Cover - USD ($) $ in Millions	12 Months Ended
Cover - USD ($) $ in Millions	Dec. 31, 2022	Mar. 21, 2023	Jun. 30, 2022
Document Type	10-K
Amendment Flag	false
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2022
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2022
Current Fiscal Year End Date	--12-31
Entity File Number	001-40730
Entity Registrant Name	DRAGONFLY ENERGY HOLDINGS CORP.
Entity Central Index Key	0001847986
Entity Tax Identification Number	85-1873463
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	1190 Trademark Drive
Entity Address, Address Line Two	#108
Entity Address, City or Town	Reno
Entity Address, State or Province	NV
Entity Address, Postal Zip Code	89521
City Area Code	(775)
Local Phone Number	622-3448
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Entity Shell Company	false
Entity Public Float			$ 128.4
Entity Common Stock, Shares Outstanding		45,794,923
Documents Incorporated by Reference [Text Block]	Portions of the registrant’s Proxy Statement relating to the 2023 Annual Meeting of Stockholders, scheduled to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2022, are incorporated by reference into Part III of this Annual Report on Form 10-K.
ICFR Auditor Attestation Flag	false
Auditor Firm ID	243
Auditor Name	BDO USA LLP
Auditor Location	Spokane, Washington
Common stock, par value $0.0001 per share [Member]
Title of 12(b) Security	Common stock, par value $0.0001 per share
Trading Symbol	DFLI
Security Exchange Name	NASDAQ
Redeemable Warrants, exercisable for common stock at an exercise price of $11.50 per share, subject to adjustment
Title of 12(b) Security	Redeemable Warrants, exercisable for common stock at an exercise price of $11.50 per share, subject to adjustment
Trading Symbol	DFLIW
Security Exchange Name	NASDAQ

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Period Type:

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Current Assets
Cash	$ 17,781	$ 25,586
Restricted cash		3,044
Accounts receivable, net of allowance for doubtful accounts	1,444	783
Inventory	49,846	27,127
Prepaid expenses	1,624	293
Prepaid inventory	2,002	7,461
Prepaid income tax	525
Other current assets	267	1,787
Total Current Assets	73,489	66,081
Property and Equipment
Machinery and equipment	10,214	3,615
Office furniture and equipment	275	201
Leasehold improvements	1,709	1,307
Vehicle	195	195
Total	12,393	5,318
Less accumulated depreciation and amortization	(1,633)	(857)
Property and Equipment, Net	10,760	4,461
Operating lease right of use asset	4,513	5,709
Total Assets	88,762	76,251
Current Liabilities
Accounts payable	13,475	11,360
Accrued payroll and other liabilities	6,295	2,608
Customer deposits	238	434
Uncertain tax position liability	128
Income tax payable		631
Notes payable, current portion, net of debt issuance costs	19,242	1,875
Operating lease liability, current portion	1,188	1,082
Total Current Liabilities	40,566	17,990
Long-Term Liabilities
Notes payable-noncurrent, net of debt issuance costs		37,053
Deferred tax liabilities		453
Warrant liabilities	32,831
Accrued expenses, long-term	492
Operating lease liability, net of current portion	3,541	4,694
Total Long-Term Liabilities	36,864	42,200
Total Liabilities	77,430	60,190
Commitments and Contingencies (See Note 6)
Equity
Common stock, 170,000,000 shares, $0.0001 par value, authorized, 43,272,728 and 36,496,998 shares issued and outstanding as of December 31, 2022 and 2021, respectively	4	4
Preferred stock, 5,000,000 shares, $0.0001 par value, authorized, no shares issued and outstanding as of December 31, 2022 and 2021, respectively
Additional paid in capital	38,461	3,619
Retained (deficit) earnings	(27,133)	12,438
Total Equity	11,332	16,061
Total Liabilities and Shareholders’ Equity	$ 88,762	$ 76,251

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock, shares authorized	170,000,000	170,000,000
Common shares, par value	$ 0.0001	$ 0.0001
Common stock, shares issued	43,272,728	36,496,998
Common stock, shares outstanding	43,272,728	36,496,998
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Income Statement [Abstract]
Net Sales	$ 86,251	$ 78,000
Cost of Goods Sold	62,247	48,375
Gross Profit	24,004	29,625
Operating Expenses
Research and development	2,764	2,689
General and administrative	41,566	10,621
Selling and marketing	13,671	9,848
Total Operating Expenses	58,001	23,158
(Loss) Income From Operations	(33,997)	6,467
Other Income (Expense)
Other income	40	1
Interest expense, net	(6,945)	(519)
Change in fair market value of warrant liability	5,446
Debt extinguishment	(4,824)
Total Other Expense	(6,283)	(518)
(Loss) Income Before Taxes	(40,280)	5,949
Income Tax (benefit) Expense	(709)	1,611
Net (Loss) Income	$ (39,571)	$ 4,338
(Loss) Earnings Per Share – Basic	$ (1.03)	$ 0.12
(Loss) Earnings Per Share – Diluted	$ (1.03)	$ 0.11
Weighted Average Number of Shares – Basic	38,565,307	35,579,137
Weighted Average Number of Shares – Diluted	38,565,307	37,742,337

Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands

Redeemable Preferred Stock [Member]

Common Stock [Member]

Additional Paid-in Capital [Member]

Retained Earnings [Member]

Total

Balance at Dec. 31, 2020

$ 2,000

$ 4

$ 451

$ 8,100

$ 8,555

Balance, shares at Dec. 31, 2020

10,000,000

20,040,470

Retroactive application of recapitalization

$ (2,000)

2,000

Retroactive application of recapitalization, shares

(10,000,000)

15,469,477

Adjusted balance, beginning of period

$ 4

2,451

8,100

10,555

Adjusted balance, beginning of period, shares

35,509,947

Net (loss) income

4,338

Stock compensation expense

734

Exercise of stock options

434

$ 434

Exercise of stock options, shares

987,051

^[1]

Balance at Dec. 31, 2021

$ 4

3,619

12,438

$ 16,061

Balance, shares at Dec. 31, 2021

36,496,998

Net (loss) income

(39,571)

Stock compensation expense

2,467

Exercise of stock options

706

$ 706

Exercise of stock options, shares

581,351

^[1]

Stock purchase agreement

15,000

$ 15,000

Stock purchase agreement, shares

1,498,301

Reverse capitalization, net of transaction costs (See Note 3)

Reverse capitalization, net of transaction costs, shares (See Note 3)

4,238,936

Cashless exercise of liability classified warrants

16,669

Cashless exercise of liability classified warrants, shares

457,142

Balance at Dec. 31, 2022

$ 4

$ 38,461

$ (27,133)

$ 11,332

Balance, shares at Dec. 31, 2022

43,272,728

[1]	Number of options and weighted average exercise price has been adjusted to reflect the exchange of Legacy Dragonfly’s stock options for New Dragonfly stock options at an exchange ratio of approximately 1.182 as a result of the merger. See Note 3 for further information.

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Cash flows from Operating Activities
Net (Loss) Income	$ (39,571,000)	$ 4,338,000
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by (Used in) Operating Activities
Stock based compensation	2,467,000	734,000
Debt extinguishment	4,824,000
Amortization of debt discount	1,822,000	206,000
Change in fair market value of warrant liability	(5,446,000)
Deferred tax liability	(453,000)	122,000
Non-cash interest expense (paid-in-kind)	1,192,000
Provision for doubtful accounts	108,000	50,000
Depreciation and amortization	891,000	617,000
Loss on disposal of property and equipment	56,000	124,000
Assumption of Warrant Liability	1,990,000
Changes in Assets and Liabilities
Accounts receivable	(769,000)	1,007,000
Inventories	(22,719,000)	(21,179,000)
Prepaid expenses	(1,467,000)	58,000
Prepaid inventory	5,459,000	(6,353,000)
Other current assets	1,520,000	(1,214,000)
Other assets	1,196,000	1,029,000
Income taxes payable	(1,156,000)	(651,000)
Accounts payable and accrued expenses	4,428,000	8,903,000
Uncertain tax position liability	128,000	(19,000)
Customer deposits	(196,000)	(1,345,000)
Total Adjustments	(6,125,000)	(17,911,000)
Net Cash Used in Operating Activities	(45,696,000)	(13,573,000)
Cash Flows From Investing Activities
Proceeds from disposal of property and equipment	35,000	61,000
Purchase of property and equipment	(6,862,000)	(2,970,000)
Net Cash Used in Investing Activities	(6,827,000)	(2,909,000)
Cash Flows From Financing Activities
Proceeds from term loan	75,000,000
Proceeds from note payable		45,000,000
Repayment from note payable	(45,000,000)
Payments of debt issuance costs	(4,032,000)	(6,278,000)
Proceeds from exercise of options	706,000	184,000
Proceeds from stock purchase agreement	15,000,000
Proceeds from revolving note agreement		5,000,000
Repayments of revolving note agreement		(5,000,000)
Net Cash Provided by Financing Activities	41,674,000	38,906,000
Net (Decrease) Increase in Cash and Restricted Cash	(10,849,000)	22,424,000
Beginning cash and restricted cash	28,630,000	6,206,000
Ending cash and restricted cash	17,781,000	28,630,000
Supplemental Disclosures of Cash Flow Information:
Cash paid for income taxes	773	2,390
Cash paid for interest	2,252	313
Supplemental Non-Cash Items
Receivable of options exercised		250,000
Purchases of property and equipment, not yet paid	419,000	255,000
Recognition of right of use asset obtained in exchange for operating lease liability		5,745,000
Cashless exercise of liability classified warrants	$ 16,669,000

NATURE OF BUSINESS

12 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF BUSINESS

NOTE 1 — NATURE OF BUSINESS

Dragonfly Energy Holdings Corp. (“New Dragonfly” or the “Company”) sells lithium-ion battery packs for use in a wide variety of applications. The Company sells to distributors under the Dragonfly Energy brand name, and sells direct to consumers under the trade name Battleborn Batteries. In addition, the Company develops technology for improved lithium-ion battery manufacturing and assembly methods.

On October 7, 2022, a merger transaction between Chardan NexTech Acquisition 2 Corporation (“CNTQ”), Dragonfly Energy Corp. (“Legacy Dragonfly”), and Bronco Merger Sub, Inc. (“Merger Sub”) was completed pursuant to which Merger Sub was merged with and into Legacy Dragonfly, with Legacy Dragonfly surviving the merger. As a result of the merger, Legacy Dragonfly became a wholly owned subsidiary of New Dragonfly.

Although New Dragonfly was the legal acquirer of Legacy Dragonfly in the merger, Legacy Dragonfly is deemed to be the accounting acquirer, and the historical financial statements of Legacy Dragonfly became the basis for the historical financial statements of New Dragonfly upon the closing of the merger. New Dragonfly together with its wholly owned subsidiary, Dragonfly Energy Corp., is referred to hereinafter as the “Company”.

Furthermore, the historical financial statements of Legacy Dragonfly became the historical financial statements of the Company upon the consummation of the merger. As a result, the financial statements included in this Annual Report reflect (i) the historical operating results of Legacy Dragonfly prior to the merger; (ii) the combined results of CNTQ and Legacy Dragonfly following the close of the merger; (iii) the assets and liabilities of Legacy Dragonfly at their historical cost and (iv) the Legacy Dragonfly’s equity structure for all periods presented, as affected by the recapitalization presentation after completion of the merger. See Note 3 – Reverse Capitalization for further details of the merger.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”) and present the consolidated financial statements of the Company and its wholly owned subsidiary.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

For the year ended December 31, 2022, the Company incurred losses and had a negative cash flow from operations. As of December 31, 2022, the Company had $17,781 in cash and cash equivalents and working capital of $32,923. The Company’s ability to achieve profitability and positive cash flow depends on its ability to increase revenue, contain its expenses and maintain compliance with the financial covenants in its outstanding indebtedness agreements.

In connection with the Company’s senior secured term loan facility in an aggregate principal amount of $75,000 (the “Term Loan”), the Company is obligated to comply with certain financial covenants, which include maintaining a maximum senior leverage ratio, minimum liquidity, a springing fixed charge coverage ratio, and maximum capital expenditures (See Note 7). On March 29, 2023, the Company obtained a waiver from the Term Loan administrative agent and lenders of its failures to satisfy the fixed charge coverage ratio and maximum senior leverage ratio with respect to the minimum cash requirements under the Term Loan during the quarter ended March 31, 2023. It is probable that the Company will fail to meet these covenants within the next twelve months. If the Company is unable to obtain a waiver or if the Company is unable to comply with such covenants, the lenders have the right to accelerate the maturity of the Term Loan. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In addition, the Company may need to raise additional debt and/or equity financings to fund its operations and strategic plans and meet its financial covenants. The Company has historically been able to raise additional capital through issuance of equity and/or debt financings and the Company intends to use its equity facility and raise additional capital as needed. However, the Company cannot guarantee that it will be able to raise additional equity, contain expenses, or increase revenue, and comply with the financial covenants under the Term Loan.

Recently adopted accounting standards

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt Modifications and Extinguishments (Subtopic 470 50), Compensation – Stock Based Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options. This ASU provides guidance which clarified an issuer’s accounting for modification or exchanges of freestanding equity classified written call options that remain equity classified after modification or exchange. The provisions of ASU No. 2021-04 are effective January 1, 2022. This ASU shall be applied on a prospective basis. The adoption of this guidance did not have a material impact on the accompanying consolidated financial statements.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023. These standards replace the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measure at amortized cost to be presented at the net amount expected to be collected. The Company determined that this change does not have a material impact to the financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. The amendments in this update will be effective for the Company on January 1, 2024 and may be early adopted at the beginning of fiscal year 2023. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

Cash, Restricted Cash, and Cash Equivalents

The Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents as of December 31, 2022 or 2021. The Company also maintained a restricted cash balance to satisfy its note payable requirements as of December 31, 2021 (Refer to Note 7). There were no restricted cash balances as of December 31, 2022.

From time to time the Company has amounts on deposit with financial institutions that exceed federally insured limits. The Company has not experienced any significant losses in such accounts, nor does management believe it is exposed to any significant credit risk.

Accounts Receivable

The Company’s trade receivables are recorded when billed and represent claims against third parties that will be settled in cash. Generally, payment is due from customers within 30-60 days of the invoice date and the contracts do not have significant financing components. Trade accounts receivables are recorded gross and are net of any applicable allowance. The Company has an allowance for doubtful accounts as of December 31, 2022 and 2021 of $90 and $50, respectively.

Inventory

Inventories (Note 5), which consist of raw materials and finished goods, are stated at the lower of cost (first in, first out) or net realizable value, net of reserves for obsolete inventory. We continually analyze our slow moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we established reserves. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. As of December 31, 2022 and 2021, no such reserves were necessary.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Property and Equipment

Property and equipment are stated at cost, including the cost of significant improvements and renovations. Costs of routine repairs and maintenance are charged to expense as incurred. Depreciation and amortization are calculated by the straight-line method over the estimated useful lives for owned property, or, for leasehold improvements, over the shorter of the asset’s useful life or term of the lease. Depreciation expense for the years ended December 31, 2022 and 2021 was $891 and $617, respectively. The various classes of property and equipment and estimated useful lives are as follows:

Office furniture and equipment	3 to 7 years

Vehicles	5 years

Machinery and equipment	3 to 7 years

Leasehold improvements	Remaining Term of Lease

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of these asset may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over its remaining life. When indications of impairment are present and the estimated undiscounted future cash flows from the use of these assets is less than the assets’ carrying value, the related assets will be written down to fair value. There were no impairments of the Company’s long-lived assets for the periods presented.

Warrants

The Company applies relevant accounting guidance for warrants to purchase the Company’s stock based on the nature of the relationship with the counterparty. For warrants issued to investors or lenders in exchange for cash or other financial assets, the Company follows guidance issued within ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”), to assist in the determination of whether the warrants should be classified as liabilities or equity. Warrants that are determined to require liability classification are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classification are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Revenue Recognition

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company excludes from the transaction price all taxes that are assessed by a governmental authority and imposed on and concurrent with the Company’s revenue transactions, and therefore presents these taxes (such as sales tax) on a net basis in operating revenues on the Consolidated Statements of Operations.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Revenue is recognized when control of the promised goods is transferred to the customer or reseller, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue associated with products holding rights of return are recognized when the Company concludes there is not a risk of significant revenue reversal in the future periods for the expected consideration in the transaction. There are no material instances including discounts and refunds where variable consideration is constrained and not recorded at the initial time of sale. Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment when title and risk of loss pass to the customer.

The Company may receive payments at the onset of the contract before delivery of goods for customers in the retail channel. Payment terms for distributors and OEMs are due within 30-60 days after shipment. In such instances, the Company records a customer deposit liability. The Company recognizes these contract liabilities as sales after the revenue criteria are met. The company had $1,779 of contract liabilities as of January 1, 2021. As of December 31, 2022 and 2021, the contract liability related to the Company’s customer deposits approximated $238 and $434, respectively. The entire contract liability balance as of December 31, 2021 was recognized as revenue during the year ended December 31, 2022. The entire contract liability balance as of January 1, 2021 was recognized as revenue during the year ended December 31, 2021.

Disaggregation of Revenue:

The following table present our disaggregated revenues by distribution channel:

Sales	2022		2021
Retail	$	43,344	$	59,042
Distributor		9,102		10,733
Original equipment manufacture		33,805		8,225
Total	$	86,251	$	78,000
Total sales	$	86,251	$	78,000

Shipping and Handling

Shipping and handling fees paid by customers are recorded within net sales, with the related expenses recorded in cost of sales. Shipping and handling costs associated with outbound freight are included in sales and marketing expenses. Shipping and handling costs associated with outbound freight totaled $5,440 and $5,105 for the years ended December 31, 2022 and 2021, respectively.

Product Warranty

The Company offers assurance type warranties from 5 to 10 years on its products. The Company estimates the costs associated with the warranty obligation using historical data of warranty claims and costs incurred to satisfy those claims and records a liability in the amount of such estimate at the time a product is sold. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liability and adjust the accrual as claims data and historical experience warrants. The Company has assessed the costs of fulfilling its existing assurance type warranties and has determined that the estimated outstanding warranty obligation on December 31, 2022 and 2021 to be $328 and $0, respectively.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Concentrations

Receivables from three customers comprised approximately 18%, 10% and 10%, respectively, of accounts receivable as of December 31, 2022. Receivables from two customers comprised approximately 42% and 16%, respectively, of accounts receivable as of December 31, 2021. There are no other significant accounts receivable concentrations.

Revenue from one customer accounted for approximately 22% of the Company’s sales for year ended December 31, 2022. There were no significant revenue concentrations for the year ended December 31, 2021.

Payables to one vendor comprised approximately 61% of accounts payables as of December 31, 2022. There were no significant payable concentrations as of December 31, 2021.

For the year ended December 31, 2022, one vendor accounted for approximately 28% of the Company’s total purchases, respectively. For the year ended December 31, 2021, three vendors accounted for approximately 27%, 10% and 10% of the Company’s total purchases, respectively.

Deferred Financing Costs

The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the consolidated statement of operations. Unamortized deferred financing costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.

Research and Development

The Company expenses research and development costs as incurred. Research and development expenses include salaries, contractor and consultant fees, supplies and materials, as well as costs related to other overhead such as depreciation, facilities, utilities, and other departmental expenses. The costs we incur with respect to internally developed technology and engineering services are included in research and development expenses as incurred as they do not directly relate to acquisition or construction of materials, property or intangible assets that have alternative future uses.

Advertising

The Company expenses advertising costs as they are incurred and are included in selling and marketing expenses. Advertising expenses amounted to $2,334 and $1,690 for the years ended December 31, 2022 and 2021, respectively.

Stock-Based Compensation

The Company accounts for stock based compensation arrangements with employees and non employee consultants using a fair value method which requires the recognition of compensation expense for costs related to all stock based payments, including stock options (Note 14). The fair value method requires the Company to estimate the fair value of stock based payment awards to employees and non employees on the date of grant using an option pricing model. Stock based compensation costs are based on the fair value of the underlying option calculated using the Black Scholes option pricing model and recognized as expense on a straight line basis over the requisite service period, which is the vesting period. Restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award. The Company measures equity based compensation awards granted to non employees at fair value as the awards vest and recognizes the resulting value as compensation expense at each financial reporting period.

Determining the appropriate fair value model and related assumptions requires judgment, including estimating stock price volatility, expected dividend yield, expected term, risk free rate of return, and the estimated fair value of the underlying common stock. Due to the lack of company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the lithium ion battery industry. The Company uses the simplified method, which is the average of the final vesting tranche date and the contractual term, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The risk free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company accounts for forfeitures as they occur.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Income Taxes

Deferred income tax assets and liabilities (Note 9) are determined based on the estimated future tax effects of net operating loss, credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates.

The Company recognizes a tax benefit for an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company has a liability of $128 and $0 as of December 31, 2022 and 2021, respectively, of uncertain tax positions.

The Company’s accounting policy is to include penalties and interest related to income taxes if any, in selling, general and administrative expenses. We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Net (Loss) Earnings per Common Share

Basic net (loss) earnings per share is calculated by dividing net (loss) earnings by the weighted-average number of common shares outstanding during the period. Diluted net (loss) earnings per share is calculated using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock.

The weighted-average number of common shares included in the computation of diluted net (loss) earnings gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and warrants.

Common stock equivalent shares are excluded from the computation of diluted net (loss) earnings per share if their effect is antidilutive. In periods in which the Company reports a net loss, diluted net loss per share is generally the same as basic net loss per share since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

As the Merger has been accounted for as a reverse recapitalization, the consolidated financial statements of the merged entity reflect the continuation of the pre-merger Legacy Dragonfly financial statements; Dragonfly equity has been retroactively adjusted to the earliest period presented to reflect the legal capital of the legal acquirer, CNTQ. As a result, net (loss) earnings per share was also retrospectively adjusted for periods ended prior to the Merger. See Note 3 - Reverse Capitalization for details and discussion of the retrospective adjustment of net loss per share.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement including the use of an identified asset(s) and the Company’s control over the use of that identified asset. The Company elected, as allowed under Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2016-02, Leases (“ASC 842”), to not recognize leases with a lease term of one year or less on its balance sheet. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets and current and non-current lease liabilities, as applicable.

Segment Reporting

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s Chief Executive Officer to make decisions with respect to resource allocation and assessment of performance. To date, the Company has viewed its operations and manages its business as one operating segment.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

REVERSE CAPITALIZATION

12 Months Ended

Dec. 31, 2022

Reverse Capitalization

REVERSE CAPITALIZATION

Note 3 – REVERSE CAPITALIZATION

On October 7, 2022, Legacy Dragonfly consummated a merger with CNTQ. Legacy Dragonfly was deemed to be the accounting acquirer in the merger. The determination was primarily based on Legacy Dragonfly’s stockholders having a majority of the voting power in the combined Company, Legacy Dragonfly having the ability to appoint a majority of the Board of Directors of the Company, Legacy Dragonfly’s existing management team comprising the senior management of the combined Company, Legacy Dragonfly comprising the ongoing operations of the combined Company and the combined Company assumed the name “Dragonfly Energy Holdings Corp.”. Accordingly, for accounting purposes, the merger was treated as the equivalent of Legacy Dragonfly issuing stock for the net assets of CNTQ, accompanied by a recapitalization. The net assets of CNTQ are stated at historical cost, with no goodwill or other intangible assets recorded.

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparable periods up to October 7, 2022, to reflect the number of shares of the Company’s common stock, $0.0001 par value per share, issued to Legacy Dragonfly’s stockholders in connection with the merger. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Dragonfly’s outstanding convertible preferred stock and Legacy Dragonfly’s common stock prior to the merger have been retroactively restated as shares reflecting the exchange ratio of 1.182 established in the merger. Legacy Dragonfly’s convertible preferred stock previously classified as temporary equity was retroactively adjusted, converted into common stock and reclassified to permanent equity as a result of the reverse recapitalization.

Immediately before the closing of the merger, and prior to the PIPE Financing, and the funds remaining after such redemptions, totaling approximately $6,265, became available to finance transaction expenses and the future operations of New Dragonfly. In connection with the merger, CNTQ entered into agreements with new investors and existing Legacy Dragonfly investors to subscribe and purchase an aggregate of approximately 500,000 shares of CNTQ Class A common stock (the “PIPE Financing”).

The PIPE Financing was consummated on September 26, 2022 and resulted in gross proceeds of an additional approximately $5,017, prior to payment of the transaction costs. As part of the PIPE Financing, the Company entered an initial Term Loan for an aggregate principal amount of $75,000. The Company incurred debt issuance costs of $1,950 of original issuance discount and additional $2,081 of transaction costs that were allocated to the Term Loan, resulting in net cash proceeds of $70,969. In addition, $52,956 of Term Loan warrants based on their combined relative fair values was recorded as a debt discount resulting in initial carrying amount of debt of $18,013. Pursuant to the terms of the loan agreement, the Term Loan was advanced in one tranche on the closing date and the funds were used to refinance on the closing date prior indebtedness of $42,492 (including payment of make-whole interest related to early extinguishment of debt), (ii) to support the Transaction under the Merger Agreement, (iii) for working capital purposes and other corporate purposes, and (iv) to pay any fees associated with transactions contemplated under the Term Loan Agreement and the other loan documents entered into in connection therewith, including the transactions described in the foregoing clauses (i) and (ii) and fees and expenses related to the merger. The direct and incremental transaction costs of approximately $13,221 were allocated to all instruments assumed and issued in the merger on a relative fair value basis. As such, the Company allocated $2,081 to the Term Loan, $9,633 to equity instruments, which was expensed in general and administrative expenses as the offering costs exceeded the proceeds received, and $1,507 to the warrant liabilities assumed and warrant liabilities issued with the term debt, which was expensed within the general and administrative expenses within the statement of operations.

Additionally, pursuant to the terms of the merger, the Company assumed $18,072 of CNTQ accrued and unpaid transaction expenses, of which all were paid upon consummation of the merger. As detailed below, $10,197 of these costs were expensed as the amount exceeded the proceeds received and such costs were determined not be a return to investors.

Upon the closing of the merger, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 175,000,000 common shares, of which 170,000,000 were designated as common stock and 5,000,000 were designated as preferred stock, both having a par value of $0.0001 per share.

Upon the closing of the merger, holders of Legacy Dragonfly common stock and preferred stock received shares of common stock in an amount determined by application of the Exchange Ratio. For periods prior to the merger, the reported share and per share amounts have been retroactively converted by applying the Exchange Ratio. The consolidated assets, liabilities, and results of operations prior to the merger are those of Legacy Dragonfly.

The following table summarizes the elements of the merger allocated to the Consolidated Statements of Operations:


	Amounts
Cash: CNTQ trust and PIPE Investors	$	10,979
Cash: CNTQ		303
Gross Proceeds		11,282
Net liabilities assumed in merger transaction		(1,017	)
Warrant liability assumed in merger		(1,990	)
CNTQ note payable settlement at close		(400	)
CNTQ transaction costs paid at close		(18,072	)
Net deficit assumed in recapitalization	$	(10,197	)

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


	Number of Shares
Common stock, outstanding prior to merger		3,093,348
Less: Redemption of CNTQ shares		(2,016,912	)
CNTQ Public Shares		1,076,436
CNTQ Sponsor Shares		3,162,500
Merger and PIPE financing shares		4,238,936
Legacy Dragonfly shares ⁽¹⁾⁽²⁾		38,576,650
Total shares of common stock immediately after the merger		42,815,586

(1)

-The number of Legacy Dragonfly shares was determined from the shares of Legacy Dragonfly outstanding immediately prior to the closing of the merger converted at the Exchange Ratio. All fractional shares were rounded down.

(2)

-The preferred shares of Legacy Dragonfly were exchanged on a 1 to 1 ratio to common stock and the shares were then exchanged for shares of Dragonfly Energy Holdings Corp. at the Exchange Ratio.

Warrants

As part of the reverse capitalization transaction, the Company issued public warrants, private placement warrants and Term Loan warrants. Refer to Note 12 for a further description of the warrants.

Earnout

The former holders of shares of Legacy Dragonfly common stock (including shares received as a result of the conversion of Legacy Dragonfly Preferred Stock into New Dragonfly Common Stock) are entitled to receive their pro rata share of up to 40,000,000 additional shares of common stock (the “Earnout Shares”). The Earnout Shares are issuable in three tranches. The first tranche of 15,000,000 shares is issuable if New Dragonfly’s 2023 total audited revenue is equal to or greater than $250,000 and New Dragonfly’s 2023 audited operating income is equal to or greater than $35,000. The second tranche of 12,500,000 shares is issuable upon achieving a volume-weighted average trading price threshold of at least $22.50 on or prior to December 31, 2026 and the third tranche of 12,500,000 is issuable upon achieving a volume-weighted average trading price threshold of at least $32.50 on or prior to December 31, 2028. To the extent not previously earned, the second tranche is issuable if the $32.50 price target is achieved by December 31, 2028.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The Company accounts for the Earnout Shares as either equity-classified or liability-classified instruments based on an assessment of the Earnout Shares specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, as defined below. The Company has determined that the Earnout Shares are indexed to the Company’s common stock and are therefore not precluded from equity classification. Such accounting determination will be assessed at each financial statement reporting date to determine whether equity classification remains appropriate. If the Earnout Shares are later determined to be liability-classified instruments, the Company would recognize subsequent changes in the fair value of such Earnout Shares within earnings at each reporting period during the earnout period. The value of the Earnout Shares was prepared utilizing a Monte Carlo simulation model. The significant assumptions utilized in determining the fair value of Earnout Shares include the following: (1) a price for our common stock of approximately $14.00; (2) a risk-free rate of 4.24%; (3) projected revenue and EBITDA of $255,100 and $41,000, respectively; (4) expected volatility of future annual revenue and future annual EBITDA of 42.0% and 64.0% respectively; (5) discount rate of 4.24%; and (6) expected probability of change in control of 15.0%.

The accounting treatment of the Earnout Shares have been recognized at fair value upon the closing of the merger and classified in stockholders’ equity. Because the merger is accounted for as a reverse recapitalization, the recognition of the Earnout Shares has been treated as a deemed dividend and has been recorded within additional-paid-in-capital and has no net impact on additional paid-in capital.

FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

Note 4 - FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

●	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
●	Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or indirectly.
●	Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of December 31, 2022 and 2021:

	As of December 31, 2022
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Liabilities
Warrant liability-Term Loan	$	30,841	$	30,841	$	-	$	-	$	30,841
Warrant liability-Private Placement Warrants		1,990		1,990		-		1,990		-
Total liabilities	$	32,831	$	32,831	$	-	$	1,990	$	30,841

There were no assets or liabilities that were measured at fair value as of December 31, 2021.

The carrying amounts of accounts receivable and accounts payable are considered level 1 and approximate fair value as of December 31, 2022 and 2021 because of the relatively short maturity of these instruments.

The carrying value of the term loan and fixed rate senior notes as of December 31, 2022 and 2021, respectively, are considered level 2 and approximates their fair value as the interest rate does not differ significantly from the current market rates available to the Company for similar debt.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

INVENTORY

12 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

INVENTORY

NOTE 5 — INVENTORY

Inventory consists of the following:

SCHEDULE OF INVENTORY

	December 31, 2022		December 31, 2021
Raw material	$	42,586	$	22,885
Finished goods		7,260		4,242
Total inventory	$	49,846	$	27,127

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 6 — 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.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Operating Leases

The Company has leases related to the main office, warehouse space, research and development lab, and engineering office, all located in Reno, Nevada. The leases require annual escalating monthly payments ranging from $60 to $74. In December of 2021, the Company entered into another lease for additional warehouse space located in Reno, Nevada that requires annual escalating monthly payments ranging from $47 to $55. 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. The first payment is due upon substantial completion of construction of the building which is expected to be within 2 years from the effective date. As of December 31, 2022, the lease has not commenced as the Company does not have control over the asset.

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

	December 31, 2022		December 31, 2021
Operating lease right-of-use assets	$	4,513	$	5,709
Short-term operating lease liabilities		1,188		1,082
Long-term operating lease liabilities		3,541		4,694
Total operating lease liabilities	$	4,729	$	5,776
Weighted average remaining lease term		3.6 years		4.6 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, 2022, the future minimum lease payments under these operating leases are as follows:


2023	$	1,399
2024		1,435
2025		1,440
2026		893
Total lease payments		5,167
Less imputed interest		438
Total operating lease liabilities	$	4,729

SCHEDULE OF LEASE COST

		December 31,		December 31,
Lease cost	Classification	2022		2021
Operating lease cost	Cost of goods sold	$	1,476	$	633
Operating lease cost	Research and development		95		103
Operating lease cost	General and administration		50		42
Operating lease cost	Selling and marketing		49		42
Total lease cost		$	1,670	$	820

All lease costs included in the schedule above are fixed.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Other Contingencies

See Note 10 for further discussion regarding contingent consideration arising from the April 2022 Asset Purchase agreement with Thomason Jones Company, LLC.

See Note 3 for further discussion regarding the earnout related to the reverse capitalization transaction.

LONG-TERM DEBT

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

LONG-TERM DEBT

NOTE 7 — LONG-TERM DEBT

Financing — Trust Indenture

On November 24, 2021, the Company entered into agreements to issue $45,000 in fixed rate senior notes (the “Series 2021-6 Notes”) pursuant to a Trust Indenture held by UMB Bank, as trustee and disbursing agent, and NewLight Capital, LLC as servicer (the “Servicer”). The trust and debt documents also required the entry into a Lender Collateral Residual Value Insurance Policy (the “Insurance Policy”), with UMB Bank as named insured for $45,000, and engagement of a placement agent, Tribe Capital Markets, LLC.

Upon closing date of the financing the Company received a wire for $35,474, which is comprised of the gross proceeds of $45,000 less $3,188 in deposits to certain reserve accounts (see subsection labeled Reserve Accounts below), and $6,338 in expenses withdrawn from the gross proceeds, which included $4,725 in prepaid policy premiums and related costs underlying the Insurance Policy (see subsection labelled Collateral below), a prepaid loan monitoring fee of $60 and $1,553 in debt issuance costs.

The obligation for the Series 2021-6 Notes underlying the Trust Indenture is $45,000 in principal on the date of the closing of the financing. The debt bears interest at 5.50% per annum accruing monthly on a 360 day basis. Late payments will be subject to a $50 late fee and default interest based on a rate 5 percentage points above the applicable interest immediately prior to such default. The Company was making interest only payments on the unpaid principal amount in arrears, commencing December 1, 2021 and ending on November 1, 2022 (for interest accruing from the Financing Closing Date through October 31, 2022). Beginning on December 1, 2022, the Company was obligated to repay the debt in twenty four equal installments of principal in the amount of $1,875, plus accrued interest on the unpaid principal amount. Any remaining obligations were due and payable on November 1, 2024 (the “Maturity Date”).

The obligations under the Trust Indenture will be deemed to be repaid or prepaid to the same extent, in the same amounts and at the same times, as the Series 2021-6 Notes are redeemed with funds provided except for payments made from the proceeds of the Insurance Policy (see subsection labelled Collateral below) as such funds must be reimbursed by the Company to the insurer.

During the year ended December 31, 2022, a total of $1,873 of interest expense was incurred under the debt. Amortization of the debt issuance costs amounted to $1,783 during the year ended December 31, 2022. In connection with the merger on October 7, 2022, the Company entered into a Term Loan, Guarantee and Security Agreement (see subsection labeled Term Loan Agreement below) and the outstanding principal balance for the Series 2021-6 Notes underlying the Trust Indenture was paid in full. A loss on extinguishment of $4,824 was recognized upon settlement. The net balance of $40,712 on the date of the merger consisted of $45,000 in principal less $4,288 in unamortized debt discount related to the debt issuance costs and Insurance Policy.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Reserve Accounts

Deposits into the reserve accounts consisted of the following items:


Payment Reserve Fund	$	3,044
Capitalized Interest Fund		144
Total	$	3,188

The Payment Reserve Fund is a debt service fund to be maintained by UMB Bank, and the initial deposit is equal to the maximum amount of monthly interest and principal debt service payment due on the Series 2021-6 notes, plus interest earned on special redemptions (see redemptions related to certain defaults on the debt). These funds may be utilized by UMB Bank to fund certain shortfalls and a special redemption, but otherwise such funds are released pro rata to the Company based on principal payments made by the Company on the Series 2021-6 Notes. Since this was a deposit account maintained by the trustee and restricted for release upon the occurrence of future events, this deposit was treated as restricted cash.

The Capitalized Interest Fund was created to hold the interest that accrued from the closing date until the first payment due on December 15, 2021. The initial deposit, therefore, was treated as prepaid interest. These funds were utilized to pay the interest incurred through that first payment date, therefore the balance as of December 31, 2021 was $3,088.

Both above funds, to the extent that they are deposited into interest bearing accounts, earn interest that UMB Bank will transfer into an Interest Earnings Fund, which funds will be held in escrow until the earlier of maturity or when the debt obligations are paid in full (assuming no events of default). There were no funds deposited into interest bearing accounts at December 31, 2022 or December 31, 2021.

In connection with the merger, the Company settled the Trust Indenture and the balance in the Payment Reserve Fund was offset against the proceeds.

Collateral

As collateral for payment of the debt and certain obligations related to performance under the Trust Indenture and related transaction documents, the Company and the guarantors granted to NewLight Capital, LLC, as representative and for the benefit of UMB Bank a continuing security interest in substantially all of the assets of the Company, including certain intellectual property assets.

Under the terms of the Trust Indenture, the Insurance Policy is required as additional collateral guaranteeing the payments under the debt by the Company. The Company determined this was not a direct incremental cost of the financing but rather a cost for maintaining the collateral, recognized under the guidance at ASC 860-30, Transfers and Servicing, Secured Borrowing and Collateral. The premium costs were recognized as a prepaid expense and were being amortized straight line over the term of the policy (three years, unless reduced due to default provisions). The secured party (i.e., UMB Bank, as trustee) would not have the right to sell or repledge either the intellectual property or the insurance collateral unless and until the Company defaulted and a claim was made. Upon settlement of the debt underlying the Trust Indenture, the collateral requirements for the Insurance Policy were eliminated.

Loan Monitoring Fees

The Company was to incur ongoing monitoring service by NewLight Capital, LLC for 24 months at $180 total expense. These services entail monitory of financial records and information related to collateral enforcement on an ongoing basis. The $60 prepayment funded on the date of closing was recognized as a prepaid expense and was being amortized on a straight line basis over the first 10 months of the agreement as the amount was paid in full in connection with the merger. The Company incurred $77 and $10 of monitoring fee expenses during the years ended December 31, 2022 and 2021, respectively.

In connection with the merger, prepayment on that date of $33 was expensed and included in debt extinguishment.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Financial Covenants – Trust Indenture

The Company was obligated to comply with certain covenants which included a minimum adjusted EBITDA, capital expenditure requirement and minimum fixed charge coverage ratio. The Company was in compliance with all financial covenants as of December 31, 2021 and through October 7, 2022, the date of the settlement of the obligations underlying the Trust Indenture.

Term Loan Agreement

On October 7, 2022, in connection with the merger, CNTQ, Legacy Dragonfly and CCM Investments 5 LLC (“CCM 5”, and in connection with the Term Loan, the “Chardan Lender”), and EICF Agent LLC (“EIP” and, collectively with the Chardan Lender, the “Initial Term Loan Lenders”) entered into the Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”) setting forth the terms of a senior secured term loan facility in an aggregate principal amount of $75,000, or the Term Loan. The Chardan Lender backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender” and collectively with EIP, the “Term Loan Lenders”), pursuant to which the Backstop Lender committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date. Pursuant to an assignment agreement, the Backstopped Loans were assigned by CCM 5 to the Backstop Lender on the Closing Date.

Pursuant to the terms of the Term Loan Agreement, the Term Loan was advanced in one tranche on the Closing Date. The proceeds of the Term Loan were used (i) to refinance on the Closing Date prior indebtedness (including the obligations underlying the Trust Indenture), (ii) to support the Transaction under the Merger Agreement, (iii) for working capital purposes and other corporate purposes, and (iv) to pay any fees associated with transactions contemplated under the Term Loan Agreement and the other loan documents entered into in connection therewith, including the transactions described in the foregoing clauses (i) and (ii) and fees and expenses related to the business combination. The Term Loan amortizes in the amount of 5% per annum (or $937.5 on the first day of each calendar quarter) beginning 24 months after the Closing Date and matures on the fourth anniversary of the Closing Date (“Maturity Date”). The Term Loan accrues interest (i) until April 1, 2023, at a per annum rate equal to the adjusted Secured Overnight Financing Rate (“SOFR”) plus a margin equal to 13.5%, of which 7% will be payable in cash and 6.5% will be paid in-kind, (ii) thereafter until October 1, 2024, at a per annum rate equal to adjusted SOFR plus 7% payable in cash plus an amount ranging from 4.5% to 6.5%, depending on the senior leverage ratio of the consolidated company, which will be paid-in-kind and (iii) at all times thereafter, at a per annum rate equal to adjusted SOFR plus a margin ranging from 11.5% to 13.5% payable in cash, depending on the senior leverage ratio of the consolidated company. In each of the foregoing cases, adjusted SOFR will be no less than 1%.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

In addition to optional prepayments by the Company upon written notice, the Term Loan Agreement provides for mandatory prepayments upon receipt of proceeds from certain transactions or casualty events. Beginning on the date the financial statements for the year ended December 31, 2023 are required to be delivered to the Term Loan Lenders, the Company will be required to prepay the Term Loan based on excess cash flow, as defined in the agreement.

In connection with the entry into the Term Loan Agreement, and as a required term and condition thereof, the Company issued (i) the penny warrants to the Term Loan Lenders exercisable to purchase an aggregate of 2,593,056 and (ii) the $10 warrants to issue warrants to the Term Loan Lenders exercisable to purchase an aggregate of 1,600,000 shares of common stock at $10 per share. Refer to Note 12 for further information.

Unless the obligations under the Term Loan are accelerated under the terms of the agreement, the maturity date will be October 7, 2026.

The Term Loan Lenders have been granted a first priority lien, and security interest in, the mortgaged properties underlying the Company’s mortgages.

During the year ended December 31, 2022, a total of $3,195 of interest expense was incurred under the debt. Amortization of the debt issuance costs amounted to $38 during the year ended December 31, 2022. The carrying balance of $19,242 on December 31, 2022 consisted of $75,000 in principal, plus $1,192 PIK interest, less $56,950 in unamortized debt discount related to the debt issuance costs.

Financial Covenants – Term Loan

Maximum Senior Leverage Ratio

The senior leverage ratio is the ratio of (a) consolidated indebtedness, as defined, on such date minus 100% of the unrestricted cash and cash equivalents held (subject to adjustment) to (b) Consolidated EBITDA for the trailing twelve (12) fiscal month period most recently ended. If liquidity, as defined, for any fiscal quarter is less than $17,500, the senior leverage ratio shall not be permitted, as of the last day of any fiscal quarter ending during any period set forth below, to exceed the ratio set forth opposite such period in the table below:

SCHEDULE OF LEVERAGE RATION

Test Period Ending		Leverage Ratio
December 31, 2022 – March 31, 2023		6.75 to 1.00
June 30, 2023 – September 30, 2023		6.00 to 1.00
December 31, 2023 – March 31, 2024		5.00 to 1.00
June 30, 2024 – September 30, 2024		4.00 to 1.00
December 31, 2024 – March 31, 2025		3.25 to 1.00
June 30, 2025 and thereafter		3.00 to 1.00

Liquidity

The Company shall not permit their liquidity (determined on a consolidated basis) to be less than $10,000 as of the last day of each fiscal month (commencing with month ending December 31, 2022).

Fixed Charge Coverage Ratio

The fixed charge coverage ratio is the ratio of consolidated EBITDA (less capital expenditures and certain other adjustments) to consolidated fixed charges, as defined in the agreement. If liquidity is less than $15,000 as of the last day of any fiscal quarter (commencing with the quarter ending December 31, 2022), then the Company shall not permit the fixed charge coverage ratio for the trailing four quarterly periods ending on the last day of any such quarter to be less than 1.15 : 1.00.

Capital Expenditures

If consolidated EBITDA for the trailing twelve-month period ending on the most recently completed fiscal quarter is less than $15,000, then the level of capital expenditures is limited.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Long-Term Debt Maturities

At December 31, 2022, the future debt maturities are as follows:

SCHEDULE OF FUTURE DEBT MATURITIES


For the Years Ending December 31,	Future Debt Maturities
2023	$	-
2024		938
2025		3,750
2026		91,809
Total		96,497
Less: Estimated interest paid-in-kind		(20,305	)
Total debt		76,192
Less: Unamortized debt issuance costs, non-current		(56,950	)
Total carrying amount		19,242
Less: current portion of debt		(19,242	)
Total long-term debt	$	-

On March 29, 2023, the Company obtained a waiver from the Administrative Agent and the Term Loan Lenders of its failures to satisfy the fixed charge coverage ratio and maximum senior leverage ratio with respect to the minimum cash requirements under the Term Loan during the quarter ended March 31, 2023. The Company concluded it is probable it will not comply with future financial covenants. As a result, the Company classified the entire Term Loan balance in current liabilities on the balance sheet as of December 31, 2022.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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+ Details

REVOLVING NOTE AGREEMENT

12 Months Ended

Dec. 31, 2022

Revolving Note Agreement

REVOLVING NOTE AGREEMENT

Note 8 - REVOLVING NOTE AGREEMENT

On October 6, 2021, the Company entered into a revolving note agreement with a lender to borrow up to $8,000. The borrowing amount is limited and based on the lesser of maximum principal amount of $8,000 and the sum equal to 80% of eligible accounts receivable and 50% of eligible inventory. Interest on each advance shall accrue at the prime rate announced by US Bank from time to time, as and when such rate changes. The revolving credit amount is collateralized by all assets of the Company. The Company drew an initial amount of $5,000 under the facility, which it subsequently re-paid and the revolving note was terminated as a closing condition of the 2021-6 Notes.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 9 - INCOME TAXES

The income tax expense consists of the following items:

SCHEDULE OF INCOME TAX EXPENSE

	2022			2021
Current	$	(257	)	$	1,489
Deferred		(452	)		122
Total tax expense	$	(709	)	$	1,611

Components of deferred tax assets (liabilities) are as follows:

	2022			2021
Deferred tax assets:
Lease liability	$	1,071		$	1,221
Stock based compensation		139			35
Accrued expenses		506			-
Allowance for bad debt		75			59
Research and development credit		200			-
Fixed assets and intangibles		25			-
Interest expense		1,595			-
Prepaid expenses		960			-
Net Operating Loss		3,727			-
Inventory (Sec. 263A)		62			45
Deferred tax asset	$	8,360		$	1,360

Deferred tax liabilities:
Right of Use Asset	$	1,036		$	1,207
Fixed assets and intangibles		-			606
Deferred tax liability	$	1,036		$	1,813
Net deferred tax asset (liability)	$	7,324		$	(453	)
Valuation Allowance		(7,324	)		-
Net deferred tax asset	$	-		$	(453	)

Reconciliation between the effective tax rate on income from continuing operations and the statutory rate for the years ended December 31, 2022 and 2021, are as follows:

	2022					2021
	Tax			Percentage		Tax			Percentage
Book income (loss) before taxes	$	(8,459	)		21.00%	$	1,249			21.00%
Permanent differences (transaction costs)		2,185			(5.42)%		-			-
Permanent differences (warrants)		(1,144	)		2.84%		-			-
Permanent differences (other -other than tax)		458			(1.14)%		188			3.16%
State taxes, net		(722	)		1.79%		128			2.15%
Deferred true-up		(288	)		0.71%		56			0.94%
Research and development credits		(200	)		0.50%
Uncertain tax positions		128			(0.32)%		(19	)		(0.32)%
Other		9			(0.02)%		9			0.15%
Change in valuation allowance		7,324			(18.18)%		-			-
Total	$	(709	)			$	1,611
Effective tax rate					1.76%					27.08%

The tax returns of the Company are open for three years form the date of filing. At the report date, the statute of limitations for federal and state tax returns are open for the Company for 2019, 2020 and 2021.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has not yet evaluated if section 382 was triggered.

Subject to the limitations described below, as of December 31, 2022, the Company had federal net operating loss carryforwards of approximately $16,140, available to reduce future taxable income which do not expire, but are limited to 80% utilization against taxable income. As of December 31, 2022, the Company had state net operating loss carryforwards of approximately $6,747, available to reduce future taxable income, which start to expire in 2037. The Company also had research and development credits of $200 as of December 31, 2022 to offset future federal income taxes, which are set to expire in 2042.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Management of the Company evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and determined that it is more likely than not that the Company will not recognize the benefits of the deferred tax assets. As a result, a full valuation allowance was recorded as of December 31, 2022. The valuation allowance as of December 31, 2022 was $7,324, primarily due to the company entering into a 3 year cumulative loss position and no expectation of income for the year ended December 31, 2023.

As part of the Tax Cuts and Jobs Act that was enacted in December of 2017, taxpayers are required to capitalize research and development expenses and amortize them over five years if the expense is incurred in the US and over fifteen years if incurred in a foreign jurisdiction. The effective date for that provision is for tax years beginning on or after January 1, 2022. The new capitalization requirement increased deferred tax assets related to research and development expenses and decreased taxable loss in the current year, both of which were offset by a full valuation allowance.

The roll-forward of the Company’s gross uncertain tax positions is as follows:

	Gross Uncertain Tax Position
Balance January 1, 2021	$	19
Additions for current year tax positions		-
Reductions for prior year tax positions		(19	)
Balance- December 31, 2021		-
Additions for current year tax positions		128
Balance- December 31, 2022	$	128

The Company’s total uncertain tax positions increased during the year ended December 31, 2022 as a result of a reserve established on federal research and development credits generated in the current year. None of the uncertain tax positions that, if realized, would affect the Company’s effective tax rate in future periods due to a valuation allowance provided against the Company’s net deferred tax assets.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

ASSET PURCHASE AGREEMENT

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

ASSET PURCHASE AGREEMENT

Note 10 – ASSET PURCHASE AGREEMENT

Bourns Productions, Inc.

On January 1, 2022, the Company entered into an asset purchase agreement (the “APA”) with Bourns Productions, Inc., a Nevada corporation (“Bourns Productions”), pursuant to which the Company acquired machinery, equipment and a lease for a podcast studio from Bourns Production Productions as set forth in the APA for a purchase price of $197 which approximated fair market value.

Thomason Jones Company, LLC

In April 2022, the Company entered into an Asset Purchase Agreement with William Thomason, Richard Jones, and Thomason Jones Company, LLC (“Thomason Jones”), whereby the Company acquired inventory and intellectual property assets for $444 cash plus contingent payments of $1,000 each to William Thomason and Richard Jones (the “Earn Out”). The Company determined the contingent consideration to be recognized as contingent compensation to Mr. Thomason and Mr. Jones. The entire purchase price of $444 was allocated to inventory.

Contingent Compensation

If, within twenty-four months of the Agreement the Company realizes $3,000 in gross sales of product either (a) sold under the Wakespeed brand and/or (b) which incorporates any portion of Purchased IP as listed within the agreement, then the Company will pay to Thomason Jones each the amount of $1,000 as soon as reasonably practicable. This payment may be made in cash or common stock, in the sole discretion of the Company. As a result, the Company determined that a liability should be recorded ratably over the 24 month period. The Company recognized expenses in the fourth quarter related to the contingent payment as no accrual was recorded from the date of the agreement through September 30, 2022. The Company recognized immediate compensation expense within sales and marketing of $417 on October 1, 2022 for amounts that should have been accrued for during the period April 2022 through September 2022. In October 2022, the Company determined the sales goals will most likely be achieved within 18 months. As a result, the Company changed its estimate prospectively and accelerated the accrual as if the sales goals would be achieved within an 18 month period from the date of acquisition. As a result, the Company recorded a cumulative accrual in the amount of $782 as of December 31, 2022.

RELATED PARTY

12 Months Ended

Dec. 31, 2022

RELATED PARTY

Note 11 - RELATED PARTY

The Company loaned its Chief Financial Officer $469 to repay amounts owed by him to his former employer and entered into a related Promissory Note with a maturity date of March 1, 2026. The loan was forgiven in full in March of 2022 and was recorded within general and administrative expense.

On October 25, 2022, the Company entered into a separation and release of claims agreement with its Chief Operating Officer (“COO”). As consideration for the COO’s execution of the agreement, the Company agreed to pay the employee a lump sum payment of $100 which is included in general and administrative expenses in the statements of operations, payments equivalent to $1,000 divided into 24 monthly payments commencing on December 1, 2022, and all outstanding equity-based compensation awards to become fully vested and exercisable. The COO shall have 12 months from the termination date to exercise outstanding options.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

WARRANTS

12 Months Ended

Dec. 31, 2022

Warrants

WARRANTS

Note 12 - WARRANTS

In connection with the merger discussed in Note 3, the Company assumed the outstanding public and private placement warrants of CNTQ.

Refer to Note 7 for further description of the warrants issued in connection with the Term Loan.

Common Stock Warrants classified as Equity

Public Warrants

Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public Warrants subject to certain conditions, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $16.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis. On the Closing Date, there were 9,487,500 Public Warrants issued and outstanding. The Public Warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and each balance sheet date thereafter. There was no activity of public warrants from the closing date through December 31, 2022.

The measurements of the Public Warrants after the detachment of the Public Warrants from the Units are classified as Level 1 due to the use of an observable market quote in an active market under the ticker DFLIW. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value of the Warrants as of each relevant date.

Common Stock Warrants classified as Liability

Private Placement Warrants

The Private Placement Warrants may not be redeemed by the Company so long as the Private Placement Warrants are held by the initial purchasers, or such purchasers’ permitted transferees. The Private Warrants: (i) will be exercisable either for cash or on a cashless basis at the holders option and (ii) will not be redeemable by the Company, in either case as long as the Private Warrants are held by the initial purchasers or any of their permitted transferees (as prescribed in the Subscription Agreement). The Private Warrants may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of, the Private Warrants (or any securities underlying the Private Warrants) for a period of one hundred eighty (180) days following the effective date of the Registration Statement to anyone other than any member participating in the Public Offering and the officers or partners thereof, if all securities so transferred remain subject to the lock-up restriction for the remainder of the time period. On the Closing Date and as of December 31, 2022, there were 4,627,858 Private Warrants issued and outstanding.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The Company accounts for the 4,627,858 Private Warrants issued in connection with the Initial Public Offering in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the private warrants do not meet the criteria for equity treatment thereunder, each private warrant must be recorded as a liability. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities will be adjusted to its current fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date.

Warrant Class

Shares

Inception
Date
Fair Value

Initial
Recognition
Date

Exercise
Price

Expiration
Date

Private Placement Warrants

4,627,858

$

1,990

10/7/2022

$

11.5

8/11/2026

The private placement warrants are classified as Level 2 as the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially similar terms as the Public Warrants (with the exception of a different remaining life). We determined, through use of a Binomial Lattice model, that the fair value of each Private Placement Warrant less a discount for the difference in remaining life is equivalent to that of each Public Warrant.

Term Loan Warrants

In connection with the entry into the Term Loan Agreement, and as a required term and condition thereof, the Company issued (i) the penny warrants to the Term Loan Lenders exercisable to purchase an aggregate of 2,593,056 shares (the “Penny Warrants”) and (ii) the $10 warrants to issue warrants to the Term Loan Lenders exercisable to purchase an aggregate of 1,600,000 shares of common stock at $10 per share (the “$10 Warrants” and, together with the Penny Warrants, the “ Term Loan Warrants”). The $10 Warrants were exercised on a cashless basis on October 10, 2022, with the Company agreeing to issue 457,142 shares of common stock in connection with such exercise. The Company concluded the warrants are not considered indexed to the Company’s stock and to be accounted for as liabilities under ASC 815. As such, the estimated fair value is recognized as a liability each reporting period, with changes in the fair value recognized within income each period.

The following table provides the significant inputs to the Black-Scholes method for the fair value of the Penny Warrants:

SCHEDULE FAIR VALUE WARRANTS

	Initial Measurement		As of December 31, 2022
Common stock price	$	14.00	$	11.09
Exercise price	$	0.01	$	0.01
Dividend yield		0%		0%
Term		10		9.77
Volatility		94.00%		90.00%
Risk-free rate		3.90%		3.90%
Fair value	$	13.99	$	11.89

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The following table provides the significant inputs to the Black-Scholes method for the fair value of the $10 Warrants:

	Initial Measurement
Common stock price	$	14.00
Exercise price	$	10.00
Dividend yield		0%
Term		10
Volatility		85.00%
Risk-free rate		4.10%
Fair value	$	10.42

The following tables presents a roll-forward of the Company’s warrants from January 1, 2022 to December 31, 2022:

SCHEDULE OF ROLL FORWARD IN WARRANTS

Private Warrants:

	Common Stock Warrants
**Warrants Outstanding, January 1, 2022		-
Assumed in the merger		4,627,858
Exercised subsequent to the merger		-
Warrants Outstanding, December 31, 2022		4,627,858

**There were no warrants issued, exercised and outstanding prior to January 1, 2022.

Public Warrants:

	Common Stock Warrants
**Warrants Outstanding, January 1, 2022		-
Assumed in the merger		9,487,500
Exercised subsequent to the merger		-
Warrants Outstanding, December 31, 2022		9,487,500

**There were no warrants issued, exercised and outstanding prior to January 1, 2022.

Term Loan Warrants:

	Common Stock Warrants
**Warrants Outstanding, January 1, 2022		-
Issued in conjunction with merger		4,193,056
Exercised subsequent to the merger		(1,600,000	)
Warrants Outstanding, December 31, 2022		2,593,056

**	There were no warrants issued, exercised and outstanding prior to January 1, 2022.

The following table presents a roll-forward of the aggregate fair values of the Company’s warrant liabilities for which fair value is determined by Level 3 Inputs. The only class of warrants that were determined to be Level 3 are the term loan warrants.

	Warrant Liability
Balances, January 1, 2022**	$	-
Issuance of warrants		52,956
Exercise of warrants		(16,669	)
Change in fair value of warrants		(5,446	)
Balances, December 31, 2022	$	30,841

**	There were no warrants issued, exercised and outstanding prior to January 1, 2022.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

COMMON STOCK

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

COMMON STOCK

Note 13 - COMMON STOCK

The Company is authorized to issue up to 170,000,000 shares of common stock with $0.0001 par value. Common stockholders are entitled to dividends if and when declared by the Board of Directors subject to the rights of the preferred stockholders. As of December 31, 2022 and 2021, there were 43,272,728 and 36,496,998 shares issued and outstanding retroactively adjusted and no dividends on common stock had been declared by the Company.

On June 12, 2022, Dragonfly entered into a Stock Purchase Agreement with THOR Industries, whereby THOR purchased shares of Dragonfly common stock for $15,000 in cash. The Stock Purchase agreement was issued in connection with a binding agreement among the parties whereby the parties would use commercially reasonable efforts to enter into a mutually agreed distribution and joint development agreement. The final terms of the agreement have not yet been determined.

As of December 31, 2022 and 2021, the Company had reserved shares of common stock for issuance as follows:

	December 31, 2022		December 31, 2021
Options issued and outstanding		3,642,958		3,690,955
Common stock outstanding		43,272,728		36,496,998
Warrants outstanding		16,708,414		-
Earnout shares		40,000,000		-
Shares available for future issuance ¹		4,924,914		12,207
Total		108,549,014		40,200,160

(1)

Refer to Stock Incentive Plan amendment at Note 14

ChEF Equity Facility

The Company and CCM LLC entered into a purchase agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “ChEF RRA”) in connection with the merger. Pursuant to the Purchase Agreement, the Company has the right to sell to CCM LLC an amount of shares of common stock, up to a maximum aggregate purchase price of $150,000, from time to time, pursuant to the terms of the Purchase Agreement.

Pursuant to, on the terms of, and subject to the satisfaction of the conditions in the Purchase Agreement, including the filing and effectiveness of a registration statement registering the resale by CCM LLC of the shares of common stock issued to it under the Purchase Agreement, the Company will have the right from time to time at its option to direct CCM LLC to purchase up to a specified maximum amount of shares of common stock, up to a maximum aggregate purchase price of $150,000, over the term of the equity facility (“ChEF Equity Facility”).

Under the terms of the Purchase Agreement, CCM LLC will not be obligated to (but may, at its option, choose to) purchase shares of common stock to the extent the number of shares to be purchased would exceed the lowest of the number of shares of common stock (i) which would result in beneficial ownership (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by CCM LLC, together with its affiliates, of more than 9.9%, (ii) which would cause the aggregate purchase price on the applicable VWAP Purchase Date (as defined in the Purchase Agreement) for such purchases to exceed $3,000 and (iii) equal to 20% of the total number of shares of common stock that would count towards VWAP on the applicable Purchase Date of such purchase.

The net proceeds from any sales under the Purchase Agreement will depend on the frequency with, and prices at, which shares of common stock are sold to CCM LLC. To the extent the Company sells shares of common stock under the Purchase Agreement, it currently plans to use any proceeds therefrom for working capital and other general corporate purposes.

In addition, pursuant to the ChEF RRA, the Company has agreed to provide CCM LLC with certain registration rights with respect to the shares of common stock issued subject to the Purchase Agreement.

The Purchase Agreement will automatically terminate on the earliest to occur of (i) the 36-month anniversary of the later of (x) the closing of the merger and (y) effective date of the Initial Registration Statement (as defined in the Purchase Agreement), (ii) the date on which CCM LLC shall have purchased 150,000,000 of shares of common stock pursuant to the Purchase Agreement, (iii) the date on which common stock shall have failed to be listed or quoted on Nasdaq or any successor principal market and (iv) the commencement of certain bankruptcy proceedings or similar transactions with respect to the Company or all or substantially all of its property.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Section 50
-Paragraph 13
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496171-112644

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Topic 505
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 12: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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-Paragraph 13
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=126973232&loc=SL123496158-112644

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1
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Reference 16: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/extlink&oid=126731327&loc=SL126733271-114008

+ Details

STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

Note 14 - STOCK-BASED COMPENSATION

On August 12, 2019, the Board of Directors approved the 2019 Stock Incentive Plan (the “2019 Plan”) with a term of ten years. The Plan was administered by the Board of Directors, which was authorized to grant, at its discretion, awards to employees, directors, and consultants. The maximum number of common shares that were reserved for grants of awards under the Plan was 3,000,000 shares. The Plan provided for the grant of stock options (both incentive stock options and nonqualified stock options), and the grants and sale of restricted stock units (“RSUs”). Shares issued under this Plan may be drawn from authorized and unissued shares, or shares reacquired by the Company.

In July of 2021, the Board of Directors approved the 2021 Stock Incentive Plan (the “2021 Plan” and, together with the 2019 Plan, the “Prior Plans”) with a term of ten years. The Plan was administered by the Board of Directors, which was authorized to grant, at its discretion, awards to employees, directors, and consultants. The maximum number of common shares reserved for grants of awards under the Plan was 1,000,000 shares which was amended and increased to 2,000,000 in May of 2022. The Plan provides for the grant of stock options (both incentive stock options and nonqualified stock options), and the grants and sale of RSUs. Shares issued under this Plan may be drawn from authorized and unissued shares, or shares reacquired by the Company.

In connection with the merger, shareholders and board members approved the 2022 Equity Incentive Plan (the “2022 Plan”). A total of 2,785,950 shares of common stock was initially reserved for issuance under the 2022 Plan, with the potential for additional shares to be issued under the plan. The 2022 Plan replaced the Prior Plans, which the Company assumed in the merger. Following the Closing, no additional awards will be granted under the Prior Plans, although all stock awards granted under the Prior Plans that are outstanding immediately prior to the Closing will be assumed by the Company and continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards and the terms of the applicable Prior Plan.

If an incentive award granted under the 2022 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under the 2022 Plan. The number of shares subject to the 2022 Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction.

The Company maintains an Employee Stock Purchase Plan (“ESPP”) which is designed to allow eligible employees and the eligible employees of our participating subsidiaries to purchase shares of our common stock, at semi-annual intervals, with their accumulated payroll deductions. A total of 2,464,400 shares of the Company’s common stock will initially be available for issuance under the ESPP. The share limit will automatically increase on the first trading day in January of each year by an amount equal to lesser of (1) 1% of the total number of outstanding shares of our common stock on December 31 in the prior year, (2) 1,500,000 shares, or (3) such number as determined by the Company’s board of directors.

A summary of the Company’s option activity and related information follows:

	Number of Options⁽¹⁾			Weighted- Average Exercise Price		Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic value
Balances, January 1, 2021		3,029,791		$	0.45	$	0.72		7.92	$	651
Options granted		2,069,309			3.41		2.03				3,551
Options forfeited		(421,094	)		1.44		1.82				-
Options exercised		(987,051	)		0.51		0.53				442
Balances, December 31, 2021		3,690,955		$	1.98	$	1.38		8.52	$	6,550

Balances, January 1, 2022		3,690,955		$	1.98	$	1.38		8.52	$	6,550
Options granted		572,428			3.46		1.57				-
Options forfeited		(39,074	)		3.13		1.73				-
Options exercised		(581,351	)		1.16		0.89				-
Balances, December 31, 2022		3,642,958		$	2.02	$	1.21		7.90	$	35,898

At December 31, 2022
Vested and Exercisable		1,646,304		$	1.48				7.13	$	17,114
Vested and expected to vest		3,642,958		$	2.02				7.90	$	35,898

(1)

Number of options and weighted average exercise price has been adjusted to reflect the exchange of Legacy Dragonfly’s stock options for New Dragonfly stock options at an exchange ratio of approximately 1.182 as a result of the merger. See Note 3 for further information.

Share-based compensation expense for options and RSUs totaling $2,467 and $734 was recognized in the Company’s consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively. Of the $2,467 of share-based compensation incurred during the year ended December 31, 2022, $155 is allocated to cost of goods sold, $149 to research and development, $654 to selling and marketing, and $1,509 to general and administrative expenses. Of the $734 of share-based compensation incurred during the year ended December 31, 2021, $252 is allocated to cost of goods sold, $95 to research and development, $156 to selling and marketing, and $231 to general and administrative expenses.

As of December 31, 2022, there were 4,924,914 shares of unissued authorized and available for future awards under the plans.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The valuation methodology used to determine the fair value of the options issued during the year was the Black Scholes option pricing model. The Black Scholes model requires the use of a number of assumptions including volatility of the stock price, the fair value of the underlying stock, the average risk free interest rate, and the weighted average expected life of the options. The expected term was estimated using the simplified method due to lack of sufficient history of option exercises.

	2022		2021
Weighted average fair value of options granted	$	1.57	$	2.05
Risk-free interest rate		2.71%		1.08%
Volatility		45.0%		52.6%
Expected life (years)		5.68		6.02
Dividend yield		0.00%		0.00%

Restricted Stock Units

On October 7, 2022, the Company granted 180,000 restricted stock units under the 2022 plan which vest one year from the grant date. The fair value of the restricted stock units on the date of grant was $2,520, which is recognized as compensation expense over the requisite service period based on the value of the underlying shares on the date of grant.

There were no grants of restricted stock units prior to October 7, 2022. The following table presents the restricted stock units activity for the year ended December 31, 2022:

	Number of Shares		Weighted-Average Fair Market Value
Unvested shares, December 31, 2021		-		-
Granted and unvested		180,000	$	14.00
Vested		-		-
Forfeited/Cancelled		-		-
Unvested shares, December 31, 2022		180,000	$	14.00
Vested as of December 31, 2022		-	$	-

REDEEMABLE PREFERRED STOCK RIGHTS

12 Months Ended

Dec. 31, 2022

Redeemable Preferred Stock Rights

REDEEMABLE PREFERRED STOCK RIGHTS

Note 15 - REDEEMABLE PREFERRED STOCK RIGHTS

In connection with the merger, Legacy Redeemable Convertible Preferred Stock previously classified as temporary equity was retroactively adjusted, converted into common stock at an exchange ratio of approximately 1.182, and reclassified to permanent equity as a result of the reverse recapitalization. As of December 31, 2022, there was no Legacy Redeemable Convertible Preferred Stock authorized, issued or outstanding.

The following describes the rights and preferences of the Legacy Dragonfly Redeemable Convertible Preferred Stock prior to the conversion in the merger:

Dividends

The Company shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company (other than dividends on shares of common stock payable in shares of common stock) unless the holders of Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A preferred stock in an amount as set forth in the amended and restated certificate of incorporation. No dividends have been declared to date.

Voting Rights

The holders of Preferred Stock are entitled to vote, together with the holders of common stock, on all matters submitted to stockholders for a vote. Each preferred stockholder is entitled to the number of votes equal to the number of shares of common stock into which each preferred share is convertible at the time of such vote.

The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Company (the “Series A Director”). The Series A Director shall be given two votes on any action requiring the vote or approval of the Board of Directors.

The holders of record of the shares of common stock, exclusively and as a separate class, shall be entitled to elect two directors of the Company, the “Common Stock Director A” and the “Common Stock Director B”). The Common Stock Director A shall be given three votes on any action requiring the vote or approval of the Board of Directors and the Common Stock Director B shall be given one vote on any action requiring the vote or approval of the Board of Directors. Any director elected as provided above may be removed without caused by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Assets Sales

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, as defined, the holders of shares of Series A Preferred Stock then outstanding (the “Series A shareholders”) shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders prior to payment to common shareholders, an amount per share equal to the greater of (i) the Series A Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A preferred Stock been converted into common stock immediately prior to such liquidation event. If upon the occurrence of such liquidation event, if the assets of the Company available for distribution to its stockholders are insufficient to pay the Series A shareholders the full amount to which they shall be entitled, the Series A shareholders will be entitled to a pro rata distribution of assets in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. Upon the occurrence of such liquidation event, and after the payment of all preferential amounts required to be paid to the Series A holders, the remaining assets of the Company available for distribution to its stockholders shall be distributed among the holders of shares of common stock, pro rata based on the number of shares held by each such holder.

Redemption

The preferred shares are subject to mandatory redemption based on the occurrence of certain “deemed liquidation events” as defined which include a merger or consolidation or the sale, exchange, lease, transfer, exclusive license, or other disposition by the Company of all or substantially all of the Company’s assets. If the Company does not affect a dissolution of the Company under Nevada Law within ninety days after a deemed liquidation event, then the Company is required to send written notice to each holder of Series A Preferred Stock no later than the ninetieth day after the deemed liquidation event advising such holders of their right to require the redemption of such shares of Preferred Stock. Dissolution of the Company under Nevada Law with ninety days after a deemed liquidation event is not within the control of the Company. As such the Preferred Stock is precluded from permanent equity classification and has been presented as mezzanine equity.

Conversion Rights

Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series A Original Issue Price by the Series A Conversion Price of $0.20. Such initial conversion price may be converted into common stock, subject to certain adjustments.

Mandatory Conversion

Upon either (a) the closing of the sale of shares of common stock at a price of at least $1.00 per share, in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $25,000 of gross proceeds to the Company or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of more than 50% of the then outstanding shares of Series A Preferred Stock, then (i) all outstanding shares of Series A Preferred Stock shall automatically be converted into shares of common stock, at the then effective conversion rate and (ii) such shares may not be reissued by the Company.

EARNINGS (LOSS) PER SHARE

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

Note 16 - EARNINGS (LOSS) PER SHARE

Earnings (Loss) per Common Share

The following table sets forth the information needed to compute basic and diluted (loss) earnings per share for the years ended December 31, 2022 and December 31, 2021:

	December 31, 2022			December 31, 2021
Basic (Loss) Earnings per common share:
Net (Loss) Income available to common shareholders	$	(39,571	)	$	4,338
Weighted average number of common shares-basic		38,565,307			35,579,137
(Loss) Earnings per share, basic	$	(1.03	)	$	0.12

Diluted (Loss) earnings per common share:
Net (Loss) Income available to common shareholders	$	(39,571	)	$	4,338
Weighted average number of common shares-basic		38,565,307			35,579,137
Dilutive effect related to stock options		-			2,163,200
Weighted average diluted shares outstanding		38,565,307			37,742,337
(Loss) Earnings per share, diluted	$	(1.03	)	$	0.11

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income per share net (loss) income per share because their effect was anti-dilutive:

	December 31, 2022		December 31, 2021
Warrants		16,708,414		-
Restricted stock units		180,000		-
Options		3,642,958		-
Weighted average number of common shares-basic		20,531,372		-

SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2022

Subsequent Events

SUBSEQUENT EVENTS

NOTE 17 – SUBSEQUENT EVENTS

On March 5, 2023, the Company entered into a convertible promissory note with a board member in the amount of $1,000, or the Principal Amount. Upon execution of the Note and funding of the original principal sum, a payment of $100, or the Loan Fee, was fully earned as of the date of the note and was due and payable in full in cash on April 4, 2023. The Company paid the Principal Amount and the Loan Fee on April 1, 2023 and April 4, 2023, respectively.

On March 29, 2023, the Company obtained a waiver from the Administrative Agent and the Term Loan Lenders of its failures to satisfy the fixed charge coverage ratio and maximum senior leverage ratio with respect to the minimum cash requirements under the Term Loan during the quarter ended March 31, 2023.

On March 31, 2023, the Company changed its state of incorporation from the State of Delaware to the State of Nevada (the “Reincorporation”) pursuant to a plan of conversion dated March 30, 2023 (the “Plan of Conversion”). Pursuant to the Plan of Conversion, the issued and outstanding shares of common stock of the Company were automatically converted into common stock of the reincorporated company at the effective time of the Reincorporation.

Under the terms of the Purchase Agreement described in Note 13 the Company issued 98,500 shares pursuant to the Purchase Agreement with CCM LLC for aggregate net proceeds to the Company of $671 through April 17, 2023.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles generally accepted in the United States of America (“U.S. GAAP”) and present the consolidated financial statements of the Company and its wholly owned subsidiary.

Going Concern

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

For the year ended December 31, 2022, the Company incurred losses and had a negative cash flow from operations. As of December 31, 2022, the Company had $17,781 in cash and cash equivalents and working capital of $32,923. The Company’s ability to achieve profitability and positive cash flow depends on its ability to increase revenue, contain its expenses and maintain compliance with the financial covenants in its outstanding indebtedness agreements.

In connection with the Company’s senior secured term loan facility in an aggregate principal amount of $75,000 (the “Term Loan”), the Company is obligated to comply with certain financial covenants, which include maintaining a maximum senior leverage ratio, minimum liquidity, a springing fixed charge coverage ratio, and maximum capital expenditures (See Note 7). On March 29, 2023, the Company obtained a waiver from the Term Loan administrative agent and lenders of its failures to satisfy the fixed charge coverage ratio and maximum senior leverage ratio with respect to the minimum cash requirements under the Term Loan during the quarter ended March 31, 2023. It is probable that the Company will fail to meet these covenants within the next twelve months. If the Company is unable to obtain a waiver or if the Company is unable to comply with such covenants, the lenders have the right to accelerate the maturity of the Term Loan. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In addition, the Company may need to raise additional debt and/or equity financings to fund its operations and strategic plans and meet its financial covenants. The Company has historically been able to raise additional capital through issuance of equity and/or debt financings and the Company intends to use its equity facility and raise additional capital as needed. However, the Company cannot guarantee that it will be able to raise additional equity, contain expenses, or increase revenue, and comply with the financial covenants under the Term Loan.

Recently adopted accounting standards

Recently adopted accounting standards

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt Modifications and Extinguishments (Subtopic 470 50), Compensation – Stock Based Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options. This ASU provides guidance which clarified an issuer’s accounting for modification or exchanges of freestanding equity classified written call options that remain equity classified after modification or exchange. The provisions of ASU No. 2021-04 are effective January 1, 2022. This ASU shall be applied on a prospective basis. The adoption of this guidance did not have a material impact on the accompanying consolidated financial statements.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Recently issued accounting pronouncements

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023. These standards replace the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measure at amortized cost to be presented at the net amount expected to be collected. The Company determined that this change does not have a material impact to the financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. The amendments in this update will be effective for the Company on January 1, 2024 and may be early adopted at the beginning of fiscal year 2023. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

Cash, Restricted Cash, and Cash Equivalents

Cash, Restricted Cash, and Cash Equivalents

The Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents as of December 31, 2022 or 2021. The Company also maintained a restricted cash balance to satisfy its note payable requirements as of December 31, 2021 (Refer to Note 7). There were no restricted cash balances as of December 31, 2022.

From time to time the Company has amounts on deposit with financial institutions that exceed federally insured limits. The Company has not experienced any significant losses in such accounts, nor does management believe it is exposed to any significant credit risk.

Accounts Receivable

Accounts Receivable

The Company’s trade receivables are recorded when billed and represent claims against third parties that will be settled in cash. Generally, payment is due from customers within 30-60 days of the invoice date and the contracts do not have significant financing components. Trade accounts receivables are recorded gross and are net of any applicable allowance. The Company has an allowance for doubtful accounts as of December 31, 2022 and 2021 of $90 and $50, respectively.

Inventory

Inventory

Inventories (Note 5), which consist of raw materials and finished goods, are stated at the lower of cost (first in, first out) or net realizable value, net of reserves for obsolete inventory. We continually analyze our slow moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we established reserves. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. As of December 31, 2022 and 2021, no such reserves were necessary.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, including the cost of significant improvements and renovations. Costs of routine repairs and maintenance are charged to expense as incurred. Depreciation and amortization are calculated by the straight-line method over the estimated useful lives for owned property, or, for leasehold improvements, over the shorter of the asset’s useful life or term of the lease. Depreciation expense for the years ended December 31, 2022 and 2021 was $891 and $617, respectively. The various classes of property and equipment and estimated useful lives are as follows:

Office furniture and equipment	3 to 7 years

Vehicles	5 years

Machinery and equipment	3 to 7 years

Leasehold improvements	Remaining Term of Lease

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of these asset may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over its remaining life. When indications of impairment are present and the estimated undiscounted future cash flows from the use of these assets is less than the assets’ carrying value, the related assets will be written down to fair value. There were no impairments of the Company’s long-lived assets for the periods presented.

Warrants

Warrants

The Company applies relevant accounting guidance for warrants to purchase the Company’s stock based on the nature of the relationship with the counterparty. For warrants issued to investors or lenders in exchange for cash or other financial assets, the Company follows guidance issued within ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”), to assist in the determination of whether the warrants should be classified as liabilities or equity. Warrants that are determined to require liability classification are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classification are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified.

Commitments and Contingencies

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Revenue Recognition

Revenue Recognition

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company excludes from the transaction price all taxes that are assessed by a governmental authority and imposed on and concurrent with the Company’s revenue transactions, and therefore presents these taxes (such as sales tax) on a net basis in operating revenues on the Consolidated Statements of Operations.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Revenue is recognized when control of the promised goods is transferred to the customer or reseller, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue associated with products holding rights of return are recognized when the Company concludes there is not a risk of significant revenue reversal in the future periods for the expected consideration in the transaction. There are no material instances including discounts and refunds where variable consideration is constrained and not recorded at the initial time of sale. Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment when title and risk of loss pass to the customer.

The Company may receive payments at the onset of the contract before delivery of goods for customers in the retail channel. Payment terms for distributors and OEMs are due within 30-60 days after shipment. In such instances, the Company records a customer deposit liability. The Company recognizes these contract liabilities as sales after the revenue criteria are met. The company had $1,779 of contract liabilities as of January 1, 2021. As of December 31, 2022 and 2021, the contract liability related to the Company’s customer deposits approximated $238 and $434, respectively. The entire contract liability balance as of December 31, 2021 was recognized as revenue during the year ended December 31, 2022. The entire contract liability balance as of January 1, 2021 was recognized as revenue during the year ended December 31, 2021.

Disaggregation of Revenue

Disaggregation of Revenue:

The following table present our disaggregated revenues by distribution channel:

Sales	2022		2021
Retail	$	43,344	$	59,042
Distributor		9,102		10,733
Original equipment manufacture		33,805		8,225
Total	$	86,251	$	78,000
Total sales	$	86,251	$	78,000

Shipping and Handling

Shipping and Handling

Shipping and handling fees paid by customers are recorded within net sales, with the related expenses recorded in cost of sales. Shipping and handling costs associated with outbound freight are included in sales and marketing expenses. Shipping and handling costs associated with outbound freight totaled $5,440 and $5,105 for the years ended December 31, 2022 and 2021, respectively.

Product Warranty

Product Warranty

The Company offers assurance type warranties from 5 to 10 years on its products. The Company estimates the costs associated with the warranty obligation using historical data of warranty claims and costs incurred to satisfy those claims and records a liability in the amount of such estimate at the time a product is sold. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liability and adjust the accrual as claims data and historical experience warrants. The Company has assessed the costs of fulfilling its existing assurance type warranties and has determined that the estimated outstanding warranty obligation on December 31, 2022 and 2021 to be $328 and $0, respectively.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Concentrations

Concentrations

Receivables from three customers comprised approximately 18%, 10% and 10%, respectively, of accounts receivable as of December 31, 2022. Receivables from two customers comprised approximately 42% and 16%, respectively, of accounts receivable as of December 31, 2021. There are no other significant accounts receivable concentrations.

Revenue from one customer accounted for approximately 22% of the Company’s sales for year ended December 31, 2022. There were no significant revenue concentrations for the year ended December 31, 2021.

Payables to one vendor comprised approximately 61% of accounts payables as of December 31, 2022. There were no significant payable concentrations as of December 31, 2021.

For the year ended December 31, 2022, one vendor accounted for approximately 28% of the Company’s total purchases, respectively. For the year ended December 31, 2021, three vendors accounted for approximately 27%, 10% and 10% of the Company’s total purchases, respectively.

Deferred Financing Costs

Deferred Financing Costs

The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the consolidated statement of operations. Unamortized deferred financing costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.

Research and Development

Research and Development

The Company expenses research and development costs as incurred. Research and development expenses include salaries, contractor and consultant fees, supplies and materials, as well as costs related to other overhead such as depreciation, facilities, utilities, and other departmental expenses. The costs we incur with respect to internally developed technology and engineering services are included in research and development expenses as incurred as they do not directly relate to acquisition or construction of materials, property or intangible assets that have alternative future uses.

Advertising

Advertising

The Company expenses advertising costs as they are incurred and are included in selling and marketing expenses. Advertising expenses amounted to $2,334 and $1,690 for the years ended December 31, 2022 and 2021, respectively.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for stock based compensation arrangements with employees and non employee consultants using a fair value method which requires the recognition of compensation expense for costs related to all stock based payments, including stock options (Note 14). The fair value method requires the Company to estimate the fair value of stock based payment awards to employees and non employees on the date of grant using an option pricing model. Stock based compensation costs are based on the fair value of the underlying option calculated using the Black Scholes option pricing model and recognized as expense on a straight line basis over the requisite service period, which is the vesting period. Restricted stock unit awards are valued based on the closing trading value of the Company’s common stock on the date of grant and then amortized on a straight-line basis over the requisite service period of the award. The Company measures equity based compensation awards granted to non employees at fair value as the awards vest and recognizes the resulting value as compensation expense at each financial reporting period.

Determining the appropriate fair value model and related assumptions requires judgment, including estimating stock price volatility, expected dividend yield, expected term, risk free rate of return, and the estimated fair value of the underlying common stock. Due to the lack of company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the lithium ion battery industry. The Company uses the simplified method, which is the average of the final vesting tranche date and the contractual term, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The risk free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company accounts for forfeitures as they occur.

Income Taxes

Income Taxes

Deferred income tax assets and liabilities (Note 9) are determined based on the estimated future tax effects of net operating loss, credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates.

The Company recognizes a tax benefit for an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company has a liability of $128 and $0 as of December 31, 2022 and 2021, respectively, of uncertain tax positions.

The Company’s accounting policy is to include penalties and interest related to income taxes if any, in selling, general and administrative expenses. We regularly assess the need to record a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Net (Loss) Earnings per Common Share

Net (Loss) Earnings per Common Share

Basic net (loss) earnings per share is calculated by dividing net (loss) earnings by the weighted-average number of common shares outstanding during the period. Diluted net (loss) earnings per share is calculated using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock.

The weighted-average number of common shares included in the computation of diluted net (loss) earnings gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and warrants.

Common stock equivalent shares are excluded from the computation of diluted net (loss) earnings per share if their effect is antidilutive. In periods in which the Company reports a net loss, diluted net loss per share is generally the same as basic net loss per share since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

As the Merger has been accounted for as a reverse recapitalization, the consolidated financial statements of the merged entity reflect the continuation of the pre-merger Legacy Dragonfly financial statements; Dragonfly equity has been retroactively adjusted to the earliest period presented to reflect the legal capital of the legal acquirer, CNTQ. As a result, net (loss) earnings per share was also retrospectively adjusted for periods ended prior to the Merger. See Note 3 - Reverse Capitalization for details and discussion of the retrospective adjustment of net loss per share.

Leases

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement including the use of an identified asset(s) and the Company’s control over the use of that identified asset. The Company elected, as allowed under Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2016-02, Leases (“ASC 842”), to not recognize leases with a lease term of one year or less on its balance sheet. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets and current and non-current lease liabilities, as applicable.

Segment Reporting

Segment Reporting

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s Chief Executive Officer to make decisions with respect to resource allocation and assessment of performance. To date, the Company has viewed its operations and manages its business as one operating segment.

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

SCHEDULE OF VARIOUS CLASSES OF PROPERTY AND EQUIPMENT AND ESTIMATED USEFUL LIVES

Office furniture and equipment	3 to 7 years

Vehicles	5 years

Machinery and equipment	3 to 7 years

Leasehold improvements	Remaining Term of Lease

SCHEDULE OF DISAGGREGATED REVENUES BY DISTRIBUTION CHANNEL

The following table present our disaggregated revenues by distribution channel:

Sales	2022		2021
Retail	$	43,344	$	59,042
Distributor		9,102		10,733
Original equipment manufacture		33,805		8,225
Total	$	86,251	$	78,000
Total sales	$	86,251	$	78,000

REVERSE CAPITALIZATION (Tables)

12 Months Ended

Dec. 31, 2022

Reverse Capitalization

SCHEDULE OF MERGER CASH FLOW AND SHAREHOLDERS EQUITY

The following table summarizes the elements of the merger allocated to the Consolidated Statements of Operations:


	Amounts
Cash: CNTQ trust and PIPE Investors	$	10,979
Cash: CNTQ		303
Gross Proceeds		11,282
Net liabilities assumed in merger transaction		(1,017	)
Warrant liability assumed in merger		(1,990	)
CNTQ note payable settlement at close		(400	)
CNTQ transaction costs paid at close		(18,072	)
Net deficit assumed in recapitalization	$	(10,197	)

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


	Number of Shares
Common stock, outstanding prior to merger		3,093,348
Less: Redemption of CNTQ shares		(2,016,912	)
CNTQ Public Shares		1,076,436
CNTQ Sponsor Shares		3,162,500
Merger and PIPE financing shares		4,238,936
Legacy Dragonfly shares ⁽¹⁾⁽²⁾		38,576,650
Total shares of common stock immediately after the merger		42,815,586

(1)

-The number of Legacy Dragonfly shares was determined from the shares of Legacy Dragonfly outstanding immediately prior to the closing of the merger converted at the Exchange Ratio. All fractional shares were rounded down.

(2)

-The preferred shares of Legacy Dragonfly were exchanged on a 1 to 1 ratio to common stock and the shares were then exchanged for shares of Dragonfly Energy Holdings Corp. at the Exchange Ratio.

FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

SCHEDULE OF FAIR VALUE, ASSETS AND LIABILITIES

	As of December 31, 2022
	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Liabilities
Warrant liability-Term Loan	$	30,841	$	30,841	$	-	$	-	$	30,841
Warrant liability-Private Placement Warrants		1,990		1,990		-		1,990		-
Total liabilities	$	32,831	$	32,831	$	-	$	1,990	$	30,841

INVENTORY (Tables)

12 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

SCHEDULE OF INVENTORY

Inventory consists of the following:

SCHEDULE OF INVENTORY

	December 31, 2022		December 31, 2021
Raw material	$	42,586	$	22,885
Finished goods		7,260		4,242
Total inventory	$	49,846	$	27,127

COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

SCHEDULE OF TABLE REPRESENTING THE BREAKOUT OF THE OPERATING LEASES

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

	December 31, 2022		December 31, 2021
Operating lease right-of-use assets	$	4,513	$	5,709
Short-term operating lease liabilities		1,188		1,082
Long-term operating lease liabilities		3,541		4,694
Total operating lease liabilities	$	4,729	$	5,776
Weighted average remaining lease term		3.6 years		4.6 years
Weighted average discount rate		5.2%		5.2%

SCHEDULE OF THE FUTURE MINIMUM LEASE PAYMENTS UNDER THE OPERATING LEASES

At December 31, 2022, the future minimum lease payments under these operating leases are as follows:


2023	$	1,399
2024		1,435
2025		1,440
2026		893
Total lease payments		5,167
Less imputed interest		438
Total operating lease liabilities	$	4,729

SCHEDULE OF LEASE COST

		December 31,		December 31,
Lease cost	Classification	2022		2021
Operating lease cost	Cost of goods sold	$	1,476	$	633
Operating lease cost	Research and development		95		103
Operating lease cost	General and administration		50		42
Operating lease cost	Selling and marketing		49		42
Total lease cost		$	1,670	$	820

LONG-TERM DEBT (Tables)

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

SCHEDULE OF DEPOSITS INTO RESERVE ACCOUNTS

Deposits into the reserve accounts consisted of the following items:


Payment Reserve Fund	$	3,044
Capitalized Interest Fund		144
Total	$	3,188

SCHEDULE OF LEVERAGE RATION

Test Period Ending		Leverage Ratio
December 31, 2022 – March 31, 2023		6.75 to 1.00
June 30, 2023 – September 30, 2023		6.00 to 1.00
December 31, 2023 – March 31, 2024		5.00 to 1.00
June 30, 2024 – September 30, 2024		4.00 to 1.00
December 31, 2024 – March 31, 2025		3.25 to 1.00
June 30, 2025 and thereafter		3.00 to 1.00

SCHEDULE OF FUTURE DEBT MATURITIES

At December 31, 2022, the future debt maturities are as follows:

SCHEDULE OF FUTURE DEBT MATURITIES


For the Years Ending December 31,	Future Debt Maturities
2023	$	-
2024		938
2025		3,750
2026		91,809
Total		96,497
Less: Estimated interest paid-in-kind		(20,305	)
Total debt		76,192
Less: Unamortized debt issuance costs, non-current		(56,950	)
Total carrying amount		19,242
Less: current portion of debt		(19,242	)
Total long-term debt	$	-

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

SCHEDULE OF INCOME TAX EXPENSE

The income tax expense consists of the following items:

SCHEDULE OF INCOME TAX EXPENSE

	2022			2021
Current	$	(257	)	$	1,489
Deferred		(452	)		122
Total tax expense	$	(709	)	$	1,611

SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS (LIABILITIES)

Components of deferred tax assets (liabilities) are as follows:

	2022			2021
Deferred tax assets:
Lease liability	$	1,071		$	1,221
Stock based compensation		139			35
Accrued expenses		506			-
Allowance for bad debt		75			59
Research and development credit		200			-
Fixed assets and intangibles		25			-
Interest expense		1,595			-
Prepaid expenses		960			-
Net Operating Loss		3,727			-
Inventory (Sec. 263A)		62			45
Deferred tax asset	$	8,360		$	1,360

Deferred tax liabilities:
Right of Use Asset	$	1,036		$	1,207
Fixed assets and intangibles		-			606
Deferred tax liability	$	1,036		$	1,813
Net deferred tax asset (liability)	$	7,324		$	(453	)
Valuation Allowance		(7,324	)		-
Net deferred tax asset	$	-		$	(453	)

SCHEDULE OF RECONCILIATION BETWEEN THE EFFECTIVE TAX RATE ON INCOME FROM CONTINUING OPERATIONS AND THE STATUTORY RATE

Reconciliation between the effective tax rate on income from continuing operations and the statutory rate for the years ended December 31, 2022 and 2021, are as follows:

	2022					2021
	Tax			Percentage		Tax			Percentage
Book income (loss) before taxes	$	(8,459	)		21.00%	$	1,249			21.00%
Permanent differences (transaction costs)		2,185			(5.42)%		-			-
Permanent differences (warrants)		(1,144	)		2.84%		-			-
Permanent differences (other -other than tax)		458			(1.14)%		188			3.16%
State taxes, net		(722	)		1.79%		128			2.15%
Deferred true-up		(288	)		0.71%		56			0.94%
Research and development credits		(200	)		0.50%
Uncertain tax positions		128			(0.32)%		(19	)		(0.32)%
Other		9			(0.02)%		9			0.15%
Change in valuation allowance		7,324			(18.18)%		-			-
Total	$	(709	)			$	1,611
Effective tax rate					1.76%					27.08%

SCHEDULE OF GROSS UNCERTAIN TAX POSITIONS

The roll-forward of the Company’s gross uncertain tax positions is as follows:

	Gross Uncertain Tax Position
Balance January 1, 2021	$	19
Additions for current year tax positions		-
Reductions for prior year tax positions		(19	)
Balance- December 31, 2021		-
Additions for current year tax positions		128
Balance- December 31, 2022	$	128

WARRANTS (Tables)

12 Months Ended

Dec. 31, 2022

Warrants

SCHEDULE OF WARRANT CLASSIFICATION AT EACH BALANCE SHEET DATE

Warrant Class

Shares

Inception
Date
Fair Value

Initial
Recognition
Date

Exercise
Price

Expiration
Date

Private Placement Warrants

4,627,858

$

1,990

10/7/2022

$

11.5

8/11/2026

SCHEDULE FAIR VALUE WARRANTS

The following table provides the significant inputs to the Black-Scholes method for the fair value of the Penny Warrants:

SCHEDULE FAIR VALUE WARRANTS

	Initial Measurement		As of December 31, 2022
Common stock price	$	14.00	$	11.09
Exercise price	$	0.01	$	0.01
Dividend yield		0%		0%
Term		10		9.77
Volatility		94.00%		90.00%
Risk-free rate		3.90%		3.90%
Fair value	$	13.99	$	11.89

DRAGONFLY ENERGY HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The following table provides the significant inputs to the Black-Scholes method for the fair value of the $10 Warrants:

	Initial Measurement
Common stock price	$	14.00
Exercise price	$	10.00
Dividend yield		0%
Term		10
Volatility		85.00%
Risk-free rate		4.10%
Fair value	$	10.42

SCHEDULE OF ROLL FORWARD IN WARRANTS

The following tables presents a roll-forward of the Company’s warrants from January 1, 2022 to December 31, 2022:

SCHEDULE OF ROLL FORWARD IN WARRANTS

Private Warrants:

	Common Stock Warrants
**Warrants Outstanding, January 1, 2022		-
Assumed in the merger		4,627,858
Exercised subsequent to the merger		-
Warrants Outstanding, December 31, 2022		4,627,858

**There were no warrants issued, exercised and outstanding prior to January 1, 2022.

Public Warrants:

	Common Stock Warrants
**Warrants Outstanding, January 1, 2022		-
Assumed in the merger		9,487,500
Exercised subsequent to the merger		-
Warrants Outstanding, December 31, 2022		9,487,500

**There were no warrants issued, exercised and outstanding prior to January 1, 2022.

Term Loan Warrants:

	Common Stock Warrants
**Warrants Outstanding, January 1, 2022		-
Issued in conjunction with merger		4,193,056
Exercised subsequent to the merger		(1,600,000	)
Warrants Outstanding, December 31, 2022		2,593,056

**	There were no warrants issued, exercised and outstanding prior to January 1, 2022.

The following table presents a roll-forward of the aggregate fair values of the Company’s warrant liabilities for which fair value is determined by Level 3 Inputs. The only class of warrants that were determined to be Level 3 are the term loan warrants.

	Warrant Liability
Balances, January 1, 2022**	$	-
Issuance of warrants		52,956
Exercise of warrants		(16,669	)
Change in fair value of warrants		(5,446	)
Balances, December 31, 2022	$	30,841

**	There were no warrants issued, exercised and outstanding prior to January 1, 2022.

COMMON STOCK (Tables)

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

SUMMARY OF RESERVED SHARES OF COMMON STOCK FOR ISSUANCE

As of December 31, 2022 and 2021, the Company had reserved shares of common stock for issuance as follows:

	December 31, 2022		December 31, 2021
Options issued and outstanding		3,642,958		3,690,955
Common stock outstanding		43,272,728		36,496,998
Warrants outstanding		16,708,414		-
Earnout shares		40,000,000		-
Shares available for future issuance ¹		4,924,914		12,207
Total		108,549,014		40,200,160

(1)

Refer to Stock Incentive Plan amendment at Note 14

STOCK-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

SCHEDULE OF OPTION ACTIVITY AND RELATED INFORMATION

A summary of the Company’s option activity and related information follows:

	Number of Options⁽¹⁾			Weighted- Average Exercise Price		Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic value
Balances, January 1, 2021		3,029,791		$	0.45	$	0.72		7.92	$	651
Options granted		2,069,309			3.41		2.03				3,551
Options forfeited		(421,094	)		1.44		1.82				-
Options exercised		(987,051	)		0.51		0.53				442
Balances, December 31, 2021		3,690,955		$	1.98	$	1.38		8.52	$	6,550

Balances, January 1, 2022		3,690,955		$	1.98	$	1.38		8.52	$	6,550
Options granted		572,428			3.46		1.57				-
Options forfeited		(39,074	)		3.13		1.73				-
Options exercised		(581,351	)		1.16		0.89				-
Balances, December 31, 2022		3,642,958		$	2.02	$	1.21		7.90	$	35,898

At December 31, 2022
Vested and Exercisable		1,646,304		$	1.48				7.13	$	17,114
Vested and expected to vest		3,642,958		$	2.02				7.90	$	35,898

(1)

Number of options and weighted average exercise price has been adjusted to reflect the exchange of Legacy Dragonfly’s stock options for New Dragonfly stock options at an exchange ratio of approximately 1.182 as a result of the merger. See Note 3 for further information.

SCHEDULE OF VALUATION ASSUMPTIONS OF OPTIONS

	2022		2021
Weighted average fair value of options granted	$	1.57	$	2.05
Risk-free interest rate		2.71%		1.08%
Volatility		45.0%		52.6%
Expected life (years)		5.68		6.02
Dividend yield		0.00%		0.00%

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

There were no grants of restricted stock units prior to October 7, 2022. The following table presents the restricted stock units activity for the year ended December 31, 2022:

	Number of Shares		Weighted-Average Fair Market Value
Unvested shares, December 31, 2021		-		-
Granted and unvested		180,000	$	14.00
Vested		-		-
Forfeited/Cancelled		-		-
Unvested shares, December 31, 2022		180,000	$	14.00
Vested as of December 31, 2022		-	$	-

EARNINGS (LOSS) PER SHARE (Tables)

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

SCHEDULE OF INFORMATION NEEDED TO COMPUTE BASIC AND DILUTED EARNINGS PER SHARE

The following table sets forth the information needed to compute basic and diluted (loss) earnings per share for the years ended December 31, 2022 and December 31, 2021:

	December 31, 2022			December 31, 2021
Basic (Loss) Earnings per common share:
Net (Loss) Income available to common shareholders	$	(39,571	)	$	4,338
Weighted average number of common shares-basic		38,565,307			35,579,137
(Loss) Earnings per share, basic	$	(1.03	)	$	0.12

Diluted (Loss) earnings per common share:
Net (Loss) Income available to common shareholders	$	(39,571	)	$	4,338
Weighted average number of common shares-basic		38,565,307			35,579,137
Dilutive effect related to stock options		-			2,163,200
Weighted average diluted shares outstanding		38,565,307			37,742,337
(Loss) Earnings per share, diluted	$	(1.03	)	$	0.11

SCHEDULE OF POTENTIAL SHARES OF COMMON STOCK EXCLUDED FROM DILUTED NET (LOSS) INCOME PER SHARE

The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income per share net (loss) income per share because their effect was anti-dilutive:

	December 31, 2022		December 31, 2021
Warrants		16,708,414		-
Restricted stock units		180,000		-
Options		3,642,958		-
Weighted average number of common shares-basic		20,531,372		-

SCHEDULE OF VARIOUS CLASSES OF PROPERTY AND EQUIPMENT AND ESTIMATED USEFUL LIVES (Details)	12 Months Ended
	Dec. 31, 2022
Furniture and Fixtures [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	3 years
Furniture and Fixtures [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	7 years
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	5 years
Machinery and Equipment [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	3 years
Machinery and Equipment [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life (in years)	7 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	Remaining Term of Lease

SCHEDULE OF DISAGGREGATED REVENUES BY DISTRIBUTION CHANNEL (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Disaggregation of Revenue [Line Items]
Total sales	$ 86,251	$ 78,000
Sales Channel, Directly to Consumer [Member]
Disaggregation of Revenue [Line Items]
Total sales	43,344	59,042
Sales Channel, Through Intermediary [Member]
Disaggregation of Revenue [Line Items]
Total sales	9,102	10,733
Original Equipment Manufacture [Member]
Disaggregation of Revenue [Line Items]
Total sales	$ 33,805	$ 8,225

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8906-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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-Paragraph 41
-Subparagraph (a)
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 4
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130543-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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-Paragraph 22
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 22
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-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 5
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130545-203045

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 924
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-URI https://asc.fasb.org/extlink&oid=6472922&loc=d3e499488-122856

+ Details

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	12 Months Ended
	Dec. 31, 2022 USD ($) Customer Vendor Segment	Dec. 31, 2021 USD ($) Customer Vendor	Jan. 01, 2021 USD ($)	Dec. 31, 2020 USD ($)
Product Information [Line Items]
Cash and cash equivalents	$ 17,781,000	$ 25,586,000
Working capital	32,923,000
Cash equivalents	0	0
Restricted cash	$ 0
Period within which payment is due from customers	30-60 days
Allowance for doubtful accounts	$ 90,000	50,000
Depreciation expense	891,000	617,000
Customer deposits	238,000	434,000	$ 1,779,000
Shipping and handling costs	5,440,000	5,105,000
Warrant obilgation outstanding	$ 328,000	$ 0
Number of vendors \| Customer	3	2
Advertising expense	$ 2,334,000	$ 1,690,000
Uncertain tax positions	$ 128,000			$ 19,000
Number of operating segments \| Segment	1
Accounts Receivable [Member] \| Credit Concentration Risk [Member] \| Customer One [Member]
Product Information [Line Items]
Concentration risk, percentage	18.00%	42.00%
Accounts Receivable [Member] \| Credit Concentration Risk [Member] \| Customer Two [Member]
Product Information [Line Items]
Concentration risk, percentage	10.00%	16.00%
Accounts Receivable [Member] \| Credit Concentration Risk [Member] \| Customer Three [Member]
Product Information [Line Items]
Concentration risk, percentage	10.00%
Revenue from Contract with Customer Benchmark [Member] \| Customer Concentration Risk [Member]
Product Information [Line Items]
Number of vendors \| Customer	1
Revenue from Contract with Customer Benchmark [Member] \| Customer Concentration Risk [Member] \| Customer One [Member]
Product Information [Line Items]
Concentration risk, percentage	22.00%
Total Purchases [Member] \| Supplier Concentration Risk [Member]
Product Information [Line Items]
Number of vendors \| Customer	1
Number of vendors \| Vendor	1	3
Total Purchases [Member] \| Supplier Concentration Risk [Member] \| Vendor One [Member]
Product Information [Line Items]
Concentration risk, percentage	28.00%	27.00%
Total Purchases [Member] \| Supplier Concentration Risk [Member] \| Vendor Two [Member]
Product Information [Line Items]
Concentration risk, percentage		10.00%
Total Purchases [Member] \| Supplier Concentration Risk [Member] \| Vendor Three [Member]
Product Information [Line Items]
Concentration risk, percentage		10.00%
Accounts Payable [Member] \| Supplier Concentration Risk [Member] \| Vendor [Member]
Product Information [Line Items]
Concentration risk, percentage	61.00%
Minimum [Member]
Product Information [Line Items]
Payment term for distributors and OEMs	30 days
Term of product warranty provided	5 years
Maximum [Member]
Product Information [Line Items]
Payment term for distributors and OEMs	60 days
Term of product warranty provided	10 years
Senior Secured Term Loan Facility [Member] \| Term Loan [Member]
Product Information [Line Items]
Loan amount	$ 75,000,000

SCHEDULE OF MERGER CASH FLOW AND SHAREHOLDERS EQUITY (Details) - USD ($)
$ in Thousands

12 Months Ended

Sep. 26, 2022

Dec. 31, 2022

Short-Term Debt [Line Items]

CNTQ transaction costs paid at close

$ 18,072

Net deficit assumed in recapitalization

$ 10,197

Common stock, outstanding prior to merger

36,496,998

Total shares of common stock immediately after the merger

43,272,728

CNTQ Trust And PIPE Investors [Member]

Short-Term Debt [Line Items]

Gross Proceeds

$ 10,979

CNTQ [Member]

Short-Term Debt [Line Items]

Gross Proceeds

303

PIPE Financing [Member]

Short-Term Debt [Line Items]

Gross Proceeds

11,282

Net liabilities assumed in merger transaction

(1,017)

Warrant liability assumed in merger

(1,990)

CNTQ note payable settlement at close

(400)

CNTQ transaction costs paid at close

(18,072)

Net deficit assumed in recapitalization

$ (10,197)

Common stock, outstanding prior to merger

3,093,348

Less: Redemption of CNTQ shares

(2,016,912)

Merger and PIPE financing shares

4,238,936

Legacy Dragonfly shares

^[1],[2]

38,576,650

Total shares of common stock immediately after the merger

42,815,586

PIPE Financing [Member] | CNTQ Public [Member]

Short-Term Debt [Line Items]

CNTQ Sponsor Shares

1,076,436

PIPE Financing [Member] | CNTQ Sponsor [Member]

Short-Term Debt [Line Items]

CNTQ Sponsor Shares

3,162,500

[1]	-The number of Legacy Dragonfly shares was determined from the shares of Legacy Dragonfly outstanding immediately prior to the closing of the merger converted at the Exchange Ratio. All fractional shares were rounded down.
[2]	The preferred shares of Legacy Dragonfly were exchanged on a 1 to 1 ratio to common stock and the shares were then exchanged for shares of Dragonfly Energy Holdings Corp. at the Exchange Ratio.

REVERSE CAPITALIZATION (Details Narrative)			12 Months Ended
REVERSE CAPITALIZATION (Details Narrative)	Oct. 07, 2022 USD ($) $ / shares shares	Sep. 26, 2022 USD ($)	Dec. 31, 2022 USD ($) $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares
Common stock, par value, (per share) \| $ / shares	$ 0.0001		$ 0.0001	$ 0.0001
Recapitalization exchange ratio	1.182		1.182
Redemption value	$ 6,265,000
Payments of Debt Issuance Costs			$ 4,032,000	$ 6,278,000
Proceeds from Loans		$ 70,969,000
Carrying amount of debt			$ 19,242,000
Transaction cost		18,072,000
[custom:ProceedsFromIssuanceOfLongTermDebts]		10,197,000
Capital stock, shares authorized \| shares	175,000,000
Common stock, shares authorized \| shares			170,000,000	170,000,000
Preferred stock, shares authorized \| shares			5,000,000	5,000,000
Preferred stock, par value, (per share) \| $ / shares			$ 0.0001	$ 0.0001
Number of Shares \| shares			40,000,000
Audited revenue			$ 250,000
Audited operating income			$ 35,000
Share Price \| $ / shares			$ 11.09
Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input			3.90
Fair Value, Inputs, Level 3 [Member] \| Measurement Input, Commodity Forward Price [Member]
Share Price \| $ / shares			$ 14.00
Fair Value, Inputs, Level 3 [Member] \| Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input			4.24
Fair Value, Inputs, Level 3 [Member] \| Measurement Input, Revenue Multiple [Member]
Warrants and Rights Outstanding, Measurement Input			42.0
Debt Instrument, Fair Value Disclosure			$ 255,100,000
Fair Value, Inputs, Level 3 [Member] \| Measurement Input, EBITDA Multiple [Member]
Warrants and Rights Outstanding, Measurement Input			64.0
Debt Instrument, Fair Value Disclosure			$ 41,000,000
Fair Value, Inputs, Level 3 [Member] \| Measurement Input, Discount Rate [Member]
Warrants and Rights Outstanding, Measurement Input			4.24
Fair Value, Inputs, Level 3 [Member] \| Measurement Input, Expected Dividend Payment [Member]
Warrants and Rights Outstanding, Measurement Input			15.0
Holders Of Outstanding Shares Of Legacy Dragonfly Common Stock [Member] \| Second Tranche [Member]
Volume weighted average price per share \| $ / shares			$ 22.50
Holders Of Outstanding Shares Of Legacy Dragonfly Common Stock [Member] \| Any Time During Period Beginning On Closing Date And Ending On December 312028 [Member]
Volume weighted average price per share \| $ / shares			$ 32.50
Share-Based Payment Arrangement, Tranche One [Member]
Earnout shares issuable \| shares			15,000,000
Share-Based Payment Arrangement, Tranche Two [Member]
Earnout shares issuable \| shares			12,500,000
Volume weighted average price per share \| $ / shares			$ 32.50
Share-Based Payment Arrangement, Tranche Three [Member]
Earnout shares issuable \| shares			12,500,000
Additional Paid-in Capital [Member]
Transaction cost		9,633,000
Warrant Liabilities [Member]
Transaction cost		1,507,000
Term Loan [Member]
Transaction cost		2,081,000
Term Loan Warrants [Member]
Debt Instrument, Unamortized Discount		52,956,000
Carrying amount of debt		18,013,000
Extinguishment of Debt, Amount		42,492,000
Transaction cost		13,221,000
PIPE Financing [Member]
Stock Repurchased During Period, Shares \| shares			2,016,912
Proceeds from Short-Term Debt		5,017,000
Debt Instrument, Face Amount		75,000,000
Payments of Debt Issuance Costs		1,950,000
Payments of Financing Costs		$ 2,081,000
Transaction cost			$ (18,072,000)
[custom:ProceedsFromIssuanceOfLongTermDebts]			$ (10,197,000)
Common Class A [Member]
Stock Repurchased During Period, Shares \| shares	500,000

SCHEDULE OF FAIR VALUE, ASSETS AND LIABILITIES (Details) - Fair Value, Recurring [Member] $ in Thousands	Dec. 31, 2022 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Amount	$ 32,831
Fair Value	32,831
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,990
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	30,841
Term Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Amount	30,841
Fair Value	30,841
Term Loan [Member] \| Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Term Loan [Member] \| Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Term Loan [Member] \| Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	30,841
Private Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Amount	1,990
Fair Value	1,990
Private Warrants [Member] \| Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value
Private Warrants [Member] \| Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,990
Private Warrants [Member] \| Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value

SCHEDULE OF INVENTORY (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Raw material	$ 42,586	$ 22,885
Finished goods	7,260	4,242
Total inventory	$ 49,846	$ 27,127

SCHEDULE OF TABLE REPRESENTING THE BREAKOUT OF THE OPERATING LEASES (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
Operating lease right-of-use assets	$ 4,513	$ 5,709
Short-term operating lease liabilities	1,188	1,082
Long-term operating lease liabilities	3,541	4,694
Total operating lease liabilities	$ 4,729	$ 5,776
Weighted average remaining lease term	3 years 7 months 6 days	4 years 7 months 6 days
Weighted average discount rate	5.20%	5.20%

SCHEDULE OF THE FUTURE MINIMUM LEASE PAYMENTS UNDER THE OPERATING LEASES (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
2023	$ 1,399
2024	1,435
2025	1,440
2026	893
Total lease payments	5,167
Less imputed interest	438
Total operating lease liabilities	$ 4,729	$ 5,776

SCHEDULE OF LEASE COST (Details) - USD ($) $ in Thousands		12 Months Ended
SCHEDULE OF LEASE COST (Details) - USD ($) $ in Thousands	Feb. 02, 2022	Dec. 31, 2022	Dec. 31, 2021
Loss Contingencies [Line Items]
Operating lease cost	$ 23	$ 1,670	$ 820
Cost of Sales [Member]
Loss Contingencies [Line Items]
Operating lease cost		1,476	633
Research and Development Expense [Member]
Loss Contingencies [Line Items]
Operating lease cost		95	103
General and Administrative Expense [Member]
Loss Contingencies [Line Items]
Operating lease cost		50	42
Selling and Marketing Expense [Member]
Loss Contingencies [Line Items]
Operating lease cost		$ 49	$ 42

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands		12 Months Ended
	Feb. 02, 2022	Dec. 31, 2022	Dec. 31, 2021
Loss Contingencies [Line Items]
Contract term	124 months
Monthly base rent	$ 230
Operating lease costs	23	$ 1,670	$ 820
Estimated monthly property taxes	$ 21
Percentage of escalation of monthly base rent	3.00%
Percentage of escalation of fix operating expense costs	2.40%
Term of due of first payment	2 years
Minimum [Member]
Loss Contingencies [Line Items]
Lease payments		60	47
Maximum [Member]
Loss Contingencies [Line Items]
Lease payments		$ 74	$ 55

SCHEDULE OF DEPOSITS INTO RESERVE ACCOUNTS (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Debt Disclosure [Abstract]
Payment Reserve Fund	$ 3,044
Capitalized Interest Fund	144	$ 3,088
Total	$ 3,188

SCHEDULE OF LEVERAGE RATION (Details)	12 Months Ended
SCHEDULE OF LEVERAGE RATION (Details)	Dec. 31, 2022
December 31, 2022 - March 31, 2023 [Member]
Line of Credit Facility [Line Items]
Leverage ratio	6.75 to 1.00
June 30, 2023 - September 30, 2023 [Member]
Line of Credit Facility [Line Items]
Leverage ratio	6.00 to 1.00
December 31, 2024 - March 31, 2025 [Member]
Line of Credit Facility [Line Items]
Leverage ratio	5.00 to 1.00
June 30, 2024 - September 30, 2024 [Member]
Line of Credit Facility [Line Items]
Leverage ratio	4.00 to 1.00
December Thirty One Two Thousand Twenty Four To March Thirty One Two Thousand Twenty Five [Member]
Line of Credit Facility [Line Items]
Leverage ratio	3.25 to 1.00
June 30, 2025 and Thereafter [Member]
Line of Credit Facility [Line Items]
Leverage ratio	3.00 to 1.00

SCHEDULE OF FUTURE DEBT MATURITIES (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Debt Disclosure [Abstract]
2023
2024	938
2025	3,750
2026	91,809
Total	96,497
Less: Estimated interest paid-in-kind	(20,305)
Total debt	76,192
Less: Unamortized debt issuance costs, non-current	(56,950)
Total carrying amount	19,242
Less: current portion of debt	(19,242)
Total long-term debt

LONG-TERM DEBT (Details Narrative)		12 Months Ended
LONG-TERM DEBT (Details Narrative)	Oct. 07, 2022 USD ($)	Dec. 31, 2022 USD ($) Installment $ / shares shares	Dec. 31, 2021 USD ($)	Oct. 10, 2022 shares	Nov. 24, 2021 USD ($)
Debt Instrument [Line Items]
Issuance of notes payable		$ 35,474,000
Proceeds from Notes Payable			$ 45,000,000
Deposits in reserve accounts		3,188,000
Prepaid loan monitoring fee	$ 33,000	60,000
Gain (Loss) on Extinguishment of Debt		(4,824,000)
Long term debt		76,192,000
Capitalized interest fund		$ 144,000	3,088,000
Ongoing monitoring service fees term		24 months
Loan monitoring fees		$ 77,000	10,000
Loan monitoring fees, amortization term		10 months
SharePrice \| $ / shares		$ 11.09
Paid in kind interest		$ 1,192,000
Debt Issuance Costs, Net		$ 56,950,000
Liquidity description		The Company shall not permit their liquidity (determined on a consolidated basis) to be less than $10,000 as of the last day of each fiscal month (commencing with month ending December 31, 2022).
Fixed charge coverage ratio description		The fixed charge coverage ratio is the ratio of consolidated EBITDA (less capital expenditures and certain other adjustments) to consolidated fixed charges, as defined in the agreement. If liquidity is less than $15,000 as of the last day of any fiscal quarter (commencing with the quarter ending December 31, 2022), then the Company shall not permit the fixed charge coverage ratio for the trailing four quarterly periods ending on the last day of any such quarter to be less than 1.15 : 1.00.
Capital expenditures description		If consolidated EBITDA for the trailing twelve-month period ending on the most recently completed fiscal quarter is less than $15,000, then the level of capital expenditures is limited.
Penny Warrants [Member]
Debt Instrument [Line Items]
Warrants exercisable \| shares		2,593,056
Warrants 10 [Member]
Debt Instrument [Line Items]
Warrants exercisable \| shares		1,600,000		457,142
SharePrice \| $ / shares		$ 10
Senior Secured Term Loan Facility [Member] \| Term Loan Agreement [Member]
Debt Instrument [Line Items]
Debt instrument, face amount	$ 75,000,000
Debt instrument, amortization percentage	5.00%
Debt instrument, amortization amount	$ 937,500
Debt instrument, amortization period	24 months
Basis spread on variable rate	13.50%
Senior Secured Term Loan Facility [Member] \| Term Loan Agreement [Member] \| Until April 1 2023 [Member] \| Adjusted Secured Overnight Financing Rate [Member]
Debt Instrument [Line Items]
Variable rate, payable in cash	7.00%
Variable rate, payable in kind	6.50%
Senior Secured Term Loan Facility [Member] \| Term Loan Agreement [Member] \| After April 1, 2023 Until October 1, 2024 [Member] \| Adjusted Secured Overnight Financing Rate [Member]
Debt Instrument [Line Items]
Variable rate, payable in cash	7.00%
Senior Secured Term Loan Facility [Member] \| Term Loan Agreement [Member] \| After April 1, 2023 Until October 1, 2024 [Member] \| Adjusted Secured Overnight Financing Rate [Member] \| Minimum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Variable rate, payable in cash	11.50%
Variable rate, payable in kind	4.50%
Senior Secured Term Loan Facility [Member] \| Term Loan Agreement [Member] \| After April 1, 2023 Until October 1, 2024 [Member] \| Adjusted Secured Overnight Financing Rate [Member] \| Maximum [Member]
Debt Instrument [Line Items]
Variable rate, payable in cash	13.50%
Variable rate, payable in kind	6.50%
Maximum Senior Leverage Ratio [Member]
Debt Instrument [Line Items]
Debt instrument description		The senior leverage ratio is the ratio of (a) consolidated indebtedness, as defined, on such date minus 100% of the unrestricted cash and cash equivalents held (subject to adjustment) to (b) Consolidated EBITDA for the trailing twelve (12) fiscal month period most recently ended. If liquidity, as defined, for any fiscal quarter is less than $17,500, the senior leverage ratio shall not be permitted
New Light Capital LLC [Member]
Debt Instrument [Line Items]
Loan monitoring fees		$ 180,000
Senior Notes [Member]
Debt Instrument [Line Items]
Debt instrument, face amount		45,000,000			$ 45,000,000
Debt instrument, insured amount					$ 45,000,000
Proceeds from Notes Payable		45,000,000
Deposits in reserve accounts		3,188,000
Expenses withdrawn from gross proceeds		6,338,000
Prepaid policy premiums amount		4,725,000
Prepaid loan monitoring fee		60,000
Debt issuance costs other		$ 1,553,000
Interest rate stated percentage		5.50%
Debt instrument, late fee		$ 50
Debt instrument, default interest rate		5.00%
Number of equal installments of principal to be paid \| Installment		24
Periodic payment, principal		$ 1,875,000
Maturity date		Nov. 01, 2024
Interest Expense, Debt, Excluding Amortization		$ 1,873,000
Amortization of Debt Issuance Costs		1,783,000
Gain (Loss) on Extinguishment of Debt		4,824,000
Long term debt		40,712,000
Debt unamortized discount		4,288,000
Senior Notes [Member] \| Term Loan Agreement [Member]
Debt Instrument [Line Items]
Debt instrument, face amount		75,000,000
Interest Expense, Debt, Excluding Amortization		3,195,000
Amortization of Debt Issuance Costs		38,000
Long term debt		19,242,000
Paid in kind interest		1,192,000
Debt Issuance Costs, Net		$ 56,950,000

REVOLVING NOTE AGREEMENT (Details Narrative) $ in Thousands	Oct. 06, 2021 USD ($)
Revolving Note Agreement
Line of Credit Facility, Maximum Borrowing Capacity	$ 8,000
Percentage of eligible account receivable	80.00%
percentage of eligible inventory	50.00%
Proceeds from Lines of Credit	$ 5,000

SCHEDULE OF INCOME TAX EXPENSE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Current	$ (257)	$ 1,489
Deferred	(452)	122
Total tax expense	$ (709)	$ 1,611

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS (LIABILITIES) (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deferred tax assets:
Lease liability	$ 1,071	$ 1,221
Stock based compensation	139	35
Accrued expenses	506
Allowance for bad debt	75	59
Research and development credit	200
Fixed assets and intangibles	25
Interest expense	1,595
Prepaid expenses	960
Net Operating Loss	3,727
Inventory (Sec. 263A)	62	45
Deferred tax asset	8,360	1,360
Right of Use Asset	1,036	1,207
Fixed assets and intangibles		606
Deferred tax liability	1,036	1,813
Net deferred tax asset (liability)	7,324	(453)
Valuation Allowance	(7,324)
Net deferred tax asset		$ (453)

SCHEDULE OF RECONCILIATION BETWEEN THE EFFECTIVE TAX RATE ON INCOME FROM CONTINUING OPERATIONS AND THE STATUTORY RATE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Book income (loss) before taxes, tax	$ (8,459)	$ 1,249
Book income (loss) before taxes, percent	21.00%	21.00%
Permanent differences (transaction costs), tax	$ 2,185
Permanent differences (transaction costs), percent	(5.42%)
Permanent differences (warrants), tax	$ (1,144)
Permanent differences (warrants), percent	2.84%
Permanent differences (other -other than tax), tax	$ 458	$ 188
Permanent differences (other -other than tax), percent	(1.14%)	3.16%
State taxes net, tax	$ (722)	$ 128
State taxes net, percent	1.79%	2.15%
Deferred true-up, tax	$ (288)	$ 56
Deferred true-up, percent	0.71%	0.94%
Research and development credits, tax	$ (200)
Research and development credits, percent	0.50%
Uncertain tax positions, tax	$ 128	$ (19)
Uncertain tax positions, percent	(0.32%)	(0.32%)
Other, tax	$ 9	$ 9
Other, percent	(0.02%)	0.15%
Change in valuation allowance, tax	$ 7,324
Change in valuation allowance, percent	(18.18%)
Total, tax	$ (709)	$ 1,611
Effective tax rate, percent	1.76%	27.08%

SCHEDULE OF GROSS UNCERTAIN TAX POSITIONS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Balance- December 31, 2021		$ 19
Additions for current year tax positions	128
Reductions for prior year tax positions		(19)
Balance- December 31, 2022	$ 128

INCOME TAXES (Details Narrative) - USD ($)	12 Months Ended
INCOME TAXES (Details Narrative) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Operating Loss Carryforwards [Line Items]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%
Deferred tax assets, valuation allowance	$ 7,324,000
Domestic Tax Authority [Member]
Operating Loss Carryforwards [Line Items]
Operating Loss Carryforwards	$ 16,140,000
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	80.00%
Deferred Tax Assets, Tax Credit Carryforwards, Research	$ 200
[custom:TaxCreditCarryForwardExpirationYear]	2042
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Operating Loss Carryforwards	$ 6,747,000

ASSET PURCHASE AGREEMENT (Details Narrative) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Jan. 01, 2022	Apr. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Asset Acquisition [Line Items]
Repayment to related party			$ 1,000
Selling and marketing expense			13,671	$ 9,848
Bourns Production, Inc
Asset Acquisition [Line Items]
Purchase price for acquiring machinery and equipment	$ 197
Thomason Jones Company LLC [Member]
Asset Acquisition [Line Items]
Purchase price for acquiring machinery and equipment			444
Contingent payments		$ 1,000
Revenues			3,000
Repayment to related party			1,000
Selling and marketing expense			417
Accrued expense			$ 782
Thomason Jones Company LLC [Member] \| Maximum [Member]
Asset Acquisition [Line Items]
Purchase price for acquiring machinery and equipment		$ 444

RELATED PARTY (Details Narrative) $ in Thousands	12 Months Ended
RELATED PARTY (Details Narrative) $ in Thousands	Dec. 31, 2022 USD ($)
Related Party Transaction [Line Items]
Repayment to related party	$ 1,000
Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Repayment to officer	100
Promissory Note with Related Party \| Chief Financial Officer [Member]
Related Party Transaction [Line Items]
Repayment to officer	$ 469

- Definition

Carrying amount as of the balance sheet date of obligations due all related parties.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(k)(1))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iii)(C))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(5))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03.17)
-URI https://asc.fasb.org/extlink&oid=126734703&loc=d3e572229-122910

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iv))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(4)(iii)(B))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1A
-Subparagraph (SX 210.13-01(a)(5))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442526-122756

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 10
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iv))
-URI https://asc.fasb.org/extlink&oid=126975872&loc=SL124442552-122756

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-03.15(3),(4))
-URI https://asc.fasb.org/extlink&oid=126897435&loc=d3e534808-122878

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 850
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864

+ Details

SCHEDULE OF WARRANT CLASSIFICATION AT EACH BALANCE SHEET DATE (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Number of warrants outstanding	16,708,414
Exercise price	$ 11.50
Warrant [Member]
Number of warrants outstanding	4,627,858
Fair value	1,990
Expiration date	Oct. 07, 2022
Exercise price	$ 11.5
Expiration date	Aug. 11, 2026

SCHEDULE FAIR VALUE WARRANTS (Details)	Dec. 31, 2022 $ / shares
Common stock price	$ 11.09
Fair value	$ 11.89
Measurement Input, Share Price [Member]
Warrant measurement input	0.01
Measurement Input, Expected Dividend Rate [Member]
Warrant measurement input	0
Measurement Input, Expected Term [Member]
Term	9 years 9 months 7 days
Measurement Input, Price Volatility [Member]
Warrant measurement input	90.00
Measurement Input, Risk Free Interest Rate [Member]
Warrant measurement input	3.90
Initial Measurement [Member]
Common stock price	$ 14.00
Fair value	13.99
Initial Measurement [Member] \| 10 Warrants [Member]
Common stock price	14.00
Fair value	$ 10.42
Initial Measurement [Member] \| Measurement Input, Share Price [Member]
Warrant measurement input	0.01
Initial Measurement [Member] \| Measurement Input, Share Price [Member] \| 10 Warrants [Member]
Warrant measurement input	10.00
Initial Measurement [Member] \| Measurement Input, Expected Dividend Rate [Member]
Warrant measurement input	0
Initial Measurement [Member] \| Measurement Input, Expected Dividend Rate [Member] \| 10 Warrants [Member]
Warrant measurement input	0
Initial Measurement [Member] \| Measurement Input, Expected Term [Member]
Term	10 years
Initial Measurement [Member] \| Measurement Input, Expected Term [Member] \| 10 Warrants [Member]
Term	10 years
Initial Measurement [Member] \| Measurement Input, Price Volatility [Member]
Warrant measurement input	94.00
Initial Measurement [Member] \| Measurement Input, Price Volatility [Member] \| 10 Warrants [Member]
Warrant measurement input	85.00
Initial Measurement [Member] \| Measurement Input, Risk Free Interest Rate [Member]
Warrant measurement input	3.90
Initial Measurement [Member] \| Measurement Input, Risk Free Interest Rate [Member] \| 10 Warrants [Member]
Warrant measurement input	4.10

SCHEDULE OF ROLL FORWARD IN WARRANTS (Details) - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2022

Dec. 31, 2021

Change in fair value of warrants

$ 5,446

Private Warrants [Member]

Warrants Outstanding, January 1, 2022

Assumed in the merger

4,627,858

Exercised subsequent to the merger

Warrants Outstanding, December 31, 2022

4,627,858

Public Warrants [Member]

Warrants Outstanding, January 1, 2022

Assumed in the merger

9,487,500

Exercised subsequent to the merger

Warrants Outstanding, December 31, 2022

9,487,500

Term Loan Warrants [Member]

Warrants Outstanding, January 1, 2022

^[1]

Exercised subsequent to the merger

(1,600,000)

Warrants Outstanding, December 31, 2022

2,593,056

^[1]

Issued in conjunction with merger

4,193,056

Warrant [Member]

Balances, January 1, 2022

^[2]

Issuance of warrants

52,956

Exercise of warrants

(16,669)

Change in fair value of warrants

(5,446)

Balances, December 31, 2022

$ 30,841

^[2]

[1]	There were no warrants issued, exercised and outstanding prior to January 1, 2022.
[2]	There were no warrants issued, exercised and outstanding prior to January 1, 2022.

WARRANTS (Details Narrative) - $ / shares	Dec. 31, 2022	Oct. 10, 2022
Class of Warrant or Right [Line Items]
Exercise price of warrants	$ 11.50
Share Price	$ 11.09
Warrants outstanding	16,708,414
Public Warrants [Member]
Class of Warrant or Right [Line Items]
Exercise price of warrants	$ 0.01
Share Price	$ 16.00
Warrants outstanding	9,487,500
Private Warrants [Member]
Class of Warrant or Right [Line Items]
Warrants outstanding	4,627,858
Private Warrants [Member] \| IPO [Member]
Class of Warrant or Right [Line Items]
Warrants outstanding	4,627,858
Penny Warrants [Member]
Class of Warrant or Right [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	2,593,056
Warrants 10 [Member]
Class of Warrant or Right [Line Items]
Share Price	$ 10
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	1,600,000	457,142

SUMMARY OF RESERVED SHARES OF COMMON STOCK FOR ISSUANCE (Details) - shares

Dec. 31, 2022

Dec. 31, 2021

Dec. 31, 2020

Equity [Abstract]

Options issued and outstanding

^[1]

3,642,958

3,690,955

3,029,791

Common stock outstanding

43,272,728

36,496,998

Warrants outstanding

16,708,414

Earnout shares

40,000,000

Shares available for future issuance

^[2]

4,924,914

12,207

Total

108,549,014

40,200,160

[1]	Number of options and weighted average exercise price has been adjusted to reflect the exchange of Legacy Dragonfly’s stock options for New Dragonfly stock options at an exchange ratio of approximately 1.182 as a result of the merger. See Note 3 for further information.
[2]	Refer to Stock Incentive Plan amendment at Note 14

COMMON STOCK (Details Narrative) - USD ($)		12 Months Ended
COMMON STOCK (Details Narrative) - USD ($)	Jun. 12, 2022	Dec. 31, 2022	Oct. 07, 2022	Dec. 31, 2021
Common stock, shares authorized		170,000,000		170,000,000
Common stock, par value		$ 0.0001	$ 0.0001	$ 0.0001
Common stock, shares issued		43,272,728		36,496,998
Common stock, shares outstanding		43,272,728		36,496,998
Stock Issued During Period, Value, New Issues		$ 15,000,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Terms of Award		the 36-month anniversary of the later of (x) the closing of the merger and (y) effective date of the Initial Registration Statement (as defined in the Purchase Agreement), (ii) the date on which CCM LLC shall have purchased 150,000,000 of shares of common stock pursuant to the Purchase Agreement, (iii) the date on which common stock shall have failed to be listed or quoted on Nasdaq or any successor principal market and (iv) the commencement of certain bankruptcy proceedings or similar transactions with respect to the Company or all or substantially all of its property.
Purchase Agreement [Member] \| Maximum [Member]
Aggregated purchase price		$ 150,000
THOR Industries [Member]
Stock Issued During Period, Value, New Issues	$ 15,000,000
C C M L L C [Member] \| Purchase Agreement [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Terms of Award		which would result in beneficial ownership (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by CCM LLC, together with its affiliates, of more than 9.9%, (ii) which would cause the aggregate purchase price on the applicable VWAP Purchase Date (as defined in the Purchase Agreement) for such purchases to exceed $3,000 and (iii) equal to 20% of the total number of shares of common stock that would count towards VWAP on the applicable Purchase Date of such purchase
C C M L L C [Member] \| Purchase Agreement [Member] \| Maximum [Member]
Aggregated purchase price		$ 150,000

SCHEDULE OF OPTION ACTIVITY AND RELATED INFORMATION (Details) - USD ($)
$ / shares in Units, $ in Thousands

12 Months Ended

Dec. 31, 2022

Dec. 31, 2021

Share-Based Payment Arrangement [Abstract]

Number of Options, Balance at the beginning

^[1]

3,690,955

3,029,791

Weighted- Average Exercise Price - Balances at the beginning

$ 1.98

$ 0.45

Weighted- Average Grant Date Fair Value, Balances at the beginning

$ 1.38

$ 0.72

Weighted- Average Remaining Contractual Life (in years)

8 years 6 months 7 days

7 years 11 months 1 day

Aggregate Intrinsic value Balances at the beginning

$ 6,550

$ 651

Number of Options granted

^[1]

572,428

2,069,309

Weighted- Average Exercise Price Options granted

$ 3.46

$ 3.41

Weighted- Average Grant Date Fair Value, Options granted

$ 1.57

$ 2.03

Aggregate Intrinsic value Options granted

$ 3,551

Number of Options forfeited

^[1]

(39,074)

(421,094)

Weighted- Average Exercise Price Options forfeited

$ 3.13

$ 1.44

Weighted- Average Grant Date Fair Value, Options forfeited

$ 1.73

$ 1.82

Aggregate Intrinsic value Options forfeited

Number of Options exercised

^[1]

(581,351)

(987,051)

Weighted- Average Exercise Price Options exercised

$ 1.16

$ 0.51

Weighted- Average Grant Date Fair Value, Options exercised

$ 0.89

$ 0.53

Aggregate Intrinsic value Options exercised

$ 442

Number of Options, Balance at the end

^[1]

3,642,958

3,690,955

Weighted- Average Exercise Price Balances at the end

$ 2.02

$ 1.98

Weighted- Average Grant Date Fair Value, Balances at the end

$ 1.21

$ 1.38

Weighted- Average Remaining Contractual Life (in years)

7 years 10 months 24 days

8 years 6 months 7 days

Aggregate Intrinsic value Balances at the end

$ 35,898

$ 6,550

Number of Options, Vested and Exercisable

^[1]

1,646,304

Weighted- Average Exercise Price Vested and Exercisable

$ 1.48

Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Remaining Contractual Term

7 years 1 month 17 days

Aggregate Intrinsic value Vested and Exercisable

$ 17,114

Number of Options, Vested and expected to vest

^[1]

3,642,958

Weighted- Average Exercise Price Vested and expected to vest (in dollars per share)

$ 2.02

Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Remaining Contractual Term

7 years 10 months 24 days

Aggregate Intrinsic value Vested and expected to vest

$ 35,898

[1]	Number of options and weighted average exercise price has been adjusted to reflect the exchange of Legacy Dragonfly’s stock options for New Dragonfly stock options at an exchange ratio of approximately 1.182 as a result of the merger. See Note 3 for further information.

SCHEDULE OF OPTION ACTIVITY AND RELATED INFORMATION (Details) (Parenthetical)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Share-Based Payment Arrangement [Abstract]
Stock option exchange ratio	1.182	1.182

SCHEDULE OF VALUATION ASSUMPTIONS OF OPTIONS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Share-Based Payment Arrangement [Abstract]
Weighted average fair value of options granted	$ 1.57	$ 2.05
Risk-free interest rate	2.71%	1.08%
Volatility	45.00%	52.60%
Expected life	5 years 8 months 4 days	6 years 7 days
Dividend yield	0.00%	0.00%

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY (Details) - Restricted Stock Units (RSUs) [Member] shares in Thousands, $ / shares in Thousands	12 Months Ended
	Dec. 31, 2022 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of shares , beginning balance
Weighted average fair market value , beginning balance \| $ / shares
Number of shares granted and unvested	180,000
Weighted average fair market value granted and unvested \| $ / shares	$ 14
Number of shares vested
Weighted average fair market value vested \| $ / shares
Number of shares forfeited and cancelled
Weighted average fair market value forfeited and cancelled \| $ / shares
Number of shares , ending balance	180,000
Weighted average fair market value , beginning balance \| $ / shares	$ 14
Number of shares ,vested
Weighted average fair market value,vested

STOCK-BASED COMPENSATION (Details Narrative) - USD ($)

1 Months Ended

12 Months Ended

Oct. 07, 2022

Aug. 12, 2019

Jul. 31, 2021

Dec. 31, 2022

Dec. 31, 2021

May 31, 2022

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Common stock reserved for issuance

108,549,014

40,200,160

Total compensation

$ 2,467,000

$ 734,000

Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant

^[1]

4,924,914

12,207

Cost of Sales [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Total compensation

$ 155,000

$ 252,000

Research and Development Expense [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Total compensation

149,000

95,000

Selling and Marketing Expense [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Total compensation

654,000

156,000

General and Administrative Expense [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Total compensation

$ 1,509,000

231,000

Restricted Stock Units (RSUs) [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Total compensation

$ 734,000

Restricted Stock Units

180,000

180,000,000

Restricted stock units, value

$ 2,520

Common Stock [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Issuance of shares

1,498,301

2019 Stock Incentive Plan [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Term of plan

10 years

Maximum number of common shares reserved for grants

3,000,000

2021 Stock Incentive Plan [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Term of plan

10 years

Maximum number of common shares reserved for grants

1,000,000

2,000,000

2022 Stock Incentive Plan [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Common stock reserved for issuance

2,785,950

2022 Stock Incentive Plan [Member] | Common Stock [Member]

Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]

Issuance of shares

2,464,400

1,500,000

Outstanding shares percentage

1.00%

[1]	Refer to Stock Incentive Plan amendment at Note 14

REDEEMABLE PREFERRED STOCK RIGHTS (Details Narrative) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) director $ / shares	Oct. 07, 2022
Recapitalization exchange ratio	1.182	1.182
Dividends declared \| $ / shares	$ 0
Director [Member] \| Common Stock [Member]
Number of votes per director	2
Series A Director [Member]
Number of directors elected by share holders	2
Common Stock Director A [Member]
Number of votes per director	3
Common Stock Director B [Member]
Number of votes per director	1
Series A Preferred Stock [Member]
Conversion price \| $ / shares	$ 0.20
Percentage of votes for mandatory conversion of stock	50.00%
Series A Preferred Stock [Member] \| Director [Member]
Number of directors elected by share holders	1
Common Stock [Member]
Stock price trigger for mandatory conversion of stock \| $ / shares	$ 1.00
Minimum gross proceeds for mandatory conversion of stock \| $	$ 25,000

SCHEDULE OF INFORMATION NEEDED TO COMPUTE BASIC AND DILUTED EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Basic (Loss) Earnings per common share:
Net (Loss) Income available to common shareholders	$ (39,571)	$ 4,338
Weighted average number of common shares-basic	38,565,307	35,579,137
(Loss) Earnings per share, basic	$ (1.03)	$ 0.12
Diluted (Loss) earnings per common share:
Dilutive effect related to stock options		2,163,200
Weighted average diluted shares outstanding	38,565,307	37,742,337
(Loss) Earnings per share, diluted	$ (1.03)	$ 0.11

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.

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SCHEDULE OF POTENTIAL SHARES OF COMMON STOCK EXCLUDED FROM DILUTED NET (LOSS) INCOME PER SHARE (Details) - shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Purchase an aggregate shares	20,531,372
Share-Based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Purchase an aggregate shares	3,642,958
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Purchase an aggregate shares	180,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Purchase an aggregate shares	16,708,414

SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ in Thousands		12 Months Ended
	May 05, 2023	Dec. 31, 2022	Dec. 31, 2021	Mar. 05, 2023
Subsequent Event [Line Items]
Aggregate net proceeds		$ 15,000
Subsequent Event [Member]
Subsequent Event [Line Items]
Loan amount				$ 100
Subsequent Event [Member] \| Purchase Agreement [Member]
Subsequent Event [Line Items]
Number of shares issued	98,500
Aggregate net proceeds	$ 671
Subsequent Event [Member] \| Board of Directors Chairman [Member]
Subsequent Event [Line Items]
Promissory note				$ 1,000