What changed in this filing

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Item 1. Financial Statements

2024-05-15 compared with 2023-11-14 · 689 added, 797 removed, 362 unchanged (80% of the section changed)

3 unchanged sentences

thousands, except share and per share data)

September 30, 2023

December 31, 2022

September 30, 2023

December 31, 2022

Current Assets

Accounts receivable, net of allowance for credit losses

Cash and cash

Accounts receivable, net

of allowance for credit losses

Prepaid expenses

1 unchanged sentence

Prepaid income tax

Other current assets

Total Current Assets

current assets

Current Assets

Property and Equipment

2 unchanged sentences

Leasehold improvements

Less accumulated depreciation and amortization

Property and Equipment, Net

Operating lease right of use asset

accumulated depreciation and amortization

Property and Equipment,

Operating lease right

of use asset, net

Current Liabilities

Accounts payable

Accrued payroll and other liabilities

Accrued payroll and other

Accrued tariffs

Customer deposits

Uncertain tax position liability

Notes payable, current portion, net of deferred financing fees

Operating lease liability, current portion

Financing lease liability, current portion

Total Current Liabilities

Uncertain tax position

Notes payable, current

portion, net of debt issuance costs

Operating lease liability,

current portion

lease liability, current portion

Current Liabilities

Long-Term Liabilities

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Accrued expenses-long term

Operating lease liability, net of current portion

Financing lease liability, net of current portion

Total Long-Term Liabilities

Total Liabilities

Commitments and Contingencies (See Note 5)

Common stock, 170,000,000 shares at $ 0.0001 par value, authorized, 58,880,712 and 43,272,728 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Preferred stock, 5,000,000 shares at $ 0.0001 par value, authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Operating lease liability,

net of current portion

lease liability, net of current portion

Long-Term Liabilities

Commitments and Contingencies

Stockholders’

Preferred stock, 5,000,000

shares at $ 0.0001 par value, authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023,

Common stock, 250,000,000

shares at $ 0.0001 par value, authorized, 60,260,282 shares issued and outstanding as of March 31, 2024 and December 31, 2023,

Additional paid in capital

Retained deficit

Total Liabilities and Shareholders’ Equity

accompanying notes are an integral part of these condensed and consolidated financial statements.

Accumulated deficit

Stockholders’ Equity

Liabilities and Stockholders’ Equity

accompanying notes are an integral part of the condensed consolidated financial statements.

Energy Holdings Corp.

Condensed Interim Consolidated Statements of Operations

Condensed Consolidated Statements of Operations

the Three Months Ended March 31, 2024 and 2023

thousands, except share and per share data)

For The Three Months Ended September 30,

For The Nine Months Ended September 30,

The Three Months Ended

Cost of Goods Sold

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General and administrative

Selling and marketing

Total Operating Expenses

Loss From Operations

Other (Expense) Income

Interest expense

Change in fair market value of warrant liability

Total Other (Expense) Income

Loss Before Taxes

Income Tax (Benefit) Expense

Loss Per Share- Basic

Loss Per Share- Diluted

and marketing

Operating Expenses

From Operations

Other Income (Expense)

Interest expense, net

Other expense

in fair market value of warrant liability

Other Income (Expense)

(Loss) Income Before Taxes

Tax (Benefit) Expense

(Loss) Income

Net (loss) income Per

Share- Diluted

Weighted Average Number of Shares - Basic

Weighted Average Number of Shares - Diluted

accompanying notes are an integral part of these condensed and consolidated financial statements.

accompanying notes are an integral part of the condensed consolidated financial statements.

Energy Holdings Corp.

Condensed Consolidated Statements of Shareholders’ Equity

THE PERIOD ENDED September 30, 2023 AND 2022

Condensed Consolidated Statements of STockholders’ Equity

the Three Months Ended March 31, 2024 and 2023

thousands, except share data)

Preferred Stock

Balance -January 1, 2022

Retroactive application of recapitalization

( 10,000,000 )

Adjusted balance, beginning of period

Stock compensation expense

Exercise of stock options

Balance – March 31, 2022

Stock compensation expense

Exercise of stock options

Balance – June 30, 2022

Stock compensation expense

Stock purchase agreement

Exercise of stock options

Balance – September 30, 2022

Balance - January 1, 2023

Common stock issued in public offering (ATM), net of costs

Paid-In Capital

-January 1, 2023

Common stock issued in public offering (ATM),

Exercise of stock options

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Balance - March 31,

Common stock issued in public offering, net of costs

Common stock issued in public offering (ATM), net of costs

Exercise of stock options

Cashless exercise of liability classified warrants

Shares issued for vested restricted stock units

Stock compensation expense

Balance - June 30, 2023

Balance - January 1,

Net income (loss)

Exercise of stock options

Cash exercise of liability classified warrants

Stock compensation expense

Balance – September 30, 2023

accompanying notes are an integral part of these condensed and consolidated financial statements.

Balance - March 31,

accompanying notes are an integral part of the condensed consolidated financial statements.

Energy Holdings Corp.

Condensed Consolidated Statements of Cash Flows

the Nine Months Ended September 30, 2023 and 2022

September 30, 2023

September 30, 2022

the Three Months Ended March 31, 2024 and 2023

Cash flows from Operating Activities

Adjustments to Reconcile Net Loss to Net Cash

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities

Used in Operating Activities

Adjustments to Reconcile Net (Loss) Income to Net Cash Used in Operating Activities

Stock based compensation

Amortization of debt discount

Change in fair market value of warrant liability

Deferred tax liability

Non-cash interest expense (Paid-in Kind)

Provision for doubtful accounts

Change in fair market value

of warrant liability

Non-cash interest expense

(paid-in kind)

Provision for credit losses

Depreciation and amortization

Loss on disposal of property and equipment

Amortization of right of use of assets

Loss on disposal of property

and equipment

Changes in Assets and Liabilities

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Income taxes payable

Accounts payable and accrued expenses

Customer deposits

Total Adjustments

Net Cash Used in Operating Activities

Accounts payable and accrued

Accrued tariffs

Cash Used in Operating Activities

Cash Flows From Investing Activities

Purchase of property and equipment

Net Cash Used in Investing Activities

accompanying notes are an integral part of these condensed and consolidated financial statements.

of property and equipment

Cash Used in Investing Activities

accompanying notes are an integral part of the condensed consolidated financial statements.

Energy Holdings Corp.

Condensed Consolidated Statements of Cash Flows (continued)

the NINE Months Ended September 30, 2023 and 2022

the Three Months Ended March 31, 2024 and 2023

(continued from previous page)

September 30, 2023

September 30, 2022

Cash Flows From Financing Activities

Proceeds from public offering, net

Proceeds from public offering (ATM), net

Proceeds from public offering,

Proceeds from note payable, related party

Repayment of note payable, related party

Repayment of note payable

Proceeds from exercise of public warrants

Proceeds from exercise of options

Proceeds from stock purchase agreement

Proceeds from exercise of Investor Warrants

Net Cash Provided by Financing Activities

Net Decrease in Cash

Beginning cash

Net Cash Provided by

Financing Activities

Net Decrease in Cash and cash equivalents

Cash and cash

equivalents - beginning of period

Cash and cash

equivalents - end of period

Supplemental Disclosures of Cash Flow Information:

Cash paid for income taxes

Cash paid for income

Cash paid for interest

Supplemental Non-Cash Items

Purchases of property and equipment, not yet paid

Recognition of warrant liability

Non-cash impact of cash exercise of liability classified warrants

Cashless exercise of liability classified warrants

accompanying notes are an integral part of these condensed and consolidated financial statements.

Purchases of property

and equipment, not yet paid

Recognition of right

of use asset obtained in exchange for operating lease liability

Cashless exercise of

liability classified warrants

accompanying notes are an integral part of the condensed consolidated financial statements.

ENERGY HOLDINGS CORP.

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of applications.

The Company sells to Original Equipment Manufacturers (“OEMs”) 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.

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.

New Dragonfly was the legal acquirer of Legacy Dragonfly in the merger, Legacy Dragonfly was 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.”

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 Quarterly 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;

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.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN

of consolidation

accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting

accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with 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.

All significant intercompany transactions and balances are eliminated in

consolidation.

GAAP”) and present the consolidated financial statements

of the Company and its wholly owned subsidiary.

All significant intercompany transactions and balances are eliminated in consolidation.

of presentation

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for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”)

set forth in Article 8 of Regulation S X.

set forth in Article 8 of Regulation SX.

Accordingly, they do not include all of the information and footnotes required by U.S.

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These condensed consolidated financial

statements should be read along with the 10-K filed with the SEC on April 17, 2023 (as amended May 1, 2023, the “Annual Report”)

statements should be read along with the 10-K filed with the SEC on April 16, 2024 (as amended April 29, 2024, the “Annual Report”)

of the Company for the annual period ended December 31, 2023.

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thousands, except share and per share data)

accompanying condensed 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 condensed consolidated financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

the nine months ended September 30, 2023, and 2022, the Company incurred losses from operations and had negative cash flow from operations.

As of September 30, 2023, the Company had $ 13,235 in cash and working capital of $ 22,000 .

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.

2 – Summary of Significant Accounting Policies (continued)

accompanying condensed 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 condensed consolidated financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

the three months ended March 31, 2024 and 2023, the Company incurred losses from operations and had negative cash flow from operations.

As of March 31, 2024, the Company had $ 8,501 in cash and cash equivalents and working capital of $ 4,168 .

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.

connection with the Company’s senior secured term loan facility in an aggregate principal amount of $ 75,000 (the “Term Loan”),

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liquidity, a springing fixed charge coverage ratio, and maximum capital expenditures (See Note 6).

On March 29, 2023 and September 29,

2023, the Company obtained waivers 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 quarters ended March

31, 2023 and September 30, 2023.

It is probable that the Company will fail to meet these covenants within the next twelve months.

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.

addition, the Company may need to raise additional debt and/or equity financings to fund our operations, strategic plans, and meet its

On March 31, 2024, the Company obtained a waiver from the

Term Loan administrative agent and lenders of its failures to satisfy the liquidity requirement under the Term Loan for the quarter ended

March 31, 2024.

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.

addition, the Company may need to raise additional debt and/or equity financings to fund its operations, strategic plans, and meet its

financial covenants.

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it will be able to raise additional equity, contain expenses, or increase revenue, and comply with the financial covenants under the

adopted accounting standards :

June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 or financial statement disclosures.

issued accounting pronouncements :

There were no recently

issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07,

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 requires, among

other updates, enhanced disclosures about significant segment expenses that are regularly provided to the CODM, as well as the aggregate

amount of other segment items included in the reported measure of segment profit or loss.

ASU 2023-07 is effective for fiscal years beginning

after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption.

Early adoption is permitted.

The Company is evaluating the impact of this guidance on its consolidated financial statements and related

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information.

ASU 2023-09 is

effective for fiscal years beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis.

Early adoption

is permitted.

The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

ENERGY HOLDINGS CORP.

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2 – Summary of Significant Accounting Policies (continued)

and Cash Equivalents

Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

31, 2024 and December 31, 2023, the Company held no Cash Equivalents.

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.

Company’s trade receivables are recorded when billed and represent claims against third parties that will be settled in cash.

1 unchanged sentence

Trade accounts receivables are recorded gross and are net of any applicable allowance.

The Company has an allowance for doubtful accounts

as of September 30, 2023 and December 31, 2022 of $ 178 and $ 90 , respectively.

The allowance for credit losses as of March 31,

2024 and December 31, 2023 were not material.

(Note 4), which consist of raw materials and finished goods, are stated at the lower of cost (first in, first out) or net realizable

2 unchanged sentences

Based on historical and

projected sales volumes and anticipated selling prices, we establish 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 September 30, 2023 and December 31, 2022, no such reserves were necessary.

and Equipment

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.

expense for the nine months ended September 30, 2023 and 2022 was $ 909 and $ 648 , respectively.

Depreciation expense for the three months

ended September 30, 2023 and 2022 was $ 316 and $ 259 , respectively.

The various classes of property and equipment and estimated useful

lives are as follows:

OF VARIOUS CLASSES OF PROPERTY AND EQUIPMENT AND ESTIMATED USEFUL LIVES

furniture and equipment

and equipment

Term of Lease

preparation of financial statements, in conformity with U.S.

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.

Company applies relevant accounting guidance for warrants to purchase the Company’s common stock, par value $ 0.0001 per share (the

“Common 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 Accounting Standards Codification (“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.

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.

The inventory reserve as of March 31, 2024 and December 31, 2023 is immaterial.

preparation of financial statements in conformity with U.S 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

The Company utilizes the use of estimates in its calculations for the reserve for obsolete or slow moving inventory,

right of use assets, warrant liability, equity based compensation, and income taxes.

ENERGY HOLDINGS CORP.

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liabilities as sales after the revenue criteria are met.

As of September 30, 2023 and December 31, 2022, the contract liability

related to the Company’s customer deposits approximated $ 217

As of March 31, 2024 and December 31, 2023, the contract liability related

to the Company’s customer deposits are $ 231

respectively.

The Company recognized $ 230

of the contract liability pertaining to the year ended December 31, 2022 during the nine months ended September 30, 2023.

contract liability balance of $ 434

as of January 1, 2022 was recognized as revenue during the nine months ended September 30, 2022.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

2 – Summary of Significant Accounting Policies (continued)

Recognition (Continued)

Company recognized $ 134

of the contract liability as of December 31, 2023 during the three months ended March 31, 2024.

recognized $ 211

of the contract liability as of December 31, 2022 during the three months ended March 31, 2023.

Disaggregation

following table presents our disaggregated revenues by distribution channel:

following table present our disaggregated revenues by distribution channel:

OF DISAGGREGATED REVENUES BY DISTRIBUTION CHANNEL

For The Three Months Ended September 30,

For The Nine Months Ended September 30,

For the Three Months Ended

Direct to Customer

Original equipment manufacture

During the quarter ended September 30, 2023, The Company deemed it more

appropriate to classify Retail and Distributor revenues as a single line item referred to as direct-to-consumer revenue.

has combined previously reported retail and distributor amounts to direct-to-consumer revenue to conform with current year presentation.

The consolidation into direct-to-consumer revenue is motivated by The Company’s strategic perspective on its operations and better

represents how it evaluates their sales channels.

and handling fees paid by customers are recorded within net sales, with the related expenses recorded in cost of sales.

handling costs associated with outbound freight are included in sales and marketing expenses.

Shipping and handling costs associated

with outbound freight totaled $ 2,872 and $ 4,042 for the nine months ended September 30, 2023 and 2022, respectively.

Shipping and handling

costs associated with outbound freight totaled $ 913 and $ 1,508 for the three months ended September 30, 2023 and 2022, respectively.

equipment manufacturer

the year ended December 31, 2023, the Company deemed it more appropriate to classify Retail and Distributor revenues as a single line

item referred to as direct-to-consumer revenue.

The Company has combined previously reported retail and distributor amounts to direct-to-consumer

revenue to conform with current year presentation.

The consolidation into direct-to-consumer revenue is motivated by The Company’s

strategic perspective on its operations and better represents how it evaluates their sales channels.

Company offers assurance type warranties from 5 to 10 years on its products.

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The Company estimates, based upon a review

of historical warranty claim experience, the costs that may be incurred under our warranties and record a liability in the amount of

of historical warranty claim experience, the costs that may be incurred under its warranties and record a liability in the amount of

such estimate at the time a product is sold.

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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 September 30, 2023 and December 31,

The Company periodically assesses 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 at March 31, 2024 and December

31, 2023 to be $ 414 and $ 307 , respectively.

OF WARRANTY OBLIGATION

Beginning warranty obligation

Provision of warranty expense

Settlement of warranty

Ending warranty obligation

Concentrations

As of March 31, 2024, receivables from Customer A, Customer B and Customer C comprised approximately 22 %, 14 % and 12 %, respectively, of accounts receivable.

As of December 31, 2023, receivables

from Customer D and Customer E comprised approximately 28 % and 10 %, respectively, of accounts receivable.

the three months ended March 31, 2024, sales from Customer

A accounted for approximately 16 % of

the Company’s total revenue.

For the three months ended March 31, 2023, sales from Customer

B accounted for approximately 26 % of

the Company’s total revenue.

of March 31, 2024, payables to Vendor A comprised approximately 60 %

of accounts payables.

As of December 31, 2023, payables to Vendor A comprised approximately 65 %

of accounts payables.

For the three months ended March 31, 2024, Vendor

A accounted for approximately 12 %

of the Company’s total purchases.

For the three months ended March 31, 2023, Vendor B and Vendor C accounted for approximately 38 % and 10 %, respectively,

of the Company’s total purchases.

ENERGY HOLDINGS CORP.

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2 – Summary of Significant Accounting Policies (continued)

Concentrations

from two customers comprised approximately 38 % and 15 %, respectively, of accounts receivable as of September 30, 2023.

Receivables from

three customers comprised approximately 18 %, 10 % and 10 %, respectively, of accounts receivable as of December 31, 2022.

other significant accounts receivable concentration.

from one customer comprised approximately 19 % of revenue for the nine months ended September 30, 2023.

One customer accounted for approximately

20 % of the Company’s total revenue for the nine months ended September 30, 2022.

Sales from one customer comprised approximately

11 % of revenue for the three months ended September 30, 2023.

One customer accounted for approximately 34 % of the Company’s total

revenue for the three months ended September 30, 2022.

to one vendor comprised approximately 68 % of accounts payable as of September 30, 2023.

Payables to one vendor comprised approximately

61 % of accounts payables as of December 31, 2022.

the nine months ended September 30, 2023, one vendor accounted for approximately 16 % of the Company’s total purchases.

nine months ended September 30, 2022, one vendor accounted for approximately 24 % of the Company’s total purchases.

For the three

months ended September 30, 2023, three vendors accounted for approximately 14 %, 11 %, and 10 %, respectively, of the Company’s total

For the three months ended September 30, 2022, three vendors accounted for approximately 20 %, 10 %, and 10 %, respectively,

of the Company’s total purchases.

Company expenses advertising costs as they are incurred and are included in selling and marketing expenses.

Advertising expenses amounted

to $ 2,020 and $ 1,777 for the nine months ended September 30, 2023 and 2022, respectively.

Advertising expenses amounted to $ 750 and $ 515

for the three months ended September 30, 2023 and 2022, respectively.

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 option s (Note

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.

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.

requires the recognition of compensation expense for costs related to all stock based payments, including stock options (Note 11).

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.

the appropriate fair value model and related assumptions requires judgment, including estimating stock price volatility, expected dividend

22 unchanged sentences

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.

has a liability of $ 128 as of September 30, 2023, and December 31, 2022 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.

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 $ 91 as of March 31,

2024, and December 31, 2023, respectively, of uncertain tax positions.

Company’s accounting policy is to include penalties and interest related to income taxes if any, in selling, general and administrative

The Company regularly assesses 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.

(Loss) Income per Common Share

net (loss) income per share is calculated by dividing net (loss) earnings by the weighted-average number of common shares outstanding

during the period.

Diluted net (loss) income 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.

weighted-average number of common shares included in the computation of diluted net (loss) income gives effect to all potentially dilutive

common equivalent shares, including outstanding stock options and warrants.

stock equivalent shares are excluded from the computation of diluted net (loss) income per share if their effect is antidilutive.

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.

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 FASB 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.

segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation

1 unchanged sentence

date, the Company has viewed its operations and manages its business as one operating segment.

Reclassifications

prior period amounts have been reclassified to conform to the current period presentation in the condensed consolidated financial statements

and these accompanying notes.

The reclassifications did not have a material impact on the Company’s unaudited condensed consolidated

financial statements and related disclosures.

The impact on any prior period disclosures was immaterial.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

3 - FAIR VALUE MEASUREMENTS

11 unchanged sentences

1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

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.

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.

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.

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.

assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

10 unchanged sentences

following table presents assets and liabilities that were measured at fair value in the Condensed Consolidated Balance Sheets on a recurring

basis as of September 30, 2023:

OF FAIR VALUE, ASSETS AND LIABILITIES

As of September 30, 2023

basis as of March 31, 2024:

OF FAIR VALUE OF ASSETS AND LIABILITIES

of March 31, 2024

Warrant liability- Term Loan

2 unchanged sentences

Total liabilities

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:

As of December 31, 2022

following table presents assets and liabilities that were measured at fair value in the Condensed Consolidated Balance Sheets on a recurring

basis as of December 31, 2023:

of December 31, 2023

Warrant liability- Term Loan

Warrant liability- June Public Offering

Warrant liability- Private placement warrants

Total liabilities

carrying amounts of accounts receivable and accounts payable are considered Level 1 and approximate fair value as of September 30, 2023

and December 31, 2022 because of the relatively short maturity of these instruments.

carrying value of the Term Loan as of September 30, 2023 and December 31, 2022 approximates fair value as the interest rate does not

differ significantly from the current market rates available to the Company for similar debt and is considered Level 2.

carrying amounts of accounts receivable and accounts payable are considered level 1 and approximate fair value as of March 31, 2024 and

December 31, 2023 because of the relatively short maturity of these instruments.

carrying value of the term loan as of March 31, 2024 and December 31, 2023 approximates fair value as the interest rate does not differ

significantly from the current market rates available to the Company for similar debt and is considered level 2.

3 Roll forward

value measurements categorized within Level 3 are sensitive to changes in assumptions or methodology used to determine fair value, and

such changes could result in a significant increase or decrease in the fair value.

ENERGY HOLDINGS CORP.

1 unchanged sentence

thousands, except share and per share data)

changes for Level 3 items measured at fair value on recurring basis using significant unobservable inputs are as follows:

OF CHANGES FOR LEVEL 3 ITEMS MEASURED AT FAIR VALUE ON RECURRING BASIS USING SIGNIFICANT UNOBSERVABLE INPUTS

Liability - Term Loan

liability- June Public Offering

Fair value as of January 1, 2024

Warrant exercises

in fair value, gain included in net loss (1)

Fair value as of March

Liability - Term Loan

Fair value as of January 1, 2023

Warrant exercises

in fair value, gain included in net loss (1)

Fair value as of March

(1) Changes in fair

value of warrant liabilities are disclosed separately in the Condensed Consolidated Statements of Operations

4 - INVENTORY

consists of the following:

September 30, 2023

December 31, 2022

Finished goods

Total inventory

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

5 - COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

financial condition.

Company has leases related to the main office, warehouse space, research and development lab, and engineering office, all located in

Reno, Nevada.

Company has leases related to the main office, warehouse space, research and development lab, engineering office, and sales office, all

located in Reno, Nevada.

The leases require annual escalating monthly payments ranging from $ 118 to $ 361 .

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 completed in early 2024.

As of September 30, 2023, the lease has not commenced as the Company does not have control

over the asset.

On February 2, 2022, the Company

entered into a 124-month lease agreement in Reno, Nevada.

The lease calls for monthly base rent of $ 230 , $ 23 of fixed operating expense

costs, and estimated monthly property taxes of $ 21 .

The monthly base rent and fixed operating expense costs are subject to escalation

of 3 % and 2.4 % , respectively, on an annual basis.

A certificate of substantial completion has been issued and the lease commencement

date was March 25, 2024.

The monthly rent under the lease will begin July 24, 2024.

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

SCHEDULE OF TABLE REPRESENTING THE BREAKOUT OF THE OPERATING LEASES

September 30, 2023

December 31, 2022

Operating lease right-of-use assets

SCHEDULE OF BREAKOUT OF OPERATING LEASES

lease right-of-use assets

Short-term operating lease liabilities

Long-term operating lease liabilities

Total operating lease liabilities

Long-term operating

lease liabilities

Total operating lease

Weighted average remaining lease term

Weighted average discount rate

used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based

on comparable market data.

Energy Holdings Corp.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

5 - Commitments and Contingencies (Continued)

Leases (Continued)

September 30, 2023, the future minimum lease payments under these operating leases are as follows:

SCHEDULE OF THE FUTURE MINIMUM LEASE PAYMENTS UNDER THE OPERATING LEASES

used in determining our incremental borrowing rate include the Company’s implied credit rating and an estimate of secured borrowing

rates based on comparable market data.

March 31, 2024, the future minimum lease payments under these operating leases are as follows:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES

Fiscal Years Ending

3 unchanged sentences

December 31, 2027

December 31, 2028

Total lease payments

Less imputed interest

Total operating lease liabilities

scheduled payments for the remaining three-month period ending December 31, 2023.

Total operating lease

(1) Represents scheduled

payments for the remaining nine-month period ending December 31, 2024.

OF LEASE COST

For The Three Months Ended September 30,

For The Nine Months Ended September 30,

The Three Months Ended March 31,

Classification

8 unchanged sentences

Total lease cost

the nine months ended September 30, 2023, the Company entered into a finance lease agreement for equipment to support the Company’s

Payments under the finance lease agreement are fixed for a term of 3

The leased assets are recognized in property

plant & equipment.

During the nine months ended September 30, 2022, the Company entered into a finance lease agreement for equipment

to support the Company’s operations.

Payments under the finance lease agreement are fixed for a term of 5 years.

The leased assets

are recognized in property plant & equipment.

following table presents the breakout of the finance leases as of:

OF TABLE REPRESENTING THE BREAKOUT OF THE FINANCE LEASES

September 30, 2023

December 31, 2022

Finance lease right-of-use assets

lease costs included in the schedule above are fixed.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

5 – Commitments and Contingencies (continued)

Company entered into finance lease agreements for equipment to support the Company’s operations.

Payments under the finance lease

agreements are fixed for a term of 3 - 5 years.

The leased assets are recognized in property plant & equipment.

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

OF BREAKOUT OF FINANCE LEASES

lease right-of-use assets

Short-term finance lease liabilities

Long-term finance lease liabilities

Total finance lease liabilities

Long-term finance lease

Total finance lease

Weighted average remaining lease term

2 unchanged sentences

on comparable market data.

September 30, 2023, the future minimum lease payments under the finance lease are as follows:

SCHEDULE OF THE FUTURE MINIMUM LEASE PAYMENTS UNDER THE FINANCE LEASES

March 31, 2024, the future minimum lease payments under these operating leases are as follows:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER FINANCE LEASES

Fiscal Years Ending

3 unchanged sentences

December 31, 2027

Total lease payments

Less imputed interest

Total finance lease liabilities

scheduled payments for the remaining three-month period ending December 31, 2023.

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.

Total operating lease

(1) Represents scheduled

payments for the remaining nine-month period ending December 31, 2024.

Contingencies

4 unchanged sentences

thousands, except share and per share data)

Trust Indenture

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 trust and

debt documents also require a Lender Collateral Residual Value Insurance Policy (the “Insurance Policy”, with UMB Bank as

named insured for $ 45,000 ), and a placement agent, which is Tribe Capital Markets, LLC.

connection with the merger on October 7, 2022 (the “Closing Date”), the Company entered into a Term Loan, Guarantee and Security

Agreement (see “ 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.

During the three months ended

September 30, 2022, a total of $ 619 of interest expense was incurred under the debt.

Amortization of the debt issuance costs amounted

to $ 586 during the three months ended September 30, 2022.

During the nine months ended September 30, 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 nine months ended September

Energy Holdings Corp.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

6 - Debt (continued)

6 - LONG TERM DEBT

Loan Agreement

October 7, 2022, in connection with the merger, CNTQ, Legacy Dragonfly and CCM Investments 5 LLC, an affiliate of CCM 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 Agreement setting forth the terms of

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.

October 7, 2022 (the “Closing Date”), in connection with the merger, CNTQ, Legacy Dragonfly and CCM Investments 5 LLC, an

affiliate of CCM LLC (“CCM 5”, and in connection with the Term Loan, the “Chardan Lender”), and EICF Agent LLC

(“EIP”) entered into the Term Loan, Guarantee and Security Agreement (the “Term Loan Agreement”) setting forth

the terms of 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.

to the terms of the Term Loan Agreement, the Term Loan was advanced in one tranche on the Closing Date.

1 unchanged sentence

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 merger.

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.

of the foregoing cases, adjusted SOFR will be no less than 1 %.

support the merger and related transactions 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 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 % .

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 ending

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 Term Loan Agreement.

Pursuant to the Term Loan Agreement, the Company partially prepaid the Term

Loan in the amount of $ 5,275 as a result of the June 2023 Offering (as defined herein).

The Company is required to prepay the Term Loan based on excess cash

flow, as defined in the agreement, beginning with the financial statements for the year ended December 31, 2023.

the year ended December 31, 2023, the Company prepaid the first four installments of the Term Loan which amounted to $ 5,275 and pushed

back the first principal payment to October 2025.

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 9 for further

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

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

the three months ended March 31, 2024 and 2023, a total of $ 3,701 and $ 3,496 , respectively, of interest expense was incurred under the

Amortization of the debt issuance costs amounted to $ 894 and $ 219 , respectively, during the three months ended March 31, 2024 and

carrying balance of $ 21,837 on March 31, 2024 consisted of $ 69,725 in principal, plus $ 7,389 PIK interest, less $ 55,277 in unamortized

debt discount related to the debt issuance costs.

The carrying balance of $ 19,683 on December 31, 2023 consisted of $ 69,725 in principal,

plus $ 6,130 PIK interest, less $ 56,172 in unamortized debt discount related to the debt issuance costs.

ENERGY HOLDINGS CORP.

1 unchanged sentence

thousands, except share and per share data)

6 - Debt (continued)

6 - Long Term Debt (continued)

Loan Agreement (continued)

the three and nine months ended September 30, 2023, a total of $ 3,589 and $ 10,736 , respectively, of interest expense was incurred under

Amortization of the debt issuance costs amounted to $ 375 and $ 995 , respectively, during the three and nine months ended September

carrying balance of $ 18,700 on September 30, 2023 consisted of $ 69,725 in principal, plus $ 4,930 Paid-in-Kind (“PIK”) interest,

less $ 55,955 in unamortized debt discount related to the debt issuance costs.

Senior Leverage Ratio

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 earnings before interest, tax and amortization

(“EBITDA”) for the trailing twelve (12) fiscal month period most recently ended.

Starting with the fiscal quarter ending

December 31, 2023, (or through fiscal quarter ended September 30, 2023, only if liquidity, as defined, 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:

OF LEVERAGE RATIO

Test Period Ending

Leverage Ratio

June 30, 2023 - September 30, 2023

December 31, 2023 - March 31, 2024

June 30, 2024 - September 30, 2024

December 31, 2024 - March 31, 2025

June 30, 2025 and thereafter

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).

Charge Coverage Ratio

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 ended 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 to 1.00.

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.

Company was in compliance with its covenants as of June 30, 2023 and December 31, 2022.

On March 29, 2023 and September 29, 2023, the

Company obtained waivers 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 quarters ended March

31, 2023 and September 30, 2023, respectively.

As a result of the uncertainty of maintaining compliance with financial covenants the

Company has continued to classify the entire Term Loan balance within current liabilities on the balance sheet.

Energy Holdings Corp.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

6 – Debt (continued)

Debt Maturities

September 30, 2023, the future debt maturities are as follows:

OF FUTURE DEBT MATURITIES

For Year Ending December 31,

Estimated interest paid-in-kind

Unamortized debt issuance costs, noncurrent

Company is subject to restrictive financial covenants pertaining to Maximum Senior Leverage Ratio, Liquidity, Fixed Charge Coverage Ratio,

and Capital Expenditures as defined in the Term Loan Agreement.

As of March 31, 2024, the Company was not in compliance with our financial

covenants pertaining to the fixed charge coverage ratio, liquidity, and the maximum senior leverage ratio.

On March 31, 2024, the Company

received a waiver from its Administrative Agent and Term Loan Lenders in regards to its compliance with the liquidity requirement under

the Term Loan as of the last day of the quarter ended March 31, 2024.

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.

Because of this, the entire

debt is classified as current instead of long-term debt.

March 31, 2024, the future debt maturities are as follows:

SCHEDULE OF FUTURE DEBT MATURITIES

For Year Ended December 31,

Estimated interest

debt issuance costs

Total carrying amount

Current portion of debt

Current portion

Total long-term debt

scheduled payments for the remaining three-month period ending December 31, 2023.

7 - ASSET PURCHASE AGREEMENT

Production, Inc

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 Productions as set forth in the APA for a purchase price of $ 197 which approximated fair market value.

Jones Company, LLC

April 2022, the Company entered into an asset purchase agreement (the “April 2022 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 up to $ 700 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.

concluded the purchase price to be $ 444 and was allocated in its entirety to inventory.

to the April 2022 Asset Purchase Agreement, if, within twenty-four months of the April 2022 Asset Purchase 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 would be obligated to pay Messrs.

Thomason and 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 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.

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.

Also as a result, the Company recorded an accrual related to the Earn Out in the amount of $ 2,000

and $ 782 as of September 30, 2023 and December 31, 2022, respectively.

The sales goals under the April 2022 Asset Purchase Agreement

were achieved during the quarter ended September 30, 2023.

April 2022, the Company entered into an Asset Purchase Agreement with William Thomason, Richard Jones, and Thomason Jones Company, LLC

whereby the Company acquired inventory and intellectual property assets for a price not to exceed $ 700 cash plus contingent payments

of $ 1,000 each to William Thomason and Richard Jones (the “Earn Out”).

The transaction was determined to be a business combination

under the guidance in FASB ASC 805:

Business Combinations.

The Company followed the guidance under ASC 805-10-55 and determined the contingent

consideration to be separate from the business combination and the earn out to be recognized as contingent compensation to Mr.

Jones as the contingency became probable of being met.

The Company concluded the purchase price to be $ 444 and was allocated

in its entirety to inventory.

to the terms of the agreement dated April 2022, Dragonfly Energy Corp.

agreed to a contingent compensation arrangement with Mr.

According to this agreement, if Dragonfly Energy Corp.

realizes $ 3,000 in gross sales from products sold under the Wakespeed

brand or which incorporate any portion of the Purchased Intellectual Property (IP) within twenty-four months of the acquisition, the

Company is obligated to pay each of Thomason and Jones $ 1,000 .

The Company may satisfy this obligation in cash or by issuing common stock

at its discretion.

Company has determined that this arrangement constitutes compensation for post-acquisition services.

Consequently, the Company has recognized

this contingent consideration as a compensation expense, measured at its fair value at the acquisition date.

The fair value was determined

using a probability weighted expected outcome approach, considering the likelihood of reaching the gross sales target.

of December 31, 2023, the Company has recognized $ 2,000 of compensation expense in connection with this arrangement.

This expense is

reflected in the statement of operations under Sales and marketing expense.

The total amount has been recognized as compensation expense

as of December 31, 2023, since it was deemed earned and no further service performance was required.

ENERGY HOLDINGS CORP.

2 unchanged sentences

8 - RELATED PARTY

Company loaned its former 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.

October 25, 2022, the Company entered into a separation and release of claims agreement with its former Chief Operating Officer (“COO”).

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

2 unchanged sentences

The COO shall have 12 months from the termination date to exercise outstanding options.

February 2023, the Company entered into an agreement with its COO in which the COO waived their rights to a transaction bonus resulting

from the merger transaction (Note 1) in lieu of a Company van.

The Company accounted for the cost of the van as an employee bonus, resulting

in $ 116 of general and administrative expense for the current period.

The twelve (12) month period ended on November

7, 2023 in which the COO exercised 100,000 options and 76,316 options expired.

February 2023, the Company entered into an agreement with its former COO in which the COO waived their rights to a transaction bonus

resulting from the merger transaction in lieu of a Company van.

The Company accounted for the cost of the van as an employee

bonus, resulting in $ 116 of general and administrative expense for the prior year.

March 5, 2023, the Company entered into a convertible promissory note (the “Note”) with a board member in the amount of $ 1,000 ,

4 unchanged sentences

Amount and the Loan Fee on April 1, 2023 and April 4, 2023, respectively.

April 26, 2023, the Company entered into a separation and release of claims agreement with its former Chief Legal Officer (the “CLO”).

As consideration for the CLO’s execution of the agreement, the Company agreed to pay the employee payments equivalent to $ 720 for

wages and benefits divided into 24 monthly payments commencing on June 1, 2023, and all outstanding equity-based compensation awards

to become fully vested and exercisable resulting in an expense of $ 76 .

The CLO had three (3) months from the termination date to exercise

the outstanding options.

The three (3) month period ended on July 26, 2023 in which the options were not exercised and the options

were forfeited as a result.

April 26, 2023, the Company entered into a separation and release of claims agreement with its former Chief Legal Officer (“CLO”).

As consideration for the CLO’s execution of the agreement, the Company agreed to pay the employee payments equivalent to $ 720 divided

into 24 monthly payments commencing on June 1, 2023, and all outstanding equity based compensation awards to become fully vested and

exercisable at an expense of $ 76 .

The CLO shall have 3 months from the termination date to exercise outstanding options.

The three (3)

month period ended on July 26, 2023 in which the options were not exercised and the options were forfeited as a result.

January 26, 2024 the Company entered into a convertible promissory note (the “January Note”) with a board member in the amount

of $ 1,000 , or the January Principal Amount.

Upon execution of the January Note and funding of the original principal sum, a payment of

$ 50 (the “January Loan Fee”) was fully earned as of the date of the January Note and was due and payable in full in cash

on February 2, 2024.

The Company paid the January Principal Amount and the January Loan Fee on February 1, 2024.

February 27, 2024 the Company entered into a convertible promissory note (the “February Note”) with a board member in the

amount of $ 1,700 , or the February Principal Amount.

Upon execution of the February Note and funding of the original principal sum, a

payment of $ 85 (the “February Loan Fee”) was fully earned as of the date of the February Note and was due and payable in

full in cash on March 1, 2024.

The Company paid the February Principal Amount and the February Loan Fee on March 1, 2024.

Stock Warrants classified as Equity

On October 7, 2022, in connection with the merger, the Company assumed the outstanding public warrants of CNTQ.

There were no Public Warrants outstanding prior to the merger.

Public Warrant entitles the holder to the right to purchase one share of Common Stock at an exercise price of $ 11.50 per share (the “Public

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 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.

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 Public Warrants as of each relevant date.

the nine months ended September 30, 2023, the Company received proceeds from Public Warrant exercises of $ 747 in exchange for 64,971

shares of Common Stock.

The Company did not receive any proceeds from Public Warrants during the three months ended September 30, 2023.

2023 Offering

connection with the entry into the underwriting agreement as further described in Note 10 of the financial statements, (the “June

2023 Offering”) the Company issued (i) underwriters warrants to purchase up to an aggregate of 570,250 shares of Common Stock (the

“Underwriters’ Warrants”) which are exercisable upon issuance and will expire on June 20, 2028.

The initial exercise

price of the Underwriters’ Warrants is $ 2.50 per share, which equals 125 % of the per share public offering price in the June 2023

Offering and (ii) warrants to purchase up to 10,000,000 shares of Common Stock to the investors in the offering together with shares

of Common Stock (the “Investor Warrants”), at the combined public offering price of $ 2.00 per share of Common Stock and accompanying

Investor Warrant, less underwriting discounts and commissions.

The Company also granted the underwriters a 45-day over-allotment option

to purchase up to an additional 1,500,000 shares of Common Stock and/or Investor Warrants to purchase up to 1,500,000 shares of Common

Stock at the public offering price per security, less underwriting discounts and commissions.

The underwriters exercised their over-allotment

option to purchase an additional 1,405,000 shares of Common Stock and Investor Warrants to purchase up to 1,405,000 shares of Common

The Company accounts for the Investor Warrants issued in connection with the Offering in accordance with the guidance contained

in ASC 815-40.

Such guidance provides that because the Investor Warrants do not meet the criteria for equity treatment thereunder, each

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.

It was determined that the Underwriters’

Warrants were not precluded from equity treatment and have been accounted for as such.

Underwriters’

OF UNDERWRITER WARRANTS

Underwriters’ Warrants Outstanding, January 1, 2023

Underwriters’ Warrants issued

Underwriters’ Warrants Outstanding, September 30, 2023

The Company’s Public Warrants are classified as equity as of March 31, 2024 and March 31, 2023 there were 9,487,500

Public Warrants issued and outstanding.

the three months ended March 31, 2024, no public warrants were exercised.

ENERGY HOLDINGS CORP.

4 unchanged sentences

Placement Warrants

On October 7, 2022, in connection with the merger, the Company assumed the outstanding private placement warrants

There were no Private Placement Warrants outstanding prior to the merger.

Private Placement Warrants (the “Private 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.

October 7, 2022, in connection with the merger, the Company assumed the outstanding private placement warrants of CNTQ.

There were no

Private Placement Warrants outstanding prior to the merger.

The Private Placement Warrants (the “Private 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

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.

During the nine months ended September 30, 2023, private placement

warrant holders exercised 3,126,472 warrants on a cashless basis, with the Company agreeing to issue 1,100,000 shares of Common Stock

in connection with such exercise.

There were 1,501,386 and 4,627,858 private warrants outstanding as of September 30, 2023, and December

31, 2022, respectively.

The Company accounts for the 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

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.

(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.

During the year ended December 31, 2023, private placement warrant holders exercised 3,126,472 warrants on a cashless

basis, with the Company agreeing to issue 1,100,000 shares of Common Stock in connection with such exercise.

There were 1,501,386 private

warrants outstanding as of March 31, 2024 and December 31, 2023, respectively.

The Company accounts for the 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.

will reassess the classification at each balance sheet date.

private placement warrants are classified as Level 2 as the transfer of Private Placement Warrants to anyone who is not a permitted transferee

4 unchanged sentences

Loan Warrants

connection with the entry into the Term Loan Agreement on October 7, 2022, 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 of Common Stock (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”).

Warrants were exercised on a cashless basis on October 10, 2022, with the Company issuing 457,142

shares of Common Stock in connection with such exercise.

During the nine months ended September 30, 2023, Penny Warrant

holders exercised 2,000,000

warrants on a cashless basis, with the Company agreeing to issue 1,996,323

shares of Common Stock in connection with such exercise.

During the three months ended September 30, 2023, there were no exercises

of Penny Warrants.

During the nine months ended September 30, 2023, the Company issued additional Penny Warrants to purchase 501

shares of Common Stock to the Term Loan Lenders in accordance with the anti-dilution provisions of the Penny Warrants with respect

to certain sales made by the Company under the ChEF Equity Facility.

The Company concluded the Penny Warrants are not considered

indexed to the Company’s Common 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.

no Term Loan Warrants outstanding prior to the merger.

connection with the entry into the Term Loan Agreement on October 7, 2022, 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 of Common Stock (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 issuing 457,142 shares

of Common Stock in connection with such exercise.

During the year ended December 31, 2023, Penny Warrant holders exercised 2,000,000

warrants on a cashless basis, with the Company agreeing to issue 1,996,323 shares of Common Stock in connection with such exercise.

the year ended December 31, 2023 the Company issued additional Penny Warrants to purchase 4,783 shares of Common Stock to the Term Loan

Lenders in accordance with the anti-dilution provisions of the penny warrants with respect to certain sales made by the Company under

the ChEF Equity Facility.

In addition, pursuant to the Company’s limited waiver agreement on December 29, 2023 between the Company

and the lenders and lending agent, the Company agreed to issue to the lenders additional penny warrants exercisable to purchase an aggregate

1,286,671 shares of its Common Stock.

The Company concluded the Penny Warrants are not considered indexed to the Company’s Common

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.

There were no Term Loan Warrants outstanding prior to the

ENERGY HOLDINGS CORP.

5 unchanged sentences

FAIR VALUE WARRANTS

September 30, 2023

December 31, 2022

Common stock price

1 unchanged sentence

Dividend yield

Term (in years)

Risk-free rate

1 unchanged sentence

June 2023 Offering:

September 30, 2023

Common stock price

1 unchanged sentence

Dividend yield

Term (in years)

Risk-free rate

following table presents a roll-forward of the Company’s warrants from January 1, 2023 to September 30, 2023:

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

9 - Warrants (continued)

OF ROLL FORWARD IN WARRANTS

Warrants Outstanding, January 1, 2023

Warrants issued

Exercise of warrants

( 3,126,472 )

Warrants Outstanding, September 30, 2023

Warrants Outstanding, January 1, 2023

Exercise of warrants

Warrants Outstanding, September 30, 2023

Loan Warrants:

Common Stock Warrants

Warrants Outstanding, January 1, 2024

Exercise of warrants

( 2,000,000 )

Warrants issued

Warrants Outstanding, September 30, 2023

Warrants Outstanding, March 31, 2024

Common Stock Warrants

Warrants Outstanding, January 1, 2023

Warrants issued

Exercise of warrants

Warrants Outstanding, September 30, 2023

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.

Balances, January 1, 2023

Warrants Outstanding, Beginning

Issuance of warrants

Exercise of warrants

Change in fair value of warrants

Balances, September 30, 2023

Energy Holdings Corp.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

Warrants outstanding, March 31, 2024

Warrants outstanding, Ending

10 - COMMON STOCK

Company is authorized to issue up to 170,000,000 shares of Common Stock.

Common stockholders are entitled to dividends if and when declared

by the Board of Directors of the Company subject to the rights of the preferred stockholders.

As of September 30, 2023 and December 31,

2022, there were 58,880,712 and 43,272,728 shares issued and outstanding.

No dividends on Common Stock had been declared by the Company.

the nine months ended September 30, 2023 and 2022, the Company reserved shares of Common Stock for issuance as follows:

No dividends on common stock had been declared

by the Company.

the three months ended March 31, 2024 and 2023, the Company had reserved shares of common stock for issuance as follows:

SUMMARY OF RESERVED SHARES OF COMMON STOCK FOR ISSUANCE

September 30, 2023

September 30, 2022

March 31, 2024

March 31, 2023

Options issued and outstanding

5 unchanged sentences

Company and Chardan Capital Markets LLC, a New York limited liability company (“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 million, pursuant to the terms of the Purchase Agreement.

In addition, the Company appointed LifeSci

Capital, LLC as “qualified independent underwriter” with respect to the transactions contemplated by the Purchase Agreement.

Under the terms of the Purchase Agreement, the Company issued 98,500 shares pursuant to the Purchase Agreement with CCM LLC for aggregate

net proceeds to the Company of $ 671 from the period January 1, 2023 through September 30, 2023.

2023 Offering

the June 2023 Offering, the Company sold an aggregate of (i) 10,000,000 shares of its Common Stock and, (ii) accompanying Investor Warrants

to purchase up to 10,000,000 shares of Common Stock, at the combined public offering price of $ 2.00 per share and accompanying Investor

Warrant, less underwriting discounts and commissions, and (iii) the Underwriters’ Warrants.

Investor Warrants are exercisable for five years from the closing date of the June 2023 Offering, have an exercise price of $ 2.00 per

share and are immediately exercisable.

In the event of certain fundamental transactions, holders of the Investor Warrants will have the

right to receive the Black Scholes Value (as defined in the Investor Warrants) of their Investor Warrants calculated pursuant to the

formula set forth in the Investor Warrants, payable either in cash or in the same type or form of consideration that is being offered

and being paid to the holders of Common Stock.

The Underwriters’ Warrants are exercisable upon issuance at an exercise price of

$ 2.50 per share and will expire on June 20, 2028 .

Company granted the underwriters a 45-day over-allotment option to purchase up to an additional 1,500,000 shares of Common Stock and/or

Warrants to purchase up to an aggregate of 1,500,000 shares of Common Stock at the public offering price per security, less underwriting

discounts and commissions, of which the underwriters exercised for 1,405,000 shares of Common Stock and Investor Warrants to purchase

up to 1,405,000 shares of Common Stock and the remaining was not exercised within the 45-day window.

Company received gross proceeds of $ 22,810 and incurred $ 2,074 of offering related costs.

The gross proceeds were first allocated to

the liability classified warrants based upon the transaction date fair value and then to the equity classified warrants with the residual

allocated to the common shares.

The offering related costs were allocated based on the relative fair value of all instruments, of which

$ 1,169 was accounted for as a reduction of additional-paid-in-capital and $ 904 was recorded within general and administrative expenses.

The Company accounted for the investor warrants issued in connection with the Public Offering and the exercise of the underwriters’

over-allotment option in accordance with the guidance contained in ASC 815-40.

Such guidance provides that the warrants described above

are precluded from equity classification.

The fair value of the warrants were recorded as a liability in the amount of $ 13,762 on issuance

and are being fair valued at each reporting period.

(the “Purchase Agreement”) and a Registration Rights Agreement 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 million,

pursuant to the terms of the Purchase Agreement.

In addition, the Company appointed LifeSci Capital, LLC as “qualified independent

underwriter” with respect to the transactions contemplated by the Purchase Agreement.

Under the terms of the Purchase Agreement,

the Company issued 73,500 shares pursuant to the Purchase Agreement with CCM LLC for aggregate net proceeds to the Company of $ 597 from

the period January 1, 2023 through March 31, 2023.

No issuances have occurred for the period of January 1, 2024 through March 31, 2024.

ENERGY HOLDINGS CORP.

2 unchanged sentences

11 - STOCK-BASED COMPENSATION

compensation expense for options and restricted stock units (“RSUs”) totaling $ 6,387 and $ 1,155 was recognized in the Company’s

condensed consolidated statements of operations for the nine months ended September 30, 2023 and 2022, respectively.

Share-based compensation

expense for options and RSUs totaling $ 946 and $ 436 was recognized in the Company’s condensed consolidated statements of operations

for the three months ended September 30, 2023 and 2022, respectively.

compensation for the nine months ended September 30, 2023 and 2022 was allocated as follows:

OF STOCK BASED COMPENSATION

September 30,

Cost of goods sold

Research and development

Selling and marketing

General and administrative expense

compensation for the three months ended September 30, 2023 and 2022 was allocated as follows:

September 30,

Cost of goods sold

Research and development

Selling and marketing

General and administrative expense

compensation expense for options and RSUs totaling $ 266 and $ 4,487 was recognized in the Company’s consolidated statements of operations

for the three months ended March 31, 2024 and 2023, respectively.

Of the $ 266 of share-based compensation incurred during the three months

ended March 31, 2024, $ 32 is allocated to cost of goods sold, $ 65 to research and development, $ 60 to selling and marketing, and $ 109

to general and administrative expenses.

Of the $ 4,487 of share-based compensation incurred during the three months ended March 31, 2023,

$ 36 is allocated to cost of goods sold, $ 29 to research and development, $ 856 to selling and marketing, and $ 3,566 to general and administrative

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

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.

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

SCHEDULE OF OPTION ACTIVITY AND RELATED INFORMATION

of Options (1)

Weighted-Average

Exercise Price

Weighted-Average

Grant Date Fair Value

Weighted-Average

Remaining Contractual Life (in years)

intrinsic value

January 1, 2022

September 30, 2022

January 1, 2023

September 30, 2023

and Exercisable

and expected to vest

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 1 for additional

October 7, 2022, the Company granted 180,000 restricted stock units under the 2022 plan which vest one year from the grant date.

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.

On February 10, 2023, the Company granted 461,998 restricted

stock units under the 2022 plan which vested immediately.

The fair value of the restricted stock units on the date of grant was $ 3,464

and was recorded as compensation expense during the nine months ended September 30, 2023.

During the first nine months of 2023, the Company

granted an additional 37,000 restricted stock units which have not vested.

The fair value of the 37,000 unvested restricted stock units

was $ 121 and an expense of $ 14 was recorded during the nine months ended September 30, 2023.

During the three months ended September

30, 2023, the Company granted an additional 9,000 restricted stock units which have not vested.

The fair value of the 9,000 restricted

stock units on the day of grant was $ 16 and no expense was recognized during the three months ended September 30, 2023.

Energy Holdings Corp.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

11 - Stock-Based Compensation (Continued)

Stock Units (Continued)

were no grants of restricted stock units prior to October 7, 2022.

The following table presents the restricted stock units activity for

the nine months ended September 30, 2023:

Weighted-Average Exercise Price

Weighted-Average Grant Date Fair Value

Weighted-Average Remaining Contractual Life (in years)

Aggregate intrinsic value

Balances, January 1, 2024

Options granted

Options forfeited

Options exercised

Balances, March 31, 2024

At March 31, 2024

Vested and Exercisable

Vested and expected to vest

February 10, 2023, the Company granted 461,998 restricted stock units under the 2022 plan which vest immediately.

The fair value of the

restricted stock units on the date of grant was $ 3,464 and was recorded as compensation expense during the three months ended March 31,

On February 5, 2024, the Company granted 220,000 restricted stock units of which 100,000 vested immediately.

The fair value of

the 220,000 restricted stock units was $ 95 and an expense of $ 45 was recorded as compensation expense during the three months ended March

following table presents the restricted stock units activity for the three months ended March 31, 2024:

OF RESTRICTED STOCK UNITS ACTIVITY

Number of Shares

Weighted-Average Fair Market Value

Unvested shares at January 1, 2023

Unvested shares, January 1, 2024

Granted and unvested

Unvested shares, September 30, 2023

Vested and exercisable as of September 30, 2023

of September 30, 2023, there were 4,470,153 shares of unissued authorized and available for future awards under the 2022 Equity Incentive

Unvested shares, March 31, 2024

of March 31, 2024, there were 10,986,525 shares of unissued authorized and available for future awards under the 2022 Equity Incentive

Plan and Employee Stock Purchase Plan.

12 - LOSS PER SHARE

Company follows the two -class method when computing net loss per share as the Company has issued warrants that meet the definition

of participating securities.

The two -class method determines net loss per share for each class of common and participating securities

according to dividends declared or accumulated and participation rights in undistributed earnings.

The two -class method requires

income available to common stockholders for the period to be allocated between common and participating securities based upon their respective

rights to receive dividends as if all income for the period had been distributed.

net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common

shares outstanding.

In addition, in computing the dilutive effect of convertible securities, the numerator is adjusted to add back any

convertible preferred dividends.

Diluted net loss per common share is computed by dividing net loss attributable to common stockholders

by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares

for all potential dilutive common shares outstanding.

Potential common shares consist of potential future exercises of outstanding stock

options and Common Stock warrants.

Because the inclusion of potential common shares would be anti-dilutive for all periods presented,

they have been excluded from the calculation.

Company’s Common Stock warrants contractually entitle the holders of such securities to participate in dividends but do not

contractually require the holders of such securities to participate in losses of the Company.

Accordingly, in periods in which the

Company reports a net loss, such losses are not allocated to such participating securities.

In periods in which the Company reports

a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net

loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their

effect is anti-dilutive.

The Company reported a net loss attributable to common stockholders for the three and nine months ended September

30, 2023 and 2022.

following table sets forth the information needed to compute basic and diluted loss per share for the three and nine months ended September

30, 2023 and 2022:

OF INFORMATION NEEDED TO COMPUTER BASIC AND DILUTED EARNINGS PER SHARE

For The Three Months Ended

September 30,

For The Nine Months Ended

September 30,

Net Loss attributable to common stockholders

Weighted average common shares outstanding used to compute net loss per share, basic and diluted

Net loss per share of Common Stock, basic and diluted

ENERGY HOLDINGS CORP.

1 unchanged sentence

thousands, except share and per share data)

12 - SUPPLIER AGREEMENT

May 9, 2023, Ioneer Rhyolite Ridge LLC, or the seller, an emerging lithium-boron producer, and the Company announced a commercial offtake

agreement partnership whereby the seller is developing the Rhyolite Ridge Project which, once completed, is expected to produce 20 ktpa

of lithium carbonate, and 174 ktpa of boic acid (the “project”).

Beginning on the Supply Start Date which is the date the

seller notifies the Company that the project is fully completed and commissioned in accordance with the engineering, procurement and

construction contract, and for the duration of the supply period, the Company shall purchase and receive product from seller, on the

terms and conditions of the agreement.

The agreement calls for a minimum annual purchase requirement.

The agreement becomes effective

when the seller has informed the Company that the seller has made a positive financial investment decision in respect of the project.

13 - (LOSS) INCOME PER SHARE

(Loss) Income per Common Share

following table sets forth the information needed to compute basic and diluted net (loss) income per share for the three months

ended March 31, 2024 and 2023:

OF BASIC AND DILUTED EARNING (LOSS) PER SHARE

March 31, 2024

March 31, 2023

Basic Net (Loss) Income per common share:

Net (Loss) Income

Weighted average number of common shares-basic

Net (Loss) Income per share, basic

Diluted Net (Loss) Income per common share:

Net (Loss) Income available to common stockholders

Weighted average number of common shares-basic

Dilutive effect related to stock options and warrants

Weighted average diluted shares outstanding

Net (Loss) Income per share, diluted

following table sets forth the number of potential shares of common stock that have been excluded from diluted net loss per share because

their effect was anti-dilutive:

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

September 30,

OF NUMBER OF POTENTIAL SHARES OF COMMON STOCK

March 31, 2024

March 31, 2023

Restricted stock units

Weighted average number of common shares-basic

13 – INCOME TAXES

Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual

effective tax rate adjusted for the effect of discrete items arising in that quarter.

The Company recorded an income tax expense (benefit)

of $ 0 and ($ 1,700 ) during the nine months ended September 30, 2023 and 2022, respectively.

The effective tax rate differs from the U.S.

statutory tax rate primarily due to the valuation allowances on the Company’s deferred tax assets as it is more likely than not

that some or all the Company’s deferred tax assets will not be realized.

The Company’s policy is to recognize interest and

penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with

the related income tax liability on the Company’s condensed consolidated balance sheets.

The Company has not recognized any interest

and penalties in its condensed consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

14 - REVISIONS OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Company has revised the previously issued financial statements for the quarter ended March 31, 2023 for the underpayment of tariffs to

Customs and Border Protection (“CBP”) related to the improper classification and valuation of certain of the products

used in its batteries.

The Company has reported the underpayment to CBP.

The underpayment of tariffs was primarily the result of utilizing

an improper tariff rate.

The additional amount of the tariffs was allocated between inventory and cost of goods sold based on the status

of imported items (i.e.

included in the inventories held vs included in the inventories already sold to customers).

accordance with Staff Accounting Bulletin (“SAB”) 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements

when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the materiality of the error from qualitative

and quantitative perspectives, and concluded that the error was immaterial to any prior annual or interim financial statements.

Notwithstanding

this conclusion, management has revised the accompanying condensed consolidated financial statements for the quarter ended March 31,

2023 and related notes included herein to correct this error for the financial statements for the quarter ended March 31, 2023 presented.

following tables present the effect of correcting this error on the Company’s previously issued financial statements.

SCHEDULE OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Statements of Operations

previously reported

For the Period Ended March 31, 2023

Consolidated Statements of Operations

As previously reported

Cost of Goods Sold

Loss From Operations

Interest Expense

Income Before Taxes

Net Income per share - Basic

Net Income per share – Diluted

Statements of Cash Flows

previously reported

For the Period Ended March 31, 2023

Consolidated Statements of Cash Flows

As previously reported

Change in Accrued Tariffs

Statements of Stockholders’ Equity

previously reported

For the Period Ended March 31, 2023

Consolidated Statements of Stockholders’ Equity

As previously reported

Accumulated Deficit - January 1, 2023

Accumulated Deficit - March 31, 2023

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

15 - SUBSEQUENT EVENTS

Subsequent to the quarter ended September 30, 2023, we issued and sold approximately 490,000

shares of our common stock under the ChEF Equity Facility, resulting in net cash proceeds of $ 607,973 .

As a result, subsequent to the

quarter ended September 30, 2023, the Company issued additional Penny Warrants to purchase 4,277 shares of common stock to the Term Loan

Lenders in accordance with the anti-dilution provisions of the Penny Warrants with respect to certain sales made by the Company under

the ChEF Equity Facility.

On April 17, 2024, the

Company issued 3,428

shares in exchange for 4,875

vested RSU’s less shares deducted to cover taxes.

On April 24, 2024, the Company issued 244,774

shares in connection with its Employee Stock Purchase Plan for a total consideration of approximately $112.

On April 30, 2024,

the Company issued 992

shares as a result of exercised stock options upon the receipt of proceeds of approximately $ 1 .

On April 12, 2024 the Company entered into a lease agreement, pursuant to which the Company agreed to lease an approximately 64 square foot facility (the “Premises”) located in Fernley, Nevada, to be used for general, warehousing, assembly/light manufacturing, painting of products, storage fulfillment, distribution of the Company’s products, and other uses as permitted under the Fernley Lease Agreement (the “Fernley Lease Agreement”).

The initial term of the Fernley Lease Agreement (the “Term”) is for a period of sixty (60) months, effective April 1, 2024.

The base rent for the Premises, payable monthly, is $ 45 for the first twelve months of the Term and is subject to a three percent ( 3.0 % ) increase on the anniversary of each year.

The Company also will be responsible for twenty-five percent (25%) of any operating expenses, taxes and insurance expenses incurred by the Landlord in connection with the building in which the Premises are located (the “Expenses”) as well as utility expenses.

The Expenses are subject to recalculation and increase upon the completion of the Initial Improvements (as defined in the Fernley Lease Agreement).

The Landlord is responsible for completing the Initial Improvements.

The Fernley Lease Agreement also contains customary default provisions allowing the Landlord to terminate the Fernley Lease Agreement if the Company fails to cure certain breaches of its obligations under the Fernley Lease Agreement within a specified period of time upon written notice to the Company.

Concurrent with the execution of the Fernley Lease Agreement, the Company paid the Landlord a security deposit of $ 50 .

Effective April 12, 2024, the Company entered into amendments to the employment agreements with its Chief Executive Officer, its Chief Revenue Officer and its Chief Marketing Officer to amend the terms of their annual equity compensation (the “Amended Employee Agreements”).

The Amended Employee Agreements allow the Company to issue a combination of cash and equity awards on an annual basis up to a specified amount ($ 1,532 for the Chief Executive Officer, $ 490 for the Chief Revenue Officer and $ 236 for the Chief Marketing Officer), subject to approval and such other terms and conditions imposed by the compensation committee of the board of directors.

On April 12, 2024, the Company issued a total of 836,295 RSUs to the following employees:

(i) 567,407 RSUs to the Chief Executive Officer;

(ii) 181,481 RSUs to the Chief Revenue Officer;

and (iii) 87,407 RSUs to the Chief Marketing Officer.

Each of the RSUs granted will vest in three equal annual installments, with the first vesting date on the one (1) year anniversary of the date of issuance and the following two vesting dates on each subsequent anniversary of the date of issuance, subject to each employees’ continued employment as of each vesting date.

In addition to the RSU awards, the Board also approved the following cash awards to the above referenced employees:

(i) $ 511 to the Chief Executive Officer;

(ii) $ 163 to the Chief Revenue Officer;

and (iii) $ 79 to the Chief Marketing Officer.

Each of the approved cash awards will not be paid out to the employees until the Company has achieved a minimum cash balance of $ 30,000 , and are subject to each employee’s continued employment on the date of payment.

April 12, 2024, the board of directors authorized the issuance of 222,222

RSUs to each director in connection with their

service as directors for the year ended December 31, 2023.

The RSUs will vest in three equal annual installments, with the first vesting

date on the one (1) year anniversary date of their issuance, subject to the directors continued service on with the Company on each vesting

On April 15, 2024, the board of directors approved

an amendment to the Company’s Director Compensation Policy offering its directors long-term incentive awards that are issuable subject

to the sole discretion of the Company’s compensation committee.

Each such long-term incentive award is payable in the form of cash

and or equity awards.

Each such award shall be determined each fiscal year and are subject to the director’s continued service with

the Company and other conditions as the Company’s compensation committee deems appropriate.

Where equity awards are issued, such

awards are subject to the terms and conditions of the Dragonfly Energy Holdings Corp.

2022 Equity Incentive Plan.

On April 29, 2024, the Company obtained a waiver from

the Term Loan administrative agent and lenders in regard to the Company’s compliance with the liquidity requirement under the Term

Loan as of the last day of the fiscal month ended April 30, 2024.

On May 13, 2024, the Company received a waiver from its Administrative Agent and Term Loan Lenders (the “May

2024 Waiver”) in regards to its compliance with the to satisfy the Senior Leverage Ratio and Fixed Charge Coverage Ratio tests

(the “Tests”) as of the last day of the quarter ended March 31, 2024 from the Term Loan Lenders in regards to its compliance

with the Tests as of the last day of the quarter ended March 31, 2024.

The May 2024 Waiver provided for a one-time issuance of penny warrants

(the “May 2024 Penny Warrants”) to purchase up to 2,550,000 shares of the Company’s common stock, par value $ 0.0001

per share (the “May 2024 Penny Warrant Shares”), at an exercise price of $ 0.01 per share, in connection with the Term Loan

Lenders’ agreement to waive the Tests under the Term Loan for the quarter ended March 31, 2024.

The May 2024 Penny Warrants were

immediately exercisable upon issuance and will expire ten years from the date of issuance.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements