What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-11-14 · 358 added, 341 removed, 380 unchanged (65% of the section changed)

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financial statements (and notes thereto) for the year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the

Securities and Exchange Commission (the “ SEC ”) on April 17, 2023, as amended May 1, 2023 (the “ Annual Report ”),

particularly those under “Risk Factors.” This discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors,

including those discussed below and elsewhere in this Quarterly Report.

We undertake no obligation to update these forward-looking statements

to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Securities and Exchange Commission (the “ SEC ”) on April 16, 2024, as amended April 29, 2024 (the “ Annual

Report ”), particularly those under “Risk Factors.” This discussion contains forward-looking statements that involve

risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result

of various factors, including those discussed below and elsewhere in this Quarterly Report.

We undertake no obligation to update these

forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Note Regarding Forward Looking-Statements

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These factors include, but are not limited to:

ability to recognize the anticipated benefits of our Business Combination, which may be affected by, among other things, the factors

listed below;

ability to successfully increase market penetration into target markets;

addressable markets that we intend to target do not grow as expected;

potential for events or circumstances that result in our failure to timely achieve the anticipated benefits of our customer arrangements

with THOR Industries and its affiliate brands (including Keystone RV Company (“Keystone”)), including Keystone’s

decision in July 2023, that, due to weaker demand for its products and their subsequent focus on reducing costs, it would no longer

install our storage solutions as standard equipment, but rather return to offering those solutions as an option to dealers and consumers;

ability to generate revenue from future product sales and our ability to achieve and maintain profitability;

loss of any members of our senior management team or other key personnel;

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failure to produce lithium battery cells in the United States in a timely manner or at all, or to scale to mass production;

in applicable laws or regulations;

in applicable laws or regulations, including changes in the rates of tariffs or any adjustments to the amounts payable by us to customs

as a result of improperly identifying the applicable tariff rate payable on our products;

ability to maintain the listing of our common stock on the Nasdaq Global Market and our public warrants on the Nasdaq Capital Market;

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ability to sell the desired amounts of shares of common stock at desired prices under our equity facility;

potential for events or circumstances that result in our failure to timely achieve the anticipated benefits of our customer arrangements

with THOR Industries and its affiliate brands (including Keystone RV Company (“ Keystone ”)), including Keystone’s

decision in July 2023, that, due to weaker demand for its products and their subsequent focus on reducing costs, it would no longer

install our storage solutions as standard equipment, but rather return to offering those solutions as an option to dealers and consumers;

ability to raise additional capital to fund our operations;

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reliance on two suppliers for our lithium iron phosphate cells and a single supplier for the manufacture of our battery management

potential impact of geopolitical events, including the Russia-Ukraine conflict and Hamas’ attack on Israel, and their effects

on our operations;

current dependence on a single manufacturing facility.

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risk factors that we are faced with that may cause our actual results to differ from those anticipated in such forward-looking statements.

Please see “ Part I—Item 1A—Risk Factors ” of our Annual Report, for additional risks which could adversely

impact our business and financial performance.

Please see “ Part I-Item 1A-Risk Factors ” of our Annual Report, for additional risks which could adversely impact our

business and financial performance.

forward-looking statements are expressly qualified in their entirety by this cautionary notice.

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or projections will result or be achieved or accomplished.

are a manufacturer of non-toxic deep cycle lithium-ion batteries that are designed to displace lead acid batteries in a number of different

storage applications and end markets including recreational vehicle (“ RV ”), marine vessel, and solar and off-grid

industries, with disruptive solid-state cell technology currently under development.

are a manufacturer of non-toxic deep cycle lithium-ion batteries that are designed to displace lead acid batteries in a number of

different storage applications and end markets including recreational vehicle (“ RV ”), marine vessel, and solar,

oil and gas and off-grid industries, with disruptive solid-state cell technology currently under development.

2020, we have sold over 300,000 batteries.

For the quarters ended September 30, 2023, and September 30, 2022, we sold 14,886 and 31,375

batteries, respectively, and had $15.9 million and $26.1 million in net sales, respectively.

We currently offer a line of batteries across

our “Battle Born” and “Dragonfly” brands, each differentiated by size, power and capacity, consisting of seven

different models, four of which come with a heated option.

We primarily sell “Battle Born” branded batteries directly to

consumers (“ DTC ”) and “Dragonfly” branded batteries to original equipment manufacturers (“ OEMs ”).

currently source the lithium iron phosphate cells incorporated into our batteries from a limited number of carefully selected suppliers

that can meet our demanding quality standards and with whom we have developed long-term relationships.

supplement our battery offerings, we also offer our line of proprietary Wakespeed alternator regulation products which are necessary

to ensure that the alternator does not get unduly stressed during the current delivery to the batteries, and that the current delivery

remains within the operating limits of the onboard battery bank.

In addition to our own accessories we are also a reseller of accessories

for battery systems.

These include chargers, inverters, monitors, controllers, solar panels and other system accessories from brands

such as Victron Energy, Progressive Dynamics, REDARK, Rich Solar, and Sterling Power.

addition to our conventional lithium iron phosphate (“ LFP ”) batteries, we are currently developing the next generation

of LFP solid-state cells.

Since our founding, we have been developing proprietary battery cell manufacturing processes and solid-state

battery cell technology for which we have issued patents and pending patent applications, where appropriate.

Solid-state lithium-ion

technology eliminates the use of a liquid electrolyte, which addresses the residual heat and flammability issues arising from lithium-ion

unique competitive advantage of our cell manufacturing process is highlighted by our dry deposition technology, which completely displaces

the need for toxic solvents in the manufacturing process and allows for the rapid and scalable production of chemistry-agnostic cells.

Additionally, our internal production of battery cells will streamline our supply chain, allowing us to vertically integrate our cells

into our batteries, thereby lowering our production costs.

In October 2023, we announced the successful dry deposition of anode and cathode

electrodes at scale using our patented battery manufacturing process.

We expect to begin producing LFP cells in the United States by

the end of 2023.

of September 30, 2023, we had cash totaling $13.2 million.

Our net loss for the quarter ended September 30, 2023 was $10.0 million and

our net loss for the quarter ended September 30, 2022 was $3.7 million.

As a result of becoming a publicly traded company, we continue

to need to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary

We expect to incur additional expenses as a public company for, among other things, directors’ and officers’ liability

insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased

audit and legal fees.

As discussed under “ Liquidity and Capital Resources ” below, we expect that we will need to raise

additional funds, including through the use of our $150 million equity facility (the “ ChEF Equity Facility ”) with

Chardan Capital Markets LLC (“ CCM LLC ”) and the issuance of equity, equity-related or debt securities or by obtaining

For the quarters ended March 31, 2024, and March 31, 2023, we sold 11,098 and 20,331 batteries,

respectively, and had $12.5 million and $18.8 million in net sales, respectively.

We currently offer a line of batteries across our “Battle

Born” and “Dragonfly” brands, each differentiated by size, power and capacity, consisting of seven different models,

four of which come with a heated option.

We primarily sell “Battle Born” branded batteries directly to consumers (“ DTC ”)

and “Dragonfly” branded batteries to original equipment manufacturers (“ OEMs ”).

decrease in sales is a reflection of weaker demand from both OEM and DTC customers in our core RV and marine markets due to rising interest

rates and inflation.

Our RV OEM customers currently include Keystone, THOR, Airstream, and REV, and we are in ongoing discussions with

a number of additional RV OEMs to further increase adoption of our products.

Related efforts include seeking to have RV OEMs “design

in” our batteries as original equipment and entering into arrangements with members of the various OEM dealer networks to stock.

currently source the lithium iron phosphate (“ LFP ”) cells incorporated into our batteries from a limited number of

carefully selected suppliers that can meet our demanding quality standards and with whom we have developed long-term relationships.

In May 2024, we announced that we achieved full certification for our energy storage products to be deployed for

use in oil & gas operations in North America.

As a result of this certification, we are working Connexa Energy Company (“ Connexa ”)

to deliver a power product to Alegacy Equipment, a market leading natural gas compressor package company, and their affiliate Agnes Systems.

The power system, which Connexa expects to integrate, are expected to be used in natural gas compression equipment to reduce methane emissions

across the oilfield.

We expect the first of these systems to be deployed in the third quarter of 2024 and this business line to begin

contributing to net sales by the fourth quarter of 2024.

supplement our battery offerings, we are also a reseller of accessories for battery systems.

These include chargers, inverters, monitors,

controllers and other system accessories from brands such as Victron Energy, Progressive Dynamics, Magnum Energy and Sterling Power.

Pursuant to the Asset Purchase Agreement dated April 22, 2022 by and among us and Thomason Jones Company, LLC (“ Thomason Jones ”)

and the other parties thereto, we also acquired the assets, including the Wakespeed Offshore brand (“ Wakespeed ”) of

Thomason Jones, allowing us to include our own alternator regulator in systems that we sell.

addition, we have successfully developed innovative manufacturing processes for dry-electrode manufacturing of lithium-ion cells, and

continue development efforts relating to next-generation solid-state technology.

Since our inception, we have built a comprehensive patent

portfolio around our proprietary dry-electrode battery manufacturing process, which eliminates the use of harmful solvents and energy-intensive

drying ovens compared to traditional methods.

This translates to significant environmental and cost benefits, including reduced energy

consumption, smaller space requirements, and a lower carbon footprint.

our solid-state technology in development removes the need for a liquid electrolyte, thereby addressing safety concerns related to flammability.

Our unique competitive edge lies in the combination of solid-state technology with its scalable dry-electrode manufacturing process.

This enables the rapid production of cells having an intercalation anode (like graphite or silicon), unlike many competitors reliant

on less stable lithium metal anodes.

We believe this design offers superior cyclability and safety, serving as a key differentiator in

the energy storage market.

Furthermore, internal production of both conventional and solid-state cells streamlines our supply chain and

enables vertical integration, ultimately driving down production costs.

In October 2023, we announced the successful dry deposition of

anode and cathode electrodes at scale using our patented battery manufacturing process.

We are currently producing sample cells for prospective

customers across a variety of chemistries and end-markets and expect to begin scaling production in the second half of 2024.

of March 31, 2024, we had cash totaling $8.5 million.

Our net loss for the quarter ended March 31, 2024 was $10.4 million and our net

income for the quarter ended March 31, 2023 was $4.8 million.

As a result of becoming a publicly traded company, we continue to need

to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.

We have incurred and expect to continue to incur additional expenses as a public company for, among other things, directors’ and

officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources,

including increased audit and legal fees.

As discussed under “ Liquidity and Capital Resources ” below, we expect that

we will need to raise additional funds, including through the use of our $150 million equity facility (the “ ChEF Equity Facility ”)

with Chardan Capital Markets LLC (“ CCM LLC ”) and the issuance of equity, equity-related or debt securities or by obtaining

additional credit from financial institutions to fund, together with our principal sources of liquidity, ongoing costs, such as research

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delaying our production facility expansions, which may adversely affect our business, operating results, financial condition and prospects.

Business Combination

October 7, 2022, Chardan NexTech 2 Acquisition Corp., a Delaware company (“ Chardan ”), and Legacy Dragonfly consummated

the merger pursuant to the Agreement and Plan of Merger, dated as of May 15, 2022 (as amended, the “ Business Combination Agreement ”),

by and among Chardan, Bronco Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Chardan (“ Merger Sub ”),

and Legacy Dragonfly.

Pursuant to the Business Combination Agreement, Merger Sub merged with and into Legacy Dragonfly (the “ Merger ”

and, together with the other transactions contemplated by the Business Combination Agreement, the “ Business Combination ”),

with Legacy Dragonfly continuing as the surviving corporation in the Merger and as our wholly owned subsidiary.

In connection with the

Business Combination, Chardan changed its name to Dragonfly Energy Holdings Corp.

Legacy Dragonfly is deemed the accounting acquirer,

which means that Legacy Dragonfly’s financial statements for previous periods will be disclosed in our future periodic reports

filed with the SEC.

Following the Business Combination, our business is the business of Legacy Dragonfly.

Business Combination was accounted for as a reverse recapitalization.

Under this method of accounting, Chardan was treated as the acquired

company for financial statement reporting purposes.

Equity Facility

intend to opportunistically use the ChEF Equity Facility to help maintain minimum cash balances required by the lenders as we

continue to execute on growing the business through product releases, customer/market expansion, and R&D milestones.

to use the ChEF Equity Facility as a regular source of funds over the next twelve months and our available share balance increases,

allowing for more consistent purchases under the ChEF Equity Facility.

Use of the ChEF Equity Facility may adversely affect us,

including the market price of our common stock and future issuances may be dilutive to existing stockholders.

2023 Offering

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aggregate net proceeds from this offering, including the partial over-allotment option, was approximately $20.7 million.

2023 Private Placement

December 29, 2023, we received a waiver (the “ December 2023 Waiver ”) from the Term Loan Lenders (as defined below)

in regards to our compliance with the fixed charge coverage ratio and maximum senior leverage ratio with respect to the minimum cash

requirements (the “ Tests ”) under the Term Loan (as defined below) as of the last day of the quarter ended December

The December 2023 Waiver provided for a one-time issuance of penny warrants (the “ December 2023 Penny Warrants ”)

to purchase up to 1,286,671 shares of our common stock, 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 December 31, 2023.

The December 2023 Penny Warrants were immediately exercisable upon

issuance and will expire ten years from the date of issuance.

May 2024 Private Placement

On May 13, 2024, we received a waiver (the “ May 2024 Waiver ”) from the Term Loan Lenders in regards

to our 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 our common stock (the “ May

2024 Penny Warrant Shares ”), at an exercise price of $0.01 per share, in connection with the Term Loan Lender’s

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.

Factors Affecting Our Operating Results

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towards the use of green energy), as well as overall macro-economic conditions, such as interest rates and inflation.

batteries have benefited from the increased adoption of the RV lifestyle, the demand for and inclusion of additional appliances and

electronics in RVs, and the accelerating trend of solar power adoption among RV customers.

However, in recent months rising fuel

costs and other macro-economic conditions, such as inflation and rising interest rates, have caused a downward shift in decisions

taken by end market consumers around spending in the RV market and in July of 2023, we were notified by our largest RV OEM customer

that, due to weaker demand for its products and their subsequent focus on reducing costs, it would no longer install our storage

solutions as standard equipment, but rather return to offering those solutions as an option to dealers and consumers.

customer is not moving to a different solution or competitor, this change had a material adverse impact on our OEM sales for the

quarter ended September 30, 2023.

Furthermore, we expect this change to continue to have a material limiting effect on our revenue

throughout the remainder of 2023 and potentially into 2024.

strategy includes plans to expand into new end markets that we have identified as opportunities for our LFP batteries, including long-haul

and fleet trucking, industrial, rail, specialty and work vehicles, material handling, solar integration, and emergency and standby power

in the medium term, and data centers, telecom and distributed on-grid storage in the longer term.

We believe that our current LFP batteries

and, eventually, our solid-state batteries, will be well-suited to supplant traditional lead-acid batteries as a reliable power source

for the variety of low power density uses required in these markets (such as powering the increasing number of on-board tools needed

in emergency vehicles).

The success of this strategy requires (1) continued growth of these addressable markets in line with our expectations

and (2) our ability to successfully enter these markets.

We expect to incur significant marketing costs understanding these new markets,

and researching and targeting customers in these end markets, which may not result in sales.

If we fail to execute on this growth strategy

in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end markets.

Sales of our batteries

have benefited from the increased adoption of the RV lifestyle, the demand for and inclusion of additional appliances and electronics

in RVs, and the accelerating trend of solar power adoption among RV customers.

However, rising fuel costs and other

macro-economic conditions have caused a downward shift in decisions taken by end market consumers around spending in the RV market and

in July 2023, we were notified by our largest RV OEM customer that, due to weaker demand for its products and their subsequent focus

on reducing costs, it would no longer install our storage solutions as standard equipment, but rather return to offering those solutions

as an option to dealers and consumers.

While this customer is not moving to a different solution or competitor, as a result in this change

in strategy there was a material limiting effect on our revenue in 2023.

Based on our discussions with customers and current forecast

projections, we expect our revenue in the RV market to increase in the second half of 2024.

While a significant portion of our sales come from the RV market, we also offer targeted solutions using the same

products for the marine market.

These solutions cater to OEMs and consumers alike, addressing the power needs of various vessels like

sailboats, powerboats, and fishing boats (center console and bass).

We have worked closely to follow ABYC (American Boat & Yacht Council)

Standards to develop systems that adhere to the recent ABYC E-13 Guidelines (Standards for Lithium Batteries).

strategy includes plans to expand into new end markets that we have identified as opportunities for our LFP batteries, including

medium and heavy duty trucking, specialty and work vehicles, solar integration, oil and gas, industrial, rail, material handling, and emergency and standby power in the medium term, and data centers, telecom and

distributed on-grid storage in the longer term.

We believe that our current LFP batteries and, eventually, our solid-state

batteries, will be well-suited to supplant traditional lead-acid batteries as a reliable power source for the variety of low power

density uses required in these markets (such as powering the increasing number of on-board tools needed in emergency vehicles).

success of this strategy requires (1) continued growth of these addressable markets in line with our expectations and (2) our

ability to successfully enter these markets.

We expect to incur significant marketing costs understanding these new markets, and

researching and targeting customers in these end markets, which may not result in sales.

If we fail to execute on this growth

strategy in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end

currently rely on two carefully selected cell manufacturers located in China, and a single supplier, also located in China, to manufacture

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when planned and could experience additional costs or disruptions to our production activities.

addition, we have entered into a lease for an additional 390,240 square foot warehouse in Reno, Nevada, which is expected to be completed

in early 2024.

This facility, combined with our existing facility, will allow further scaling of our increasingly automated battery pack

assembly capabilities, expand our warehousing space, and allow for deployment of our solid-state cell manufacturing.

addition, we entered into a lease on February 8, 2022 for an additional 390,240 square foot warehouse in Reno, Nevada, which is expected

to be completed in the second half of 2024.

The commencement date for the lease for this facility was March 25, 2024, based on the construction

project being identified as “substantially complete”.

This facility will enable us to consolidate various operations in Reno,

NV and will allow for expected expansion for new markets.

April 12, 2024, we entered into a lease agreement (the “ Fernley Lease Agreement ”) pursuant to which we agreed to lease

an approximately 64,000 square foot facility (the “ Premises ”) in Fernley, Nevada, to be used for general, warehousing,

assembly/light manufacturing, painting of products, storage fulfillment, distribution of our products, and other uses as permitted under

in the Fernley Lease Agreement.

compete with traditional lead-acid battery manufacturers and lithium-ion battery manufacturers, who primarily either import their products

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and Development

research and development is primarily focused on the advanced manufacturing of domestic battery cells and solid-state lithium-ion battery

cells using our proprietary and patented dry deposition battery cell manufacturing process.

The Company has announced that its pilot

line successfully produced both anode and cathode material, at pilot scale, using this patented process.

The Company currently expects

to deliver full sample battery cells from its pilot line before the end of 2023.

The next stage in our technical development is to construct

the battery to optimize performance and longevity to meet and exceed industry standards for our target storage markets.

Ongoing testing

and optimizing of more complicated batteries incorporating layered pouch cells will assist us in determining the optimal cell chemistry

to enhance conductivity and increase the number of cycles (charge and discharge) in the cell lifecycle.

This is expected to require significant

additional expense, and we may need to raise additional funds to continue these research and development efforts.

research and development is primarily focused on the advanced manufacturing of solid-state lithium-ion batteries using an LFP catholyte,

a solid electrolyte and an intercalation-based anolyte (intercalation being the reversible inclusion of a molecule or ion into layered

The next stage in our technical development is to construct the battery to optimize performance and longevity to meet and exceed

industry standards for our target storage markets.

Ongoing testing and optimizing of more complicated batteries incorporating layered

pouch cells will assist us in determining the optimal cell chemistry to enhance conductivity and increase the number of cycles (charge

and discharge) in the cell lifecycle.

This is expected to require significant additional expense, and we may need to raise additional

funds to continue these research and development efforts.

of Results of Operations

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of Operations

for the Three months ended September 30, 2023 and September 30, 2022

following table sets forth our results of operations for the three months ended September 30, 2023, and September 30, 2022.

should be read together with our financial statements and related notes included elsewhere in this Quarterly Report, and is qualified

in its entirety by reference to such financial statements and related notes.

months ended September 30,

for the Three months ended March 31, 2024, and March 31, 2023

following table sets forth our results of operations for the three months ended March 31, 2024 and March 31, 2023.

This data should be

read together with our financial statements and related notes included elsewhere in this Quarterly Report, and is qualified in its entirety

by reference to such financial statements and related notes.

Three months ended March 31,

(in thousands)

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Interest expense, net

Change in fair market value of warrant liability

Total Other Expense

Loss Before Taxes

Income Tax Benefit

months ended September 30,

(in thousands)

sales decreased by $10.2 million, or 39.2%, to $15.9 million for the three months ended September 30, 2023, as compared to $26.1

million for the quarter ended September 30, 2022.

This decrease was primarily due to lower OEM and DTC battery and accessory sales

compared to the three months ended September 30, 2022.

For the quarter ended September 30, 2023, OEM revenue decreased by $8.3

In July of 2023, we were notified by our largest RV OEM customer that, due to weaker demand for its products and their

subsequent focus on reducing costs, it would no longer install our storage solutions as standard equipment, but rather return to

offering those solutions as an option to dealers and consumers.

While this customer is not moving to a different solution or

competitor, this change in strategy had a material adverse impact on our OEM sales for the quarter ended September 30, 2023.

Furthermore, we expect this change to continue to have a material limiting effect on our revenue throughout the remainder of 2023 and potentially 2024.

DTC revenue decreased by $1.9 million as a result of decreased customer demand for our products due to ongoing macro-economic

factors such as rising interest rates and inflation.

of Goods Sold

of revenue decreased by $7.8 million, or 40.7%, to $11.3 million for the three months ended September 30, 2023, as compared to $19.1

million for the three months ended September 30, 2022.

This decrease was primarily due to lower unit volumes sold in the three

months ended September 30, 2023.

profit decreased by $2.5 million, or 35.0%, to $4.6 million for the three months ended September 30, 2023, as compared to $7.0 million

for the three months ended September 30, 2022.

The decrease in gross profit was primarily due to lower overall sales and unit volumes

offset by a change in revenue mix that included a smaller percentage of lower margin OEM sales and a higher percentage of higher margin

and Development Expenses

and development expenses increased by $0.6 million or 84.2%, to $1.4 million for the three months ended September 30, 2023, as compared

to $0.8 million for the three months ended September 30, 2022.

The increase was primarily due to higher patent expenses, increased wages

associated with increased headcount, and higher materials and supply costs associated with development work.

and Administrative Expenses

and administrative expenses decreased by $0.3 million, or 4.7%, to $6.0 million for the three months ended September 30, 2023, as compared

to $6.3 million for the three months ended September 30, 2022.

This decrease was primarily due to lower fees related to the Company’s

Business Combination expenses in 2022 partially offset by higher compliance, insurance and investor relation expenses.

and Marketing Expenses

and marketing expenses decreased by $0.3 million, or 8.1%, to $3.1 million for the three months ended September 30, 2023, as compared

to $3.4 million for the three months ended September 30, 2022.

This decrease was primarily due to lower shipping costs on lower unit

volumes partially offset by higher spend on wage-related expenses and general marketing expenses.

Other expense

expense totaled $4.1 million for the three months ended September 30, 2023 as compared to total other expense of $1.2 million for the

three months ended September 30, 2022.

Other expense in the quarter ended September 30, 2023 is comprised of $4.0 million in interest

expense related to our debt securities, and a $0.1 million expense due to the change in fair market value of our warrants.

The $1.2 million

expense in the quarter ended September 30, 2022 was comprised of interest expense related to the senior secured notes of $45 million

which were retired as a result of the Business Combination.

Tax (Benefit) Expense

was no tax expense recorded for the three months ended September 30, 2023, as compared to a $0.9 million benefit for the three months

ended September 30, 2022.

The income tax benefit of $0.9 million for the quarter ended September 30, 2022 was expected to be used against

future tax obligations.

Based on available evidence as of September 30, 2023, management believes it is more likely than not that some

or all the deferred tax assets will not be realized.

Accordingly, the Company established a 100% valuation allowance.

As a result of

the full valuation allowance, the Company did not record a tax benefit during the quarter ended September 30, 2023.

generated a net loss of $10.0 million for the three months ended September 30, 2023, as compared to a net loss of $3.7 million for the

three months ended September 30, 2022.

As described above, this result was driven lower sales and increased other expense.

for the Nine months ended September 30, 2023 and September 30, 2022

following table sets forth our results of operations for the nine months ended September 30, 2023, and September 30, 2022.

should be read together with our financial statements and related notes included elsewhere in this Quarterly Report, and is qualified

in its entirety by reference to such financial statements and related notes.

months ended September 30,

(in thousands)

Cost of Goods Sold

Operating expenses

Research and development

General and administrative

Sales and marketing

Total Operating expenses

(Loss) From Operations

Other Income (Expense)

Interest expense, net

Change in fair market value of warrant liability

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Income Tax Benefit

months ended September 30,

Net (Loss) Income

Three months ended March 31,

(in thousands)

sales decreased by $12.1 million, or 18.3%, to $54.0 million for the nine months ended September 30, 2023, as compared to $66.0

million for the nine months ended September 30, 2022.

This decrease was primarily due to lower DTC battery and accessory sales.

revenue decreased by $11.4 million as a result of decreased customer demand for our products due to ongoing macro-economic factors

such as rising interest rates and inflation.

OEM revenue decline by $0.6 million for the nine months ended September 30, 2023

compared to the nine-months ended September 30, 2022 primarily due to weaker overall demand in the RV market.

As described above, the change in strategy by our largest RV OEM customer in

July of 2023 had a material adverse impact on our OEM sales for the quarter ended September 30, 2023 and we expect this change to

continue to have a material limiting effect on our revenue throughout the remainder of 2023.

sales decreased by $6.3 million, or 33.5%, to $12.5 million for the quarter ended March 31, 2024, as compared to $18.8 million for

the quarter ended March 31, 2023.

This decrease was primarily due to lower DTC and OEM battery and accessory sales offset by a

higher average sales price.

For the quarter ended March 31, 2024, DTC revenue decreased by $4.8 million due to decreased customer

demand for our products related to rising interest rates and inflation.

OEM revenue decreased by $1.5 million primarily due to our

largest Recreation Vehicle (RV) customers changing our product from a standard offering to an option.

Excluding this customer our RV OEM sales

were up 69% year over year.

We expect our sales to increase as the cyclical recovery of the RV market gains momentum in the

second half of 2024.

We expect our deployment of products for use in oil and gas operations in North America to begin

contributing to net sales by the fourth quarter of 2024.

of Goods Sold

of revenue decreased by $6.0 million, or 12.8%, to $40.5 million for the nine months ended September 30, 2023, as compared to $46.5 million

for the nine months ended September 30, 2022.

This decrease was primarily due to lower unit volumes partially offset by higher material

costs associated with consuming higher-priced inventory.

profit decreased by $6.1 million, or 31.4%, to $13.4 million for the nine months ended September 30, 2023, as compared to $19.6

million for the nine months ended September 30, 2022.

The decrease in gross profit was primarily due to lower unit volumes sold and

a change in revenue mix that included a larger percentage of lower margin OEM sales and a lower percentage of higher margin DTC

sales, combined with the aforementioned higher material costs.

of revenue decreased by $4.7 million, or 33.1%, to $9.5 million for the quarter ended March 31, 2024, as compared to $14.1 million for

the quarter ended March 31, 2023.

This decrease was primarily due to lower unit volume and lower material costs associated with consuming

lower-priced inventory resulting in a $4.6 million decrease of product cost and $0.1 million decrease in overhead expense associated

with lower labor costs due to reduced headcount.

We expect our Cost of Goods Sold to increase in conjunction with the anticipated increase

in revenue over the next 12 months.

profit decreased by $1.6 million, or 34.6%, to $3.1 million for the quarter ended March 31, 2024, as compared to $4.7 million for the

quarter ended March 31, 2023.

The decrease in gross profit was primarily due to a lower unit volume of sales.

and Development Expenses

and development expenses increased by $1.4 million or 70.8%, to $3.3 million for the nine months ended September 30, 2023, as compared

to $2.0 million for the nine months ended September 30, 2022.

The increase was primarily due to increased wages in the amount of $0.6

million associated with higher headcount, higher materials and supply costs associated with development work and higher patent expenses.

and development expenses increased by $0.4 million, or 51.5%, to $1.3 million for the quarter ended March 31, 2024, as compared to $0.9

million for the quarter ended March 31, 2023.

The increase was primarily due to higher wage expense in the amount of $0.3 million and

$0.1 million for increased patent and material expenses.

While we expect to continue to grow the Research and Development headcount,

we expect to do so at a slower rate than in prior years.

and Administrative Expenses

and administrative expenses increased by $9.3 million, or 67.8%, to $23.1 million for the nine months ended September 30, 2023, as compared

to $13.8 million for the nine months ended September 30, 2022.

This increase was primarily due a $4.8 million increase in stock-based

compensation costs, a $2.2 million increase in compliance and insurance expenses, a $1.6 million increase in investor relations expenses

and a $0.8 million increase in professional services related to the June 2023 Offering.

and administrative expenses decreased by $4.7 million, or 49.3%, to $4.8 million for the quarter ended March 31, 2024, as compared to

$9.5 million for the quarter ended March 31, 2023.

This decrease was primarily due to the issuance of stock-based compensation in the

prior year in the amount of $3.5 million along with lower employee related costs in the amount of $0.5 million due to decreased headcount.

In addition, legal and compliance costs decreased by $0.6 million due to reduced support required for Exchange Act reporting and compliance,

including the preparation of our Annual Report.

Travel expenses in General and Administrative decreased by $0.2 million due to allocation

to the other functional areas in 2024.

We expect General and Administrative Expenses, as a percentage of revenue, to decline over the

next 12 months.

and Marketing Expenses

and marketing expenses increased by $1.8 million, or 18.7%, to $11.1 million for the nine months ended September 30, 2023, as compared

to $9.3 million for the nine months ended September 30, 2022.

This increase was primarily due to a $2.8 million increase in wage-related

expenses, partially offset by $1.2 million in lower shipping costs due to the decline in DTC sales.

Other Income (Expense)

income totaled $7.3 million for the nine months ended September 30, 2023 as compared to total other expense of $3.7 million for the

nine months ended September 30, 2022.

Other income for the nine months ended September 30, 2023 is comprised of a change in fair

market value of our warrants in the amount of $19.2 million of income, offset by $11.9 million in interest expense related to our

debt securities.

The $3.7 million expense for the nine months ended September 30, 2022 was comprised of interest expense related to

the senior secured notes of $45 million which were retired as a result of the Business Combination.

and marketing expenses decreased by $1.4 million, or 34.4%, to $2.7 million for the quarter ended March 31, 2024, as compared to $4.2

million for the quarter ended March 31, 2023.

This decrease was primarily due to lower employee-related costs in the amount of $1.3 million

of which $0.8 million is due to the prior year stock- based compensation.

Lower shipping costs in the amount of $0.4 million is related

to a reduction in units sold is offset by $0.3 million other marketing expense which includes travel expenses allocated from general

and administrative to selling and marketing in 2024.

We expect our Selling and Marketing Expenses to be relatively stable over the next

Other (Expense) Income

expense totaled $4.5 million for the quarter ended March 31, 2024 as compared to total other income of $14.7 million for the quarter

ended March 31, 2023.

Other expense of $4.5 million in quarter ended March 31, 2024 was comprised primarily of interest expense of $4.8

million related to our debt securities offset by a change in fair market value of warrant liability in the amount of $0.2 million.

$14.8 million of other income in quarter ended March 31, 2023 is comprised of the change in fair market value of warrant liability of

$18.5 million offset by interest expense of $3.9 million related to our debt securities.

Tax (Benefit) Expense

was no tax expense recorded for the nine months ended September 30, 2023, as compared to a $1.7 million benefit for the nine months ended

September 30, 2022.

The income tax benefit of $1.7 million for the nine months ended September 30, 2022 was expected to be used against

future tax obligations.

Based on available evidence as of September 30, 2023, management believes it is more likely than not that some

or all the deferred tax assets will not be realized.

Accordingly, the Company established a 100% valuation allowance.

As a result of

the full valuation allowance, the Company did not record a tax benefit during the nine months ended September 30, 2023.

generated a net loss of $16.8 million for the nine months ended September 30, 2023, as compared to a net loss of $7.5 million for the

nine months ended September 30, 2022.

As described above, this result was driven primarily by lower sales, increased material costs due

to the absorption of higher-priced inventory, and higher operating expenses, partially offset by increased other income (due to the change

in fair market value of the Company’s warrants treated as liabilities).

was no tax expense recorded for the three months ended March 31, 2024 or March 31, 2023.

Based on available evidence as of March 31,

2024 and March 31, 2023, management believes it is more likely than not that some or all the deferred tax assets will not be realized.

Accordingly, we established a 100% valuation allowance.

As a result of the full valuation allowance, we did not record a tax benefit

during the quarter ended March 31, 2023 or 2024.

(Loss) Income

experienced a net loss of $10.4 million for the quarter ended March 31, 2024, as compared to net income of $4.8 million for the quarter

ended March 31, 2023.

As described above, this result was driven by lower sales partially offset by lower cost of goods sold, and lower

operating expenses, and a decrease in other income (due to the change in fair market value of our warrants).

Accounting Estimates

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of the change in the estimate.

consider an accounting estimate to be critical if:

(1) the accounting estimate requires us to make assumptions about matters that were

highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from

period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact

on our financial condition or results of operations.

has discussed the development and selection of these critical accounting estimates with the Audit Committee of our board of directors.

In addition, there are other items within our financial statements that require estimation but are not deemed critical as defined above.

Changes in estimates used in these and other items could have a material impact on our financial statements.

believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our

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management judgement.

The level of the estimate is assessed by considering the recent sales experience, the aging of inventories, and

other factors that affect inventory obsolescence.

apply relevant accounting guidance for warrants to purchase our stock based on the nature of the relationship with the counterparty.

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classifications are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified.

See “ Note 9—Warrants ” in our accompanying condensed consolidated financial statements for information on the

See “ Note 9-Warrants ” in our accompanying condensed consolidated financial statements for information on the warrants.

use the Black-Scholes option-pricing model to determine the fair value of option grants.

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RSU awards are valued based on the closing trading price

of the Company’s common stock on the date of grant.

Changes in assumptions used to estimate fair value could result in materially

different results.

of our common stock on the date of grant.

Changes in assumptions used to estimate fair value could result in materially different results.

account for income taxes using the asset and liability method.

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may need to adjust our valuation allowance, which could materially impact our financial position and results of operations.

right-of-use assets and assumed lease liabilities are measured based on the remaining lease payments over the remaining portion of the

As our leases do not provide an implicit rate, our incremental borrowing rate is used as a discount rate in determining

the present value of lease payments.

Our incremental borrowing rate was determined by comparing current low- and high-end mortgage loan

rates and calculating an average.

For our new Damonte lease, to be conservative in our estimate, we chose to use the high-end average

as our incremental borrowing rate.

Financial Measures

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reported in accordance with U.S.

table below presents our adjusted EBITDA, reconciled to net loss for the three and nine months ended September 30, 2023, and September

months ended September 30,

(in thousands)

table below presents our adjusted EBITDA, reconciled to net loss for the three months ended March 31, 2024, and March 31, 2023.

Three months ended March 31,

(in thousands)

Net income (loss)

Interest Expense

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Stock-Based Compensation (1)

Separation Agreement (2)

June 2023 Offering Costs (3)

Promissory Note Forgiveness (4)

Change in fair market value of warrant liability (2)

Adjusted EBITDA

Compensation is comprised of costs associated with option and RSU grants made to our

employees, consultants and board members.

Agreement is comprised of $720 in cash severance associated with separation agreement dated April 26, 2023, between us and our former

Chief Legal Officer.

2023 Offering Costs are comprised of fees and expenses, including legal, accounting, and other expenses associated with our secondary

Note Forgiveness is comprised of the loan that was forgiven, prior to the Business Combination, in connection with the promissory

note, with a maturity date of March 1, 2026, between us and John Marchetti, our former Chief Financial Officer and current Senior

Vice President, Operations.

in fair market value of warrant liabilities represents the change in fair value for the three and nine month period ended September

Compensation is comprised of costs associated with option and RSU grants made to our employees, consultants and board members.

in fair market value of warrant liabilities represents the change in fair value for the three months ended March 31, 2024 and March

and Capital Resources

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cash flows from operations and their sufficiency to fund our operating and investing activities.

As of September 30, 2023, we had cash

totaling $13.2 million.

As of March 31, 2024, we had cash totaling

$8.5 million.

expect our capital expenditures and working capital requirements to increase materially in the near future, as we continue our research

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three years, we expect to spend in excess of $50 million on solid-state development and cell manufacturing technologies.

In connection

with the contraction of our business and uncertainty around the timing of future needs, we reduced our purchase activities in 2023.

a result, our inventory balance at March 31, 2024 decreased by $5.2 million to $33.6 million, compared to $38.8 million at December 31,

expect that we will need to raise additional funds, including through the use of the ChEF Equity Facility and the issuance of equity,

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Term Loan proceeds were used to:

(i) support the Business Combination, (ii) prepay the fixed rate senior notes at closing of the Business

Combination, (iii) pay fees and expenses in connection with the foregoing, (iv) to provide additional growth capital and (v) for other

general/corporate purposes.

The Term Loan will mature on October 7, 2026, or the Maturity Date, and will be subject to quarterly amortization

of 5% per annum beginning 24 months after issuance.

The definitive documents for the Term Loan incorporate certain mandatory prepayment

events and certain affirmative and negative covenants and exceptions hereto.

The financial covenants for the Term Loan include a maximum

senior leverage ratio covenant, a minimum liquidity covenant, a springing fixed charge coverage ratio covenant, and a maximum capital

expenditures covenant.

On March 29, 2023 and September 29, 2023, we obtained waivers from Alter Domus (US) LLC, as the administrative

agent for the lenders (the “ Administrative Agent ”) and EICF Agent LLC and certain third-party financing source of

our failure 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.

We were in compliance with the covenants as of June

(i) support the Business Combination, (ii) prepay the fixed rate senior notes at closing of the

Business Combination, (iii) pay fees and expenses in connection with the foregoing, (iv) to provide additional growth capital and

(v) for other general/corporate purposes.

The Term Loan will mature on October 7, 2026, or the Maturity Date, and will be subject to

quarterly amortization of 5% per annum beginning 24 months after issuance.

The definitive documents for the Term Loan incorporate

certain mandatory prepayment events and certain affirmative and negative covenants and exceptions hereto.

The financial covenants

for the Term Loan include a maximum senior leverage ratio covenant, a minimum liquidity covenant, a springing fixed charge coverage

ratio covenant, and a maximum capital expenditures covenant.

On March 29, 2023, September 29, 2023, December 29, 2023 and May 13,

2024, we obtained waivers from Alter Domus (US) LLC, as the administrative agent for the lenders (the “ Administrative

Agent ”) and EICF Agent LLC and certain third-party financing source of our failure to satisfy the Tests under the Term

Loan during the quarters ended March 31, 2023, September 30, 2023, December 31, 2023 and March 31, 2024.

On March 31, 2024 and April 29, 2024, we

received additional waivers from the Administrative Agent and the Term Loan Lenders in regard to our compliance with the liquidity

requirement under the Term Loan as of the last day of the fiscal quarter ended March 31, 2024 and as of the last fiscal day for the

month ended April 30, 2024.

However, it is probable that we will fail to meet these covenants within the next twelve months.

In accordance with U.S.

we reclassified our notes payable from a long-term liability to a current liability.

The Term Loan accrues interest (i) until April 1,

2023 at a per annum rate equal to adjusted secured overnight financing rate (“ SOFR ”) is 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.

In each of the foregoing case, adjusted SOFR will be no less than 1%.

accordance with U.S.

GAAP, we reclassified our notes payable from a long-term liability to a current liability.

The Term Loan

accrues interest (i) until April 1, 2023 at a per annum rate equal to adjusted secured overnight financing rate

(“ SOFR ”) is 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.

In each of the foregoing case, adjusted SOFR will

be no less than 1%.

may elect to prepay all or any portion of the amounts owed prior to the Maturity Date, provided that we provide notice to the Administrative

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exercisable to purchase 1,600,000 shares of our common stock at an exercise price of $10.00 per share.

January 1, 2023 to September 30, 2023, we issued and sold approximately 98,500 shares of our common stock under the ChEF Equity Facility,

resulting in net cash proceeds of $670,593.

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.

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, we 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.

to the Purchase Agreement, on the terms of and subject to the satisfaction of the conditions in the Purchase Agreement, including the

filing and effectiveness of a registration statement registering the resale by CCM LLC of the shares of common stock issued to it under

the Purchase Agreement, we will have the right from time to time at our option to direct CCM LLC to purchase up to a specified maximum

amount of shares of common stock, up to a maximum aggregate purchase price of $150 million over the term of the ChEF Equity Facility.

In connection with the ChEF Equity Facility, we filed a registration statement registering the resale of up to 21,512,027 shares that

may be resold into the public markets by CCM LLC, which represented approximately 36% of the shares of our common stock outstanding as

of December 31, 2023.

During the year ended December 31, 2022, we did not sell any shares of our common stock under the ChEF Equity Facility.

During the year ended December 31, 2023, we issued and sold approximately 588,500 shares of our common stock under this facility, resulting

in net cash proceeds of $1,278,566.

From January 1, 2024 through May 14, 2024, we did not issue any shares of common stock under this

Any sales of such shares into the public market could have a significant negative impact on the trading price of our common

This impact may be heightened by the fact that sales to CCM LLC will generally be at prices below the current trading price of

our common stock.

If the trading price of our common stock does not recover or experiences a further decline, sales of shares of common

stock to CCM LLC pursuant to the Purchase Agreement may be a less attractive source of capital and/or may not allow us to raise capital

at rates that would be possible if the trading price of our common stock were higher.

March 5, 2023, we issued a note in the principal amount of $1.0 million (the “ Principal Amount ”) to Brian Nelson,

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on April 4, 2023.

January 30, 2024, we issued an unsecured convertible promissory note (the “ January Note ”) in the principal amount

of $1.0 million (the “ January Principal Amount ”) to Brian Nelson, one of our directors, in a private placement in

exchange for cash in an equal amount.

The January Note became due and payable in full on February 2, 2024.

We were also obligated to

pay $50,000 (the “ January Loan Fee ”) to Mr.

Nelson on February 2, 2024.

We paid the January Principal Amount and the

January Loan Fee in full on February 2, 2024.

February 27, 2024 we issued a convertible promissory (the “ February Note ”) in the amount of $1.7 million (the “ February

Principal Amount ”) to Mr.

Nelson, in a private placement in exchange for cash in an equal amount.

The February Note became

due and payable in full on March 1, 2024.

We were also obligated to pay a $85,000 loan fee (the “ February Loan Fee ”)

Nelson on March 1, 2024.

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

June 2023, we completed the June 2023 Offering which provided net proceeds to us, including the partial over-allotment option exercise,

of approximately $20.7 million.

In July 2023, upon a request from the Company’s lenders under the Term Loan Agreement, the Company

repaid $5.3 million to satisfy a portion of its outstanding principal.

the quarter ended September 30, 2023, we generated a net loss of $16.8 million and had a negative cash flow from operations.

As of September

In July 2023, upon a request from our lenders under the Term Loan Agreement, we repaid $5.3 million to

satisfy a portion of its outstanding principal.

2024, we identified an underpayment of tariffs to CBP in the amount of approximately $1.58 million in the aggregate, related to the improper

classification and valuation of certain of the products used in our batteries.

We have reported the underpayment to CBP.

the quarter ended March 31, 2024, we generated a net loss of $10.4 million and had a negative cash flow from operations.

31, 2024, we had approximately $8.5 million in cash and cash equivalents and working capital of $4.2 million.

the Term Loan Agreement, we are obligated to comply with certain financial covenants, which include maintaining a maximum senior leverage

ratio, minimum liquidity, a springing fixed charge coverage ratio, and maximum capital expenditures.

On March 29, 2023 and September

29, 2023, we obtained waivers from our Administrative Agent and the Term Loan Lenders of our 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.

While the Company was in compliance with its covenants for the quarter ended June 30, 2023, it is probable

that we will fail to meet these covenants within the next twelve months.

If we are unable to comply with the financial covenants in our

loan agreement, the Term Loan Lenders have the right to accelerate the maturity of the Term Loan.

These conditions raise substantial

doubt about our ability to continue as a going concern.

the Term Loan Agreement, we are obligated to comply with certain financial covenants, which include maintaining a maximum senior

leverage ratio, minimum liquidity, a springing fixed charge coverage ratio, and maximum capital expenditures.

On March 29, 2023,

September 29, 2023, December 29, 2023 and May 13, 2024, we obtained waivers from our Administrative Agent and Term Loan Lenders of our failures to

satisfy the fixed charge coverage ratio and maximum senior leverage ratio with respect to the minimum cash requirements under the

Term Loan for the quarters ended, March 31, 2023, September 30, 2023, December 31, 2024 and March 31, 2024.

On March 31, 2024 and April 29, 2024, we

received additional waivers from our Administrative Agent and Term Loan Lenders in regard to our compliance with our liquidity

requirement under the Term Loan as of the last day of the fiscal quarter ended March 31, 2024 and as of the last day of the fiscal

month ended April 30, 2024.

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

If we are unable

to comply with the financial covenants in our loan agreement, the Term Loan Lenders have the right to accelerate the maturity of the

These conditions raise substantial doubt about our ability to continue as a going concern.

addition, we may need to raise additional debt and/or equity financing to fund our operations and strategic plans and meet our financial

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future debt or equity financings may be dilutive to our current stockholders.

Flows for the Nine months ended September 30, 2023, and September 30, 2022

months ended September 30,

Net Cash (used in)/provided by:

Flows for the Three months ended March 31, 2024, and March 31, 2023

Three months ended March 31,

(in thousands)

Net Cash (used in)/provided by:

Operating Activities

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Financing activities

cash used in operating activities was $16.7 million for the nine months ended September 30, 2023, primarily due to a net loss of $16.8

million partially offset by a $0.1 million increase as a result of other operating adjustments.

cash used in operating activities was $24.7 million for the nine months ended September 30, 2022, due to a net loss during the period

and a $17.3 million decrease in other operating adjustments.

cash used in investing activities was $6.5 million for the nine months ended September 30, 2023, as compared to net cash used in investing

activities of $6.1 million for the nine months ended September 30, 2022.

cash used in operating activities was $3.4 million for the three months ended March 31, 2024, primarily due to a net loss of $10.4 million

partially offset by $1.3 million of payment in-kind interest accrued on the term loan and $5.2 million decrease in inventory as a result

of management’s decision to lower overall stocking levels to adjust for more modest demand.

cash used in operating activities was $3.8 million for the three months ended March 31, 2023.

Net income of $4.8 million was offset by

$12.1 million in operating adjustments, primarily due to a $18.5 million change in the fair market value of warrant liability and an

increase in working capital of $3.5 million as a result of an increase accounts payable offset by an increase in inventory and accounts

cash used in investing activities was $0.8 million for the three months ended March 31, 2024, as compared to net cash used in investing

activities of $0.6 million for the three months ended March 31, 2023.

The increase in cash used in investing activities was primarily

due to an increase in capital equipment expenses.

cash provided by financing activities was $18.7 million for the nine months ended September 30, 2023, as compared to net cash provided

by financing activities of $15.7 million for the nine months ended September 30, 2022, and was primarily due to net proceeds of $21.1

million from the June 2023 Offering partially offset by a $5.3 million principal payment of our notes payable.

due to an increase in capital equipment expenses to support our core battery business and ongoing efforts to develop solid-state battery

technology and manufacturing process.

was zero net cash provided in financing activities, proceeds of $2.7 million note payable was subsequently repaid for the three months ended March 31, 2024, as compared to net cash provided by financing

activities of $2.4 million for the three months ended March 31, 2023 which consisted of $1.0 million note payable and proceeds related

to public warrants.

estimated future obligations consist of short-term and long-term operating lease liabilities.

As of September 30, 2023, we had $1.3 million

As of March 31, 2024, we had $1.7 million

in short-term operating lease liabilities and $22.8 million in long-term operating lease liabilities.

disclosed above, we have a Term Loan.

As of September 30, 2023, the amount outstanding under the Term Loan was $74.7 million, which consists

of $69.7 million in principal and $4.9 million in PIK interest.

disclosed above, we have a Term Loan and as of March 31, 2024, the principal amount outstanding under the Term Loan was $69.7 million.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 2. Management’s Discussion and Analysis