Dragonfly Energy Holdings Corp. Commitments Disclosure

Note 5 - Commitments and Contingencies

 

Litigation

 

From time to time the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, governmental actions, administrative actions, investigations or claims are pending against the Company or involve the Company that, in the opinion of the Company’s management, could reasonably be expected to have a material adverse effect on the Company’s business and financial condition.

 

Operating Leases

 

The Company has leases related to the main office, warehouse space, research and development lab, engineering office, and sales office, all located in Reno, Nevada. The leases require annual escalating monthly payments ranging from $111 to $309. On February 2, 2022, the Company entered into a 124-month lease agreement in Reno, Nevada. The lease calls for monthly base rent of $230, $23 of fixed operating expense costs, and estimated monthly property taxes of $21. The monthly base rent and fixed operating expense costs are subject to escalation of 3% and 2.4%, respectively, on an annual basis. A certificate of substantial completion has been issued and the lease commencement date was March 25, 2024. The Company began paying monthly rent under the lease on July 24, 2024.

 

On April 12, 2024 the Company entered into a lease agreement, pursuant to which the Company agreed to lease an approximately 64,000 square foot facility (the “Premises”) located in Fernley, Nevada, to be used for general, warehousing, assembly/light manufacturing, painting of products, storage fulfillment, distribution of the Company’s products, and other uses as permitted under the Fernley Lease Agreement (the “Fernley Lease Agreement”). The effective date of the lease is April 1, 2024 (the “Lease Commencement Date”). However, the initial term of the Fernley Lease Agreement (the “Term”) is for a period of sixty (60) months, effective June 1, 2024 (the “Rent Commencement Date”). The base rent for the Premises, payable monthly, is $45 for the first ten months, starting June 1, 2024, and is subject to a three percent (3.0%) increase on the anniversary of the Lease Commencement Date each year. The Company also will be responsible for twenty-five percent (25%) of any operating expenses, taxes and insurance expenses incurred by the Landlord in connection with the building in which the Premises are located (the “Expenses”) as well as utility expenses. The Expenses are subject to recalculation and increase upon the completion of the Initial Improvements (as defined in the Fernley Lease Agreement). The Landlord is responsible for completing the Initial Improvements. The Fernley Lease Agreement also contains customary default provisions allowing the Landlord to terminate the Fernley Lease Agreement if the Company fails to cure certain breaches of its obligations under the Fernley Lease Agreement within a specified period of time upon written notice to the Company. Concurrent with the execution of the Fernley Lease Agreement, the Company paid the Landlord a security deposit of $50.

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

 

Note 5 - Commitments and Contingencies (continued)

 

On May 8, 2025, the Company entered into a sixth lease amendment with its landlord to extend the lease term for an additional sixty-four (64) month period for the research and development lab in Sparks, Nevada. Under the terms of the amended lease, the base rent due shall be fully abated for the four (4) month period commencing on August 1, 2025, and ending on November 30, 2025. The lease is set to expire on November 30, 2030.

 

The following table presents the breakout of the operating leases as of:

 

SCHEDULE OF BREAKOUT OF OPERATING LEASES

		December 31, 2025				December 31, 2024
Operating lease right-of-use assets		$	15,240			$	19,737
Short-term operating lease liabilities			2,533				2,926
Long-term operating lease liabilities			20,470				22,588
Total operating lease liabilities		$	23,003			$	25,514
Weighted average remaining lease term			7.88 years				8.46 years
Weighted average discount rate			7.99	%			7.86	%

 

Assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data.

 

At December 31, 2025, the future minimum lease payments under these operating leases are as follows:

 

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES

Fiscal Years Ending
December 31, 2026			4,275
December 31, 2027			3,746
December 31, 2028			3,860
December 31, 2029			3,614
December 31, 2030			3,446
Thereafter			12,600
Total lease payments			31,541
Less imputed interest			8,538
Total operating lease liabilities		$	23,003

 

During the year ended December 31, 2025, the Company identified indicators of impairment related to certain right-of-use assets. As a result, the Company recognized aggregate impairment charges of $2,667 related to three leases. These impairment charges are included in operating expenses in the accompanying consolidated statement of operations.

 

SCHEDULE OF LEASE COST

				For The Years Ended December 31,
Lease cost		Classification		2025				2024
Operating lease cost		Cost of goods sold		$	2,461			$	1,579
Operating lease cost		Research and development			122				520
Operating lease cost		General and administration			2,858				2,291
Operating lease cost		Selling and marketing			52				47
Total lease cost				$	5,493			$	4,437

 

All lease costs included in the schedule above are fixed.

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

 

Note 5 - Commitments and Contingencies (continued)

 

Financing Leases

 

The Company entered into finance lease agreements for equipment to support the Company’s operations. Payments under the finance lease agreements are fixed for a term of 3-5 years. The leased assets are recognized in property plant & equipment.

 

The following table presents the breakout of the financing leases as of:

 

SCHEDULE OF BREAKOUT OF FINANCE LEASES

		December 31, 2025				December 31, 2024
Finance lease right-of-use assets		$	85			$	121
Short-term finance lease liabilities			35				47
Long-term finance lease liabilities			28				63
Total finance lease liabilities		$	63			$	110
Weighted average remaining lease term			2.15 years				2.78 years
Weighted average discount rate			5.2	%			5.2	%

 

Assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data.

 

At December 31, 2025, the future minimum lease payments under these financing leases are as follows:

 

 SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER FINANCE LEASES

Fiscal Years Ending
December 31, 2026			37
December 31, 2027			18
December 31, 2028			9
December 31, 2029			2
Total lease payments			66
Less imputed interest			3
Total financing lease liabilities		$	63

 

Other Contingencies

 

In March 2025, the Company agreed to pay LithiumHub a total of $2,500, of which approximately $562 is payable in 2025 and approximately $1,938 is payable in 2026, in exchange for a non-exclusive license in LithiumHub Technologies, LLC’s patent rights related to the Patents-in-Suit. In accordance with the Settlement Agreement, the Company and LithiumHub terminated the ongoing patent litigation between them. The Settlement Agreement includes no admission of infringement by the Company. On October 22, 2025, the Company paid the settlement amount in full.

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)