Dragonfly Energy Holdings Corp. (NASDAQ:DFLI), a Nevada-based energy storage solutions provider with a market capitalization of $22.39 million, has entered into a material definitive agreement amending its existing loan terms and issuing new equity securities, according to a recent SEC filing.
According to InvestingPro analysis, the company operates with a significant debt burden of $51.67 million and shows weak financial health metrics. The agreement, dated December 31, 2024, provides for the issuance of penny warrants and temporary adjustments to certain financial covenants.
The company, alongside its subsidiaries Dragonfly Energy Corp. and Battle Born Battery Products, LLC, has agreed to a limited waiver and fourth amendment to its Term Loan, Guarantee and Security Agreement. The amendment waives the compliance with the Senior Leverage Ratio and Fixed Charge Coverage Ratio for the quarter ended December 31, 2024. InvestingPro data reveals the company’s current ratio of 0.8, indicating potential challenges in meeting short-term obligations.
In connection with the waiver, Dragonfly Energy will issue penny warrants to purchase up to 350,000 shares of its common stock at an exercise price of $0.01 per share. These warrants will expire ten years from the date of issuance and are contingent upon obtaining shareholder approval.
Dragonfly Energy has committed to seeking shareholder approval for the issuance of up to 1,400,000 shares related to penny warrants issued to lenders, including those associated with the recent amendment. Further, the company will issue additional penny warrants based on a predefined formula upon certain triggering events.
The amendment also includes a temporary suspension of the lenders’ rights to receive additional warrant shares during a designated waiver period, which extends through the end of 2025 or until shareholder approval is received. Additionally, the amendment modifies the terms for interest payment due on January 1, 2025, and reduces the liquidity requirement to $3.5 million as of December 31, 2024.
To ensure shareholder support for the issuance of common stock underlying the penny warrants, Dragonfly Energy has entered into a support agreement with certain shareholders holding more than 20% of the voting stock.
The penny warrants, as well as the common stock underlying them, have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption under Section 4(a)(2) of the Act.
This strategic move by Dragonfly Energy, as outlined in the SEC filing, is aimed at adjusting the financial frameworks to better align with the company’s current operational and financial status. Despite recent challenges, the stock has shown a positive YTD return of 15.47%. InvestingPro subscribers have access to 15+ additional key insights and a comprehensive Pro Research Report that provides deep-dive analysis of the company’s financial health and market position.
In other recent news, Dragonfly Energy Holdings Corp. faced potential delisting from the Nasdaq due to failure to maintain the minimum Market Value of Listed Securities (MVLS) of $35 million. The company was granted a 180-day compliance period to regain compliance. However, Dragonfly Energy later regained compliance with Nasdaq’s minimum bid price requirement, effectively resolving the issue. In a strategic move, the company executed a one-for-nine reverse stock split of its issued and outstanding common stock.
In the financial realm, Dragonfly Energy reported a decrease in net sales to $12.7 million from $15.9 million in the previous year during its Third Quarter 2024 Earnings Call. Despite this, the company managed to reduce its net loss and increase cash reserves.
Investment dealer Canaccord Genuity adjusted its price target on shares of Dragonfly Energy, reducing it to $1.25 from $1.50 due to concerns over recovery pace in the recreational vehicle market and slower customer uptake in the trucking sector. Despite these concerns, Canaccord Genuity remains optimistic about Dragonfly Energy’s potential and emphasizes the need for a strategic capital infusion to accelerate the company’s plans.
In addition to these developments, Dragonfly Energy announced its entry into the heavy-duty trucking sector and plans to launch the Dragonfly Intelligence system in the fourth quarter of 2024.
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