Dragonfly Energy Holdings Corp. Debt Disclosure

Note 6 - Long Term Debt

 

Term Loan Agreement

 

As of December 31, 2025 and 2024, the Company had an outstanding term loan (the “Term Loan”) under a Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”), dated October 7, 2022, with EICF Agent LLC, as agent, and certain lenders. As amended, the Term Loan matures on October 7, 2027 and requires monthly installments based on 0.4167% of the principal amount of Term Loans outstanding beginning December 1, 2025. The obligations under the Term Loan Agreement are secured by a first priority lien on substantially all of the Company’s assets, including certain mortgaged properties.

 

Interest

 

Prior to any amendments, the Term Loan accrued interest based on the Company’s senior leverage ratio. From inception through September 30, 2024, interest accrued at a per annum rate equal to adjusted SOFR (subject to a floor of 1.0%) plus 7.0% payable in cash, plus an additional 4.5% to 6.5% payable in kind (“PIK”), depending on the Company’s senior leverage ratio. Effective April 1, 2024, interest payable to lenders subject to the regulations of the U.S. Small Business Administration (with $30,846 of principal outstanding as of that date) was limited to 14.0% per annum, excluding default interest permitted under applicable SBA regulations. From October 1, 2024 through March 31, 2025, interest on the non SBA regulated portion continued to accrue at adjusted SOFR plus 7.0% payable in cash, and 4.5% to 6.5% payable in kind. Beginning April 1, 2025, interest on all outstanding balances will be payable entirely in cash, at a rate equal to adjusted SOFR plus a margin ranging from 11.5% to 13.5%, depending on the Company’s senior leverage ratio. Effective October 20, 2025, the Term Loan was amended to adjust the fixed interest rate of the remaining outstanding principal amount under the Term Loan Agreement to a fixed interest rate of 12% per annum, payable monthly commencing December 31, 2025 that will mature in October 2027.

 

During the year ended December 31, 2025, the Company recognized interest expense of $12,636, consisting of $12,046 in PIK interest and $590 in cash, paid subsequent to year end. During the year ended December 31, 2024, the Company recognized interest expense of $13,999, consisting of $9,808 in PIK interest and $4,191 in cash. Amortization of the debt issuance costs amounted to $7,591 and $7,241, respectively, for the same periods. As of December 31, 2025, the carrying value of the Term Loan was $9,645, consisting of $19,344 in principal net of $9,699 in unamortized debt discount. As of December 31, 2024, the carrying value of the Term Loan was $29,646, consisting of $69,974 in principal and $15,938 in capitalized PIK interest, net of $56,266 in unamortized debt discount.

 

Waivers and Amendments

 

After the original execution of the Term Loan Agreement, the Company entered into several amendments which modified certain terms of the facility, including, but not limited to, interest rate mechanics, the timing of principal payments, and certain financial and operational covenants. These amendments were in effect as of December 31, 2025.

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

 

Note 6 - Long Term Debt (continued)

 

Term Loan Agreement (continued)

 

Waivers and Amendments (continued)

 

May 2024 Waiver

 

On May 13, 2024, the Company received a waiver from its Administrative Agent and Term Loan Lenders (the “May 2024 Waiver”) in regards to its compliance with the Senior Leverage Ratio and Fixed Charge Coverage Ratio tests (the “Tests”) as of the last day of the quarter ended March 31, 2024. The May 2024 Waiver provided for a one-time issuance of penny warrants (the “May 2024 Penny Warrants”) to purchase up to 28,333 shares of the Company’s common stock, par value $0.0001 per share (the “May 2024 Penny Warrant Shares”). The May 2024 Penny Warrants have an exercise price of $0.01 per share, were valued at $3,022, and recorded as a debt discount. The May 2024 Penny Warrants were issued in connection with the Term Loan Lenders’ agreement to waive the Tests under the Term Loan for the quarter ended March 31, 2024. The May 2024 Penny Warrants were immediately exercisable upon issuance and will expire ten years from the date of issuance.

 

First Amendment

 

On June 28, 2024, the Company entered into a Limited Waiver and First Amendment (the “Term Loan Amendment” and, together with the Term Loan Agreement, the “Term Loan Agreement”) to the Term Loan with the lenders in regards to its compliance with the Tests as of the last day of the quarter ended June 30, 2024 and certain amendments to the Term Loan. The Term Loan Amendment provided for a one-time issuance of Penny Warrants to purchase up to 23,333 shares of the Company’s Common Stock at an exercise price of $0.01 per share (the “June 2024 Penny Warrants”), valued at $1,767 and recorded as a debt discount. The June 2024 Penny Warrants were issued in connection with the lenders’ agreement to waive the Tests under the Term Loan for the quarter ended June 30, 2024 and to amend the Term Loan. The June 2024 Penny Warrants are immediately exercisable upon issuance and will expire ten years from the date of issuance.

 

In addition, the First Amendment (i) reduced the liquidity requirement under the Term Loan to be $3.5 million as of the last day of the month ended June 30, 2024, and $10.0 million as of the last day of each fiscal month thereafter commencing with the fiscal month ended July 31, 2024 and (ii) provided for the interest to be paid on the Payment Date (as defined in the Term Loan) occurred on July 1, 2024 to be solely payable-in-kind.

 

Second Amendment

 

In connection with the License Agreement, on July 29, 2024, the Company, Legacy Dragonfly and Battle Born LLC entered into a Limited Waiver, Consent and Second Amendment (the “Second Amendment”) to Term Loan.

 

Pursuant to the Second Amendment, the Term Loan Lenders (i) consented to the transactions contemplated by the License Agreement and the Trademark Transfer Agreement and (ii) agreed to waive the mandatory prepayment under the Term Loan that would have been due to the Lenders under the Loan Agreement upon Battle Born LLC’s receipt of the Initial Licensing Fee.

 

In connection with the Second Amendment, Battle Born LLC entered into a Joinder Agreement with the Term Lenders whereby Battle Born LLC became a guarantor and credit party to the Term Loan.

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

 

Note 6 - Long Term Debt (continued)

 

Term Loan Agreement (continued)

 

Waivers and Amendments (continued)

 

Third Amendment

 

On September 30, 2024, the Company entered into a Limited Waiver and Third Amendment (the “Third Amendment”, together with the Original Term Loan Agreement, the First Amendment and the Second Amendment, the “Term Loan Agreement”) to the Term Loan Agreement with the Term Loan Lenders in regards to its compliance with the Tests as of the last day of the quarter ended September 30, 2024 and certain amendments to the Term Loan Agreement. The Third Amendment provided for a one-time issuance of penny warrants (the “September 2024 Penny Warrants”) to purchase up to 33,333 shares of the Company’s Common Stock at an exercise price of $0.01 per share, valued at $1,576 and recorded as a debt discount. The September 2024 Penny Warrants were issued in connection with the Term Loan Lenders’ agreement to waive the Tests under the Term Loan for the quarter ended September 30, 2024 and to amend the Term Loan Agreement. The September 2024 Penny Warrants are immediately exercisable upon issuance and will expire ten years from the date of issuance.

 

In addition, the Third Amendment (i) reduced the liquidity requirement under the Term Loan to be $7.0 million as of the last day of the month ended September 30, 2024, and $10.0 million as of the last day of each fiscal month thereafter commencing with the fiscal month ended July 31, 2024 and (ii) on October 1, 2024, interest is payable (a) $1,500,000 in cash for the pro rata benefit of the Lenders and (b) the remaining interest in-kind, to be capitalized and added to the principal. For Payment Dates occurring on or after January 1, 2025 (including interest accruing from October 1, 2024, through December 31, 2024), all interest shall be paid in cash at a rate equal to Adjusted Term SOFR plus the Applicable Margin.

 

Fourth Amendment

 

On December 31, 2024, the Company entered into a Limited Waiver and Fourth Amendment (the “Fourth Amendment”, together with the Original Term Loan Agreement, the First Amendment, the Second Amendment, and the Third Amendment the “Term Loan Agreement”) to the Term Loan Agreement with the Term Loan Lenders in regards to its compliance with the Tests as of the last day of the quarter ended December 31, 2024 and certain amendments to the Term Loan Agreement. The Fourth Amendment provided for a one-time issuance of penny warrants (the “December 2024 Penny Warrants”) to purchase up to 35,000 shares of the Company’s Common Stock at an exercise price of $0.01 per share, valued at $971 and recorded as a debt discount. The December 2024 Penny Warrants were issued in connection with the Term Loan Lenders’ agreement to waive the Tests under the Term Loan for the quarter ended December 31, 2024 and to amend the Term Loan Agreement. The December 2024 Penny Warrants are immediately exercisable upon issuance and will expire ten years from the date of issuance.

 

In addition, the Fourth Amendment (i) reduced the liquidity requirement under the Term Loan to be $3.5 million as of the last day of the month ended December 31, 2024, and $10.0 million as of the last day of each fiscal month thereafter commencing with the fiscal month ended January 31, 2025 and (ii) on January 1, 2025, interest is payable in-kind, to be capitalized and added to the principal. For Payment Dates occurring on or after April 1, 2025 (including interest accruing from January 1, 2025, through March 31, 2025), all interest shall be paid in cash at a rate equal to Adjusted Term SOFR plus the Applicable Margin.

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

 

Note 6 - Long Term Debt (continued)

 

Term Loan Agreement (continued)

 

Waivers and Amendments (continued)

 

Fifth Amendment

 

In February 2025, in connection with the Securities Purchase Agreement, the Company entered into the Fifth Amendment to the Term Loan. This amendment extended the loan’s maturity date by one year to October 2027 and deferred all principal and interest payments until April 2026. Additionally, the amendment postponed certain covenant requirements, significantly reducing the likelihood of a breach and the lender’s ability to accelerate repayment based on prior noncompliance, thereby allowing the Company to reclassify the debt as long-term as of December 31, 2024. The Fifth Amendment provided for a one-time issuance of penny warrants (the “February 2025 Penny Warrants”) to purchase up to 33,000 shares of the Company’s Common Stock at an exercise price of $0.01 per share, valued at $697 and recorded as a debt discount. The February 2025 Penny Warrants were issued in connection with the waiver of the antidilution provisions in the existing penny warrants held by the lenders with respect to the shares of Series A Preferred Stock issued at the closing of the Registered Direct Offering as discussed in Note 10. The February 2025 Penny Warrants are immediately exercisable upon issuance and will expire ten years from the date of issuance.

 

Sixth Amendment

 

On October 20, 2025, the Company entered into the Sixth Amendment to the Term Loan Agreement to, among other matters, (i) adjust the fixed interest rate of the remaining outstanding principal amount under the Term Loan Agreement to a fixed interest rate of 12% per annum, payable monthly commencing December 31, 2025 that will mature in October 2027, and (ii) waive any applicable financial covenants (except for a financial covenant requiring the Company to maintain cash and cash equivalents equal to or greater than $5,000) through December 31, 2026. In connection with the Sixth Amendment, (i) the Company made a prepayment of $45,000 of outstanding indebtedness under the Term Loan Agreement from the net proceeds from the Second October 2025 Offering, (ii) the lenders forgave the repayment of $5,000 of the outstanding principal under the Term Loan Agreement, (iii) the Company incurred fees to the lenders totaling approximately $930 of which $465 were added to the principal outstanding under the Term Loan Agreement and $465 was paid in cash; (iv) the Company agreed to issue 25,000 shares of newly created Series B Preferred Stock of the Company in exchange for $25,000 outstanding principal amount of the Term Loan. Prior to this amendment, on October 7, 2025, the Company also made a voluntary prepayment on the Term Loan of $4,000.

 

On November 4, 2025, the Company and the lenders entered into the Exchange Agreement pursuant to which the Company issued 25,000 shares of newly created Series B Preferred Stock in exchange for $25,000 outstanding principal amount of the Term Loan.

 

The Company evaluated the accounting guidance for debt modifications under ASC 470-50, Modifications and Extinguishments, and ASC 470-60, Troubled Debt Restructurings by Debtors, and determined that the debt restructuring pursuant to the Sixth Amendment did not meet the definition of a troubled debt restructuring under ASC 470-60. The Company also evaluated the significance of the change in cash flows based on ASC 470-50 and determined the debt restructuring was a debt modification. However, since the Company paid down a significant portion of its debt in accordance with the agreed-upon prepayment, the Company measured the loss on extinguishment due to partial settlement of the debt. As noted in Note 2, the Company adopted the accounting policy of expensing the portion of unamortized debt issuance costs as partially settled pro rata based on the partial settlement of debt principal in the amount of $26,200, which is included in debt extinguishment on the consolidated statement of operations. Since the restructuring did not result in a pro rata reduction of future principal payments (since the provision for percentage of principal repayments was also amended), the Company updated the effective interest rate and will utilize the prospective approach for recognition of interest post-restructuring.

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

 

Note 6 - Long Term Debt (continued)

 

Term Loan Agreement (continued)

 

Waivers and Amendments (continued)

 

Sixth Amendment (continued)

 

The calculation of the loss on partial extinguishment of debt principal was as follows:

 

Reacquisition price:

 SCHEDULE OF EXTINGUISHMENT OF DEBT

 

Voluntary prepayment		$	45,000
Series B preferred stock (at fair value)			21,704
Amendment fees (paid in kind)			465
Amendment fees (paid in cash)			465
Total		$	67,634
Less: carrying amount of debt settled			(35,791	)
Loss on extinguishment		$	31,843

  

The loss on extinguishment is composed of a (i) pro rata debt discount of $26,200, (ii) Series B shares issued in settlement of $25,000 of principal, with a fair value of $21,704 (netting a $3,296 gain), and a pro rata debt discount reduction of $13,008, resulting in a net loss of $9,712, (iii) and amendment fees of $931, (iv) offset by a gain on the debt principal forgiven of $5,000.

 

Financial Covenants

 

As of December 31, 2024, the Company is subject to certain restrictive financial covenants, and the Company was not in compliance with its financial covenants pertaining to the fixed charge coverage ratio, liquidity, and the maximum senior leverage ratio. On March 31, 2024, April 29, 2024, May 30, 2024, June 28, 2024, July 31, 2024, August 30, 2024, September 30, 2024, October 31, 2024, November 30, 2024 and December 31, 2024 the Company obtained waivers from the Term Loan Lenders and administrative agent in regards to its failure to satisfy the liquidity requirement under the Term Loan for the quarters ended March 31, 2024, June 30, 2024, September 30, 2024, and December 31, 2024 and the fiscal months ended April 30, 2024, May 31, 2024 July 31, 2024, August 31, 2024, October 31, 2024 and November 30, 2024, as applicable.

 

Due to the Sixth Amendment to the Term Loan Agreement described above, as of December 31, 2025, the Company is subject to two restrictive financial covenants, one which pertains to liquidity, requiring the Company to maintain cash and cash equivalents equal to or greater than $5,000 through December 31, 2026, and a maximum capital expenditure threshold of $5,000 per year. The financial covenants pertaining to maximum senior leverage ratio and fixed charge coverage ratio are both delayed until the quarter ending March 31, 2027.

 

At December 31, 2025, the future debt maturities are as follows:

 

SCHEDULE OF FUTURE DEBT MATURITIES

For Year Ended December 31,
2026			945
2027			18,399
Total debt			19,344
Less: Unamortized debt issuance costs			(9,699	)
Total carrying amount			9,645
Less: Current portion of debt			(433	)
Total long-term debt		$	9,212

 

 

Dragonfly Energy Holdings Corp.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)