass mechanical integrity and electrochemical performance.
We are considering joint development agreements, licensing agreements, and offtake agreements as instruments of partnership with interested
parties.
In
comparison with traditional manufacturing methods, our patented process leverages two off-the-shelf technologies to deliver the
stated cell manufacturing benefits – spray drying and electrostatic powder coating. Technical risk is reduced by using
off-the-shelf equipment and both unit operations continue to be optimized in 2025. A new set of spray dryers have arrived
at our facility in the second quarter of 2024, enabling us to produce larger volumes of material for the electrode coating lines.
However, we have delayed the deployment of these spray dryers until at least the third quarter of 2025 as we focus on designing
larger-scale electrode coating equipment.
We
have developed our patented to be chemistry agnostic and capable of producing current cell chemistries (graphite, LCO, LFP, LTO, NCA,
NMC, LTO, silicon, etc.) and next generation cell chemistries (sodium-ion, solid-state, ionic liquid electrolytes, etc.). We believe
this flexibility and our robust intellectual property protection internationally positions us well for potential partnerships with cell
manufacturers, EV companies, and other pack suppliers in need of cell capacity. The next stage in technical development is to produce
larger volumes of sample cells for qualification. These production runs will be completed with partners in the United States and at our
own facilities . We have invested significant resources into developing an in-house comprehensive understanding of cell manufacturing
– raw material qualification, quality control such as, cell failure diagnostics, aging, and formation processes. Our research and
development Lab is equipped with over $20 million in research infrastructure to support the development of new cell chemistries, process
quality control, failure diagnostics, and more. This equipment includes quality control instruments (ex. moisture analysis, particle
size analysis, peel testing and titrations) and cutting-edge research instrumentation such as en operando nuclear magnetic resonance
(“NMR”), electron microscopes with lithium-tracking capabilities, and en operando x-ray diffraction. This infrastructure
has allowed us to optimize the dry-electrode process, allowing our team to match or surpass traditional electrode tape performance and
mechanical integrity. Because our process is dry and the active material is coated directly onto the current collector, interfacial and
composite resistivity of the electrode tapes often surpass the quality of slurry cast equivalents.
Our
solid-state technology continues to progress as we qualify new chemistries and refine the dry electrode process for solid-state applications.
Currently, we are cycling solid-state coin cells, although we have delayed the production of prototype pouch cells until at least the
beginning of 2026. These cell chemistries are nonflammable, solid-state, and an LFP/graphite cell chemistry. We believe these cells will
be a pivotal technology in grid storage applications once fully deployed. We intend to integrate our conventional and solid-state cells
produced using our dry-electrode process into the existing Dragonfly Energy and Battle Born Batteries product portfolios.
Headquarters,
Manufacturing, and Production
On
February 8, 2022, we entered into a 124-month lease for an additional 390,240 square foot warehouse. In November 2024, we relocated our
headquarters from our 99,000 square foot facility in Reno, Nevada to our new 390,240 square foot facility also in Reno, Nevada, which
has allowed us to increase our production capacity and gives us the ability to increase sales to existing customers and penetrate new
markets. Our 390,240 square foot facility provides a streamlined, partially autonomous production process for our current batteries,
which comprises module assembly and battery assembly, with the availability to expand the number of lines to handle increased volumes
and the additional battery modules we intend to introduce in the near future. We do not own any real estate property. We currently have
two production lines with another line currently in construction. We continue to have the capability to expand our production volumes
and line quantities to support increased volumes of new products we intend to introduce soon.
On
April 12, 2024, we entered into the Fernley Lease Agreement pursuant to which we agreed to lease an approximately 64,000 square foot
facility (the “Premises”) in Fernley, Nevada, to be used for general, warehousing, assembly/light manufacturing, painting
of products, storage fulfillment, distribution of our products, and other uses as permitted under in the Fernley Lease Agreement.
Our
manufacturing process is divided into two aspects – (1) module assembly and (2) battery assembly. We use a combination of trained
employees and automated processes to increase production capacity and lower costs while maintaining the same level of quality our customers
expect from our products. Module assembly is a significantly automated process, implementing custom-designed equipment and systems to
suit our production needs. This includes cycling of individual cells to detect faulty components and to enable sorting by capacity. Our
custom-designed automated welders spot weld individual cells that are assembled into specified module jigs based on the desired amp hour.
Completed modules are then fully discharged, recharged fully, and sorted by capacity. Battery assembly is performed largely by hand by
our trained employees, although we continue to look for innovative ways to integrate automation into this process. Our proprietary battery
management system is thoroughly tested for quality cutoffs, then mounted onto individual modules, before the modules are bolted into
its casing. We aim to automate the battery management system testing and installation process, which we expect could increase production
capacity fourfold. We are currently implementing an automated process for the gluing and sealing process, which would incorporate a two-robot
system for gluing and epoxying, as well as a glue pallet system to move finished batteries. After the assembled batteries are tested
and sealed, they are processed for outbound distribution.
Supplier
Relationships
We
have a well-established, global supply chain that underlies the sourcing of the components for our products, although we source domestically
wherever possible. We aim to maintain approximately six months’ worth of all components, other than cells, which we pre-order in
advance for the year to ensure adequate supply. For nearly all of our components, other than our battery management system, we ensure
that we have alternative suppliers available. Our battery management system is sourced from a single supplier based in China who we have
a nearly 10-year relationship with and who manufactures this component exclusively for us based on our proprietary design. Our cells
are sourced from two different, carefully selected cell manufacturers in China who are able to meet our demanding quality standards.
As a result of our long-standing relationships with these suppliers, we are able to source LFP cells on favorable terms and within reasonable
lead-times.
As
we look toward the production of our traditional and solid-state cells, we have signed a Commercial Offtake Agreement with a lithium
mining company and a lithium recycling company, both located in Nevada for the supply of lithium.
Customers;
RV OEM Strategic Arrangements
We
currently serve more than 23,000 customers in North America. Our existing customers consist of leading OEMs (such as Keystone, THOR,
REV Group and Airstream); distributors (who purchase large quantities of batteries from us and sell to consumers); upfitters (who augment
or customize vehicles for specific needs); and retail customers (who purchase from us directly). For the years ended December 31, 2024
and 2023, OEM sales represented 54.5% and 42.7% of our total revenues, respectively.
We
have deep, long-standing relationships with many of our customers. We also have a diverse customer base, with our top 10 customers accounting
for 47.4% of our revenue for the year ended December 31, 2024, in which only one customer accounted for more than 10% of our revenue.
Our customers primarily utilize our products for RVs, marine vessels and off-grid residences. We work directly with OEMs to ensure compatibility
with existing designs and also collaborate on custom designs for new applications.
The
RV market is characterized by low barriers to entry. In North America, there are two large publicly traded RV companies, THOR Industries
and REV Group, in addition to a number of independent RV OEMs. THOR and REV each own a number well-known RV OEM brands and their related
companies. These brands compete on a number of factors such as format (e.g., motorized or towable), price, design, value, quality and
service. On November 19, 2021, we entered into a long-term Manufacturing Supply Agreement with Keystone, a member of the THOR group and
the largest towable RV OEM in North America (the “Supply Agreement”). Under the Supply Agreement, we will be the exclusive
supplier to Keystone for certain of its future LFP battery requirements, solidifying our long standing relationship with Keystone.
In
July 2022, we strengthened our ties with the THOR group of RV OEMs when (i) THOR Industries made a $15,000,000 strategic investment in
us and (ii) we agreed to enter into a future, mutually agreed distribution arrangement and joint IP development arrangement. This arrangement
helps facilitate our ongoing efforts to drive adoption of our products (leveraging the trend of LFP batteries increasingly replacing
lead-acid batteries) by, among other things, increasing the number of RV OEMs that “design in” our batteries as original
equipment and entering into arrangements with members of the various OEM dealer networks to stock our batteries for service and for aftermarket
replacement sales. Once the distribution agreement has been negotiated and signed, during a to-be-agreed transition period, we will use
commercially reasonable efforts to cease marketing and selling our products to other RV OEMs and suppliers to RV OEMs in North America.
Although the full distribution agreement with THOR has not been executed and is subject to negotiation in the future, its terms are expected
to include: (i) an initial term of 24 months, which THOR may renew for successive one-year periods; (ii) a requirement that we be the
sole provider of lithium-ion batteries to the US-based THOR family of companies for THOR sales in the United States, subject to agreed
exceptions; (iii) favored pricing for products and negotiated rebates or other incentives; (iv) a requirement that THOR and its North
American OEMs be our exclusive RV OEM customers for our products in North America, subject to agreed exceptions; and (v) agreeable terms
with respect to registered and unregistered intellectual property rights and technology rights (which do not include our existing intellectual
property, including our solid-state battery technologies and related IP rights), including necessary licenses between the parties, third
party licenses, and allocation of ownership of any intellectual property rights and/or technology rights developed as a result of development
efforts jointly undertaken between THOR and us, subject to certain limitations.
We
continue to seek to grow our customer base within our existing segments; however, we also believe that our products are well suited to
address the needs in additional segments, including residential, commercial and/or industrial standby power, long-haul trucking, industrial
vehicles (such as forklifts, material handling equipment and compact construction equipment) and specialty vehicles (such as emergency
vehicles, utility vehicles and municipal vehicles) and we will seek to expand our market share in these segments in the future.
Sales
and Marketing
Our
proven sales and marketing strategy has allowed us to penetrate our current end markets efficiently. We have established a highly efficient
sales and marketing strategy, to penetrate targeted end markets and ensuring prominent visibility for our Battle Born Batteries and Wakespeed
brands. We prioritize educating our customer base about the benefits of LFP batteries as a superior investment compared to traditional
lead-acid options. Informational videos published on our website and social media platforms highlight these advantages, complemented
by written guides that assist customers in configuring, installing, and utilizing battery systems and accessories. This messaging is
further reinforced through our active presence at tradeshows, live webinars, and other in-person training events with dealers and customers,
fostering direct engagement and ensuring comprehensive product understanding. Participation in these events fosters strong relationships
with both OEMs and retail customers, keeping us attuned to evolving preferences. By leveraging this customer feedback, we collaborate
with major OEMs to design solutions tailored to new and existing applications.
In
addition to traditional print and digital advertising, we harness the significant influence of social media platforms like YouTube, Instagram,
and Facebook, through affiliate marketing. We partner with established content creators and influencers to cultivate lasting relationships
that showcase product performance organically, beyond mere one-off promotions. Organic integration of our products in television shows,
podcasts and other similar sponsorships further amplifies brand awareness. Additionally, we foster relationships with key industry publications,
securing valuable editorial coverage that showcases our innovative power solutions and how they are used. We believe these strategic
collaborations position our brands as industry leaders within our markets and to the general public as a whole, further strengthening
brand awareness and consumer confidence.
We
also leverage targeted pay-per-click advertising campaigns across various platforms, including search engines, social media, and connected
TV. This data driven approach ensures efficient conversion of high-intent customers at the bottom of the purchase funnel, maximizing