What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-15 · 561 added, 488 removed, 563 unchanged (65% of the section changed)

1 unchanged sentence

ENERGY HOLDINGS CORP.

Condensed Consolidated Balance Sheets

Consolidated Balance Sheets

thousands, except share and per share data)

June 30, 2024

December 31, 2023

Current Assets

Cash and cash

Accounts receivable, net

of allowance for credit losses

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses

Prepaid expenses

1 unchanged sentence

Prepaid income tax

current assets

Current Assets

Other current assets

Total Current Assets

Property and Equipment

2 unchanged sentences

Leasehold improvements

accumulated depreciation and amortization

Property and Equipment,

Operating lease right

of use asset, net

Less accumulated depreciation and amortization

Property and Equipment, Net

Operating lease right of use asset, net

Current Liabilities

Accounts payable

Accrued payroll and other

Accrued payroll and other liabilities

Accrued tariffs

Customer deposits

Uncertain tax position

Notes payable, current

portion, net of debt issuance costs

Operating lease liability,

current portion

lease liability, current portion

Current Liabilities

Uncertain tax position liability

Notes payable, current portion, net of debt issuance costs

Operating lease liability, current portion

Financing lease liability, current portion

Total Current Liabilities

Long-Term Liabilities

1 unchanged sentence

Accrued expenses-long term

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,

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)

Stockholders’ Equity

Preferred stock, 5,000,000 shares at $ 0.0001 par value, authorized,

no shares issued and outstanding as of June 30, 2024 and

December 31, 2023, respectively

Common stock, 250,000,000 shares at $ 0.0001 par value, authorized,

61,367,633 and 60,260,282 shares issued and outstanding as of June 30, 2024

December 31, 2023, respectively

Additional paid in capital

Accumulated deficit

Stockholders’ Equity

Liabilities and Stockholders’ Equity

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

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

1 unchanged sentence

Condensed Consolidated Statements of Operations

the Three Months Ended March 31, 2024 and 2023

the Three AND SIX Months Ended June 30, 2024 and 2023

thousands, except share and per share data)

The Three Months Ended

For The Three Months Ended

For The Six Months Ended

Cost of Goods Sold

2 unchanged sentences

General and administrative

and marketing

Operating Expenses

From Operations

Other Income (Expense)

Selling and marketing

Total Operating Expenses

Loss From Operations

Other (Expense) Income

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

Change in fair market value of warrant liability

Total Other (Expense) Income

Net Loss Before Taxes

Income Tax (Benefit) Expense

Loss Per Share- Basic & Diluted

Weighted Average Number of Shares – Basic & Diluted

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

1 unchanged sentence

Condensed Consolidated Statements of STockholders’ Equity

the Three Months Ended March 31, 2024 and 2023

the Three AND SIX Months Ended June 30, 2024 and 2023

thousands, except share data)

Paid-In Capital

-January 1, 2023

Common stock issued in public offering (ATM),

Additional Paid-In

Balance -January 1, 2023

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

Exercise of stock options

3 unchanged sentences

Balance - March 31, 2023

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, 2024

Net income (loss)

Stock compensation expense

Balance - March 31, 2024

Net income (loss)

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

Share issuance under ESPP

Share cancellation

Exercise of stock options

Shares issued for vested restricted stock units

Stock compensation expense

Balance - June 30, 2024

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

the Three Months Ended March 31, 2024 and 2023

the SIX Months Ended June 30, 2024 and 2023

Cash flows from Operating Activities

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

Adjustments to Reconcile Net Loss to Net Cash

Used in Operating Activities

Stock based compensation

Amortization of debt discount

Change in fair market value

of warrant liability

Non-cash interest expense

(paid-in kind)

Change in fair market value of warrant liability

Non-cash interest expense (paid-in kind)

Provision for credit losses

1 unchanged sentence

Amortization of right of use of assets

Loss on disposal of property

and equipment

Loss on disposal of property and equipment

Changes in Assets and Liabilities

4 unchanged sentences

Income taxes payable

Accounts payable and accrued

Accounts payable and accrued expenses

Accrued tariffs

Cash Used in Operating Activities

Customer deposits

Total Adjustments

Net Cash Used in Operating Activities

Cash Flows From Investing Activities

of property and equipment

Cash Used in Investing Activities

Purchase of property and equipment

Net Cash Used in Investing Activities

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows (continued)

the Three Months Ended March 31, 2024 and 2023

the SIX Months Ended June 30, 2024 and 2023

(continued from previous page)

1 unchanged sentence

Proceeds from public offering

Payments from public offering costs

Proceeds from note payable, related party

2 unchanged sentences

Proceeds from exercise of options

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

Net Cash Provided by Financing Activities

Net (Decrease) Increase in cash and cash equivalents

Beginning Cash and cash equivalents - beginning of year

Ending Cash and cash equivalents - end of year

Supplemental Disclosures of Cash Flow Information:

Cash paid for income

Cash paid for income taxes

Cash paid for interest

Supplemental Non-Cash Items

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

Purchases of property and equipment, not yet paid

Recognition of right of use asset obtained in exchange for operating lease liability

Recognition of leasehold improvements obtained in exchange for operating lease liability

Recognition of warrant liability

Settlement of accrued liability for employee stock purchase plan

Cashless exercise of liability classified warrants

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

19 unchanged sentences

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 SX.

set forth in Article 8 of Regulation S-X.

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

8 unchanged sentences

the audited consolidated financial statements as of and for the year then ended.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

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”),

the Company is obligated to comply with certain financial covenants, which include maintaining a maximum senior leverage ratio, minimum

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

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.

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 six months ended June 30, 2024 and 2023, the Company incurred losses from operations and had negative cash flow from operations.

As of June 30, 2024, the Company had $ 4,699 in cash and cash equivalents and a working capital deficit of $ 4,584 .

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 (as amended, the “Term

Loan”), the Company is obligated to comply with certain financial covenants, which include maintaining a maximum senior leverage

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

2024, April 29, 2024 and June 28, 2024, the Company obtained waivers from the Term Loan administrative agent and lenders of its failures

to satisfy the liquidity requirement under the Term Loan for the quarters ended March 31, 2024 and June 30, 2024 and the fiscal month

ended April 30, 2024, as applicable.

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

23 unchanged sentences

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

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

2 – Summary of Significant Accounting Policies (continued)

and Cash Equivalents

7 unchanged sentences

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

The allowance for credit losses as of March 31,

The allowance for credit losses as of June 30,

2024 and December 31, 2023 were not material.

1 unchanged sentence

value, net of reserves for obsolete inventory.

We continually analyze our slow moving and excess inventories.

Based on historical and

projected sales volumes and anticipated selling prices, we established reserves.

Inventory that is in excess of current and projected

use is reduced by an allowance to a level that approximates its estimate of future demand.

Products that are determined to be obsolete

are written down to net realizable value.

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.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

2 – Summary of Significant Accounting Policies (continued)

The Company continually analyzes its slow moving and excess inventories.

Based on historical

and projected sales volumes and anticipated selling prices, the Company 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 June 30, 2024 and December 31, 2023 was not material.

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 utilizes the use of estimates in its calculations for the reserve for obsolete or slow-moving inventory, right of use asset,

warrant liability, equity-based compensation, and income taxes.

Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the

21 unchanged sentences

Company may receive payments at the onset of the contract before delivery of goods for customers in the retail channel.

terms for distributors and OEMs are typically due within 30 - 90

days after shipment.

In such instances, the Company records a customer deposit liability.

The Company recognizes these contract

liabilities as sales after the revenue criteria are met.

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

to the Company’s customer deposits are $ 231

respectively.

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.

Payment terms

for distributors and OEMs are typically due within 30 - 90 days after shipment.

In such instances, the Company records a customer deposit

The Company recognizes these contract liabilities as sales after the revenue criteria are met.

As of June 30, 2024 and December

31, 2023, the contract liability related to the Company’s customer deposits were approximately $ 250 and $ 201 , respectively.

Company recognized $ 153 of the contract liability as of December 31, 2023 during the six months ended June 30, 2024.

The Company recognized

$ 211 of the contract liability as of December 31, 2022 during the six months ended June 30, 2023.

Disaggregation

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Direct to Customer

equipment manufacturer

Original equipment manufacture

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

15 unchanged sentences

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

its existing assurance type warranties and has determined that the estimated outstanding warranty obligation at June 30, 2024 and December

31, 2023 to be $ 467 and $ 307 , respectively.

OF WARRANTY OBLIGATION

June 30, 2024

December 31, 2023

Beginning warranty obligation

Provision of warranty expense

Settlement of warranty

Ending warranty obligation

Settlement of warranty claims

Ending warrant 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 June 30, 2024, receivables from Customer A and Customer B comprised approximately 21 % and 17 %, respectively, of accounts receivable.

As of December 31, 2023, receivables from Customer A and C comprised approximately 28 % and 10 %, respectively, of accounts receivable.

the six months ended June 30, 2024, sales from Customer A comprised approximately 14 % of the Company’s total revenue.

months ended June 30, 2023, sales from Customer B accounted for approximately 26 % of the Company’s total revenue.

For the three

months ended June 30, 2024, sales from Customer A comprised approximately 12 % of the Company’s total revenue.

For the three months

ended June 30, 2023, sales from Customer B accounted for approximately 27 % of the Company’s total revenue.

of June 30, 2024, payables to Vendor A and Vendor B comprised approximately 39 % and 13 %, respectively, of accounts payables.

As of December

31, 2023, payables to Vendor A comprised approximately 65 % of accounts payables.

the six months ended June 30, 2024, there were no purchase concentrations present.

For the six months ended June 30, 2023, Vendor A accounted

for approximately 22 % of the Company’s total purchases.

For the three months ended June 30, 2024, Vendor B accounted for approximately

15 % of the Company’s total purchases.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

2 – Summary of Significant Accounting Policies (continued)

For the three months ended June 30, 2023, Vendor C accounted for approximately 10 % of the

Company’s total purchases.

Company accounts for stock-based compensation arrangements with employees and non-employee consultants using a fair value method which

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

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

15 unchanged sentences

Company accounts for forfeitures as they occur.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

2 – Summary of Significant Accounting Policies (continued)

income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss, credit carryforwards

3 unchanged sentences

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.

The Company had a liability of $ 91 as of June 30,

2024, and December 31, 2023, 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

1 unchanged sentence

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.

Loss per Common Share

net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period.

Diluted net loss 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 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 per share if their effect is antidilutive.

In periods in

which the Company reports a net loss, diluted net loss per share is generally the same as basic net loss per share since dilutive common

shares are not assumed to have been issued if their effect is anti-dilutive.

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:

OF POTENTIAL SHARES OF COMMON STOCK EXCLUDED FROM DILUTED NET LOSS PER SHARE

June 30, 2024

June 30, 2023

Restricted stock units

Weighted average number of common shares-basic

the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and

14 unchanged sentences

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.

5 unchanged sentences

of any input that is significant to the fair value measurement.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

3 - Fair Value Measurements (continued)

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

basis as of March 31, 2024:

basis as of June 30, 2024:

OF FAIR VALUE OF ASSETS AND LIABILITIES

of March 31, 2024

As of June 30, 2024

Warrant liability- Term Loan

4 unchanged sentences

basis as of December 31, 2023:

of December 31, 2023

As of December 31, 2023

Warrant liability- Term Loan

2 unchanged sentences

Total liabilities

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

carrying amounts of accounts receivable and accounts payable are considered level 1 and approximate fair value as of June 30, 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

carrying value of the term loan as of June 30, 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.

2 unchanged sentences

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

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

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

OF FAIR VALUE ON RECURRING BASIS USING SIGNIFICANT UNOBSERVABLE INPUTS

Warrant Liability – Term Loan

Warrant Liability – June Public Offering

Fair value as of January 1, 2024

Warrants Issued

Warrant exercises

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

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

Fair value as of March 31, 2024

Liability - Term Loan

Warrants Issued

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

Fair value as of June 30, 2024

Warrant Liability - Term Loan

Warrant liability- June Public Offering

Fair value as of January 1, 2023

Warrants Issued

Warrant exercises

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

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

Fair value as of March 31, 2023

(1) Changes in fair

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

Warrants Issued

Warrant exercises

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

Fair value as of June 30, 2023

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

4 - INVENTORY

2 unchanged sentences

Total inventory

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

5 - COMMITMENTS AND CONTINGENCIES

15 unchanged sentences

date was March 25, 2024.

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

The Company began paying monthly rent under the lease on July 24, 2024.

April 12, 2024 the Company entered into a lease agreement, pursuant to which the Company agreed to lease an approximately 64,000

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 effective date of the lease is April 1, 2024 (the

“Lease Commencement Date”).

However, the initial term of the Fernley Lease Agreement (the “Term”) is for a

period of sixty (60) months, effective June 1, 2024 (the “Rent Commencement Date”).

The base rent for the Premises,

payable monthly, is $ 45

for the first ten months, starting June 1, 2024, and is subject to a three percent ( 3.0 %) increase on the anniversary of the Lease

Commencement Date 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 .

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

SCHEDULE OF BREAKOUT OF OPERATING LEASES

lease right-of-use assets

OF BREAKOUT OF OPERATING LEASES

Operating lease right-of-use assets

Short-term operating lease liabilities

Long-term operating

lease liabilities

Total operating lease

Long-term operating lease liabilities

Total operating lease liabilities

Weighted average remaining lease term

Weighted average discount rate

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

used in determining the Company’s incremental borrowing rate include its 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

June 30, 2024, the future minimum lease payments under these operating leases are as follows:

OF FUTURE MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES

Fiscal Years Ending

6 unchanged sentences

Less imputed interest

Total operating lease

(1) Represents scheduled

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

Total operating lease liabilities

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

OF LEASE COST

The Three Months Ended March 31,

For The Three Months

Ended June 30,

For The Six Months

Ended June 30,

Classification

9 unchanged sentences

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.

4 unchanged sentences

OF BREAKOUT OF FINANCE LEASES

lease right-of-use assets

Finance lease right-of-use assets

Short-term finance lease liabilities

Long-term finance lease

Total finance lease

Long-term finance lease liabilities

Total finance lease liabilities

Weighted average remaining lease term

2 unchanged sentences

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 FINANCE LEASES

June 30, 2024, the future minimum lease payments under these operating leases are as follows:

OF FUTURE MINIMUM LEASE PAYMENTS UNDER FINANCE LEASES

Fiscal Years Ending

5 unchanged sentences

Less imputed interest

Total operating lease

(1) Represents scheduled

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

Total operating lease liabilities

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

Contingencies

1 unchanged sentence

Company, LLC.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

6 - LONG TERM DEBT

2 unchanged sentences

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.

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

15 unchanged sentences

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.

accrues interest as follows:

(i) 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;

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 %;

(iii) effective

April 1, 2024 and thereafter, interest payable to certain lenders subject to regulations of the U.S.

Small Business Administration (“SBA”)

with outstanding principal on that date of $ 30,846 will be limited to 14.0 % per annum (except for default interest permitted under SBA

regulations, as applicable);

and (iv) the other outstanding principal will accrue interest from April 1, 2024 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

Company’s senior leverage ratio, and at all times thereafter, at a per annum rate equal to adjusted SOFR plus a margin ranging

from 11.5 % to 13.5 %, depending on the senior leverage ratio of the Company.

of interest based on the Term Loan Agreement, as amended, are as follows:

Interest payable on April 1, 2024, was paid in cash.

Interest payable on July 1, 2024, became payable-in-kind.

Interest payable on October 1, 2024, will be payable partly in cash and partly in-kind, at a per annum rate equal to adjusted SOFR plus

7 % payable in cash plus an amount ranging from 4.5 % to 6.5 % paid-in-kind, depending on the senior leverage ratio of the consolidated

company (subject to the 14.0 % limit for lenders subject to SBA regulations).

For each payment date occurring on or after January 1, 2025, interest will be payable in cash.

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

10 unchanged sentences

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

the six months ended June 30, 2024 and 2023, a total of $ 7,022 and $ 7,147 , respectively, of interest expense was incurred under the debt.

During the three months ended June 30, 2024 and 2023, a total of $ 3,321 and $ 3,651 , respectively, of interest expense was incurred under

Amortization of the debt issuance costs amounted to $ 2,428 and $ 620 , respectively, during the six months ended June 30, 2024

Amortization of the debt issuance costs amounted to $ 1,534 and $ 401 , respectively, during the three months ended June 30, 2024

carrying balance of $ 21,903 on June 30, 2024, consisted of $ 69,725 in principal, plus $ 10,711 PIK interest, less $ 58,533 in unamortized

debt discount related to the debt issuance costs.

1 unchanged sentence

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

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

6 - Long Term Debt (continued)

Loan Agreement (continued)

May 13, 2024, the Company received a waiver from its Administrative Agent and Term Loan Lenders (the “May 2024 Waiver”) in

regards to its compliance with the Senior Leverage Ratio and Fixed Charge Coverage Ratio tests (the “Tests”) as of the last

day of the quarter ended March 31, 2024.

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

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

2024 Penny Warrant Shares”).

The May 2024 Penny Warrants have an exercise price of $ 0.01 per share, were valued at $ 3,022 , and

recorded as a debt discount.

The May 2024 Penny Warrants were issued in connection with the Term Loan Lenders’ agreement to waive

the Tests under the Term Loan for the quarter ended March 31, 2024.

The May 2024 Penny Warrants were immediately exercisable upon issuance

and will expire ten years from the date of issuance.

June 28, 2024, the Company entered into a Limited Waiver and First Amendment (the “Term Loan Amendment” and, together with

the Term Loan Agreement, the “Term Loan Agreement”) to the Term Loan with the lenders in regards to its compliance with the

Tests as of the last day of the quarter ended June 30, 2024 and certain amendments to the Term Loan.

The Term Loan Amendment provided

for a one-time issuance of Penny Warrants to purchase up to 2,100,000 shares of the Company’s Common Stock at an exercise price

of $ 0.01 per share (the “June 2024 Penny Warrants”), valued at $ 1,767 and recorded as a debt discount.

The June 2024 Penny

Warrants were issued in connection with the lenders’ agreement to waive the Tests under the Term Loan for the quarter ended June

30, 2024 and to amend the Term Loan.

The June 2024 Penny Warrants are immediately exercisable upon issuance and will expire ten years

from the date of issuance.

addition, the Term Loan Amendment (i) reduced the liquidity requirement under the Term Loan to be $ 3.5 million as of the last day of

the month ended June 30, 2024, and $ 10.0 million as of the last day of each fiscal month thereafter commencing with the fiscal month

ended July 31, 2024 and (ii) provided for the interest to be paid on the Payment Date (as defined in the Term Loan) occurred on July

1, 2024 to be solely payable-in-kind.

connection with the License Agreement ( See Note 14- Subsequent Events ), on July 29, 2024, the Company, DFE and Battle Born LLC

entered into a Limited Waiver, Consent and Second Amendment to Term Loan, Guarantee and Security Agreement with the lenders under the

Company’s Term Loan, Guarantee and Security Agreement, dated as of October 7, 2022, and Alter Domus (US) LLC, as the agent to the

to the Amendment, the Lenders (i) consented to the transactions contemplated by the License Agreement and the Trademark Transfer Agreement

and (ii) agreed to waive the mandatory prepayment under the Loan Agreement that would have been due to the Lenders under the Loan Agreement

upon Battle Born LLC’s receipt of the Initial Licensing Fee.

connection with the Amendment, Battle Born LLC entered into a Joinder Agreement with the Lenders whereby Battle Born LLC became a guarantor

and credit party to the Loan Agreement.

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

As of June 30, 2024, the Company was not in compliance with its financial

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

On March 31, 2024, 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

On March 31, 2024 and June

28, 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 and June 30, 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

Because of this, the entire debt is classified as current instead of long-term debt.

June 30, 2024, the future debt maturities are as follows:

OF FUTURE DEBT MATURITIES

For Year Ended December 31,

Estimated interest

debt issuance costs

Estimated interest paid-in-kind

Unamortized debt issuance costs

Total carrying amount

Current portion

Current portion of debt

Total long-term debt

26 unchanged sentences

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.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

During the period

January 1, 2024 through the quarter ended June 30, 2024, no compensation expense has been recognized.

This expense is reflected in the

statement of operations under Sales and marketing expense.

The total amount was recognized as compensation expense as of December 31,

2023, since it was deemed earned and no further service performance was required.

8 - RELATED PARTY

8 unchanged sentences

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.

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 ,

11 unchanged sentences

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

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.

6 unchanged sentences

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

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.

Stock Warrants classified as Equity

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.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

9 - Warrants (Continued)

Company’s Public Warrants are classified as equity as of June 30, 2024 and June 30, 2023 there were 9,422,529 Public Warrants issued

and outstanding.

the six months ended June 30, 2024, no public warrants were exercised.

Stock Warrants classified as Liability

18 unchanged sentences

There were 1,501,386 private

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

warrants outstanding as of June 30, 2024 and December 31, 2023, respectively.

The Company accounts for the Private Warrants issued in

9 unchanged sentences

remaining life).

We determined, through use of a Binomial Lattice model, that the fair value of each Private Placement Warrant less a

discount for the difference in remaining life is equivalent to that of each Public Warrant.

The Company determined, through use of a Binomial Lattice model, that the fair value of each Private Placement Warrant

less a discount for the difference in remaining life is equivalent to that of each Public Warrant.

Loan Warrants

1 unchanged sentence

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.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

9 - Warrants (continued)

Stock Warrants classified as Liability (Continued)

“Original 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 Original 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, Original 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 year ended December 31, 2023 the Company issued additional Original 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.

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 June 30, 2024 from the Term Loan Lenders in regards to its compliance with the Tests as of the

last day of the quarter ended June 30, 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 June 30, 2024.

The May 2024 Penny Warrants were immediately exercisable

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

June 28, 2024, the Company entered into a limited waiver and first amendment (the “Amendment”) to the Term Loan with the

lenders in regards to its compliance with the for the quarter ended June 30, 2024 and certain amendments to the Term Loan.

The Amendment

provided for a one-time issuance of penny warrants (the “June 2024 Penny Warrants”, collectively with the Original Penny

Warrants, the May 2024 Penny Warrants and the June 2024 Penny Warrants, the “Penny Warrants”) to purchase up to 2,100,000

shares of the Company’s common stock, par value $ 0.0001 per share (the “June 2024 Penny Warrant Shares”), at an exercise

price of $ 0.01 per share, in connection with the lenders’ agreement to waive the Tests under the Term Loan for the quarter ended

June 30, 2024 and to amend the Term Loan.

The June 2024 Penny Warrants are immediately exercisable upon issuance and will expire ten

years from the date of issuance.

The May 2024 Penny Warrants and the June 2024 Penny Warrants were valued utilizing a Black-Scholes model

with the following assumptions:

SCHEDULE OF PENNY WARRANTS

May 2024 Penny Warrants

June 2024 Penny Warrants

Risk-free rate

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 merger.

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

FAIR VALUE WARRANTS

June 30, 2024

December 31, 2023

Common stock price

4 unchanged sentences

June 2023 Offering:

June 30, 2024

December 31, 2023

Common stock price

2 unchanged sentences

Risk-free rate

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

9 - Warrants (continued)

following table presents a roll-forward of the Company’s warrants from January 1, 2024 to June 30, 2024:

OF ROLL FORWARD IN WARRANTS

Loan Warrants:

Loan Warrants (including Penny Warrants):

Common Stock Warrants

2 unchanged sentences

Warrants issued

Warrants Outstanding, March 31, 2024

Warrants Outstanding, June 30, 2024

Common Stock Warrants

3 unchanged sentences

Exercise of warrants

Warrants outstanding, March 31, 2024

Warrants outstanding, June 30, 2024

Warrants outstanding, Ending

10 - COMMON STOCK

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:

dividends on common stock had been declared by the Company.

the six months ended June 30, 2024 and 2023, the Company had reserved shares of common stock for issuance as follows:

SUMMARY OF RESERVED SHARES OF COMMON STOCK FOR ISSUANCE

March 31, 2024

March 31, 2023

Options issued and outstanding

Common stock outstanding

Warrants outstanding

Earnout shares

Shares available for future issuance

issued and outstanding

stock outstanding

available for future issuance

Equity Facility

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 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.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

October 7, 2022, the Company and Chardan Capital Markets LLC, a New York limited liability company (“CCM LLC”) entered into

a purchase agreement (the “Original Purchase Agreement”) and a Registration Rights Agreement in connection with the merger.

Pursuant to the Original 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 (the “ChEF Equity Facility”).

In addition, the Company appointed LifeSci Capital, LLC as “qualified independent underwriter” with respect to the transactions

contemplated by the Purchase Agreement.

On May 20, 2024, the Company entered into an amendment to the Original Purchase Agreement (the

“A&R Purchase Agreement”, together with the Original Purchase Agreement, the “Purchase Agreement”) with CCM

LLC to update the volume weighted average price purchase mechanics of the equity facility to permit Intraday VWAP Purchases (as defined

in the A&R 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 June 30, 2023.

issued 850,463 shares pursuant to the Purchase Agreement with CCM LLC for aggregate proceeds to the Company of $ 737 from the period January

1, 2024 through June 30, 2024.

11 - STOCK-BASED COMPENSATION

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

compensation expense for options and RSUs totaling $ 503 and $ 5,441 was recognized in the Company’s condensed consolidated statements

of operations for the six months ended June 30, 2024 and 2023, respectively.

Share-based compensation expense for options and RSUs totaling

$ 237 and $ 954 was recognized in the Company’s consolidated statements of operations for the three months ended June 30, 2024 and

2023, respectively.

the $ 503 of share-based compensation incurred during the six months ended June 30, 2024, $ 60 is allocated to cost of goods sold, $ 101

to research and development, $ 127 to selling and marketing, and $ 215 to general and administrative expenses.

Of the $ 5,441 of share-based

compensation incurred during the six months ended June 30, 2023, $ 75 is allocated to cost of goods sold, $ 49 to research and development,

$ 971 to selling and marketing, and $ 4,346 to general and administrative expenses.

the $ 237 of share-based compensation incurred during the three months ended June 30, 2024, $ 28 is allocated to cost of goods sold, $ 36

to research and development, $ 67 to selling and marketing, and $ 106 to general and administrative expenses.

Of the $ 954 of share-based

compensation incurred during the three months ended June 30, 2023, $ 39 is allocated to cost of goods sold, $ 20 to research and development,

$ 115 to selling and marketing, and $ 780 to general and administrative expenses.

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.

employees of the Company’s participating subsidiaries to purchase shares of the Company’s common stock, at semi-annual intervals,

with their accumulated payroll deductions.

A total of 2,464,400 shares of the Company’s common stock were initially available for

issuance under the ESPP.

The share limit will automatically increase on the first trading day in January of each year by an amount equal

to lesser of (1) 1 % of the total number of outstanding shares of the Company’s 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

Weighted-Average Exercise Price

Weighted-Average Grant Date Fair Value

Weighted-Average Remaining Contractual Life (in years)

Aggregate intrinsic value

Weighted-Average

Exercise Price

Weighted-Average

Grant Date Fair

Weighted-Average

Remaining Contractual

Life (in years)

intrinsic value

Balances, January 1, 2024

1 unchanged sentence

Options forfeited

Options expired

Options exercised

Balances, March 31, 2024

At March 31, 2024

Balances, June 30, 2024

At June 30, 2024

Vested and Exercisable

Vested and expected to vest

the six months ended June 30, 2024, the Company issued 8,752 shares as a result of exercised stock options upon the receipt of proceeds

of approximately $ 3 .

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:

restricted stock units on the date of grant was $ 3,464 and was recorded as compensation expense during the six months ended June 30,

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 $ 48 was recorded as compensation expense during the six months ended June 30, 2024.

April 17, 2024, the Company issued 3,428 shares in exchange for 4,875 vested RSU’s less shares deducted to cover taxes.

22, 2024, the Company issued 375 shares in exchange for 375 vested RSU’s.

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.

On June 24, 2024, the Company granted 21,750 restricted stock units.

The fair value of the 2,191,377 restricted stock

units was $ 995 and an expense of $ 71 was recorded as compensation expense during the six months ended June 30, 2024.

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 date.

following table presents the restricted stock units activity for the six months ended June 30, 2024:

OF RESTRICTED STOCK UNITS ACTIVITY

Weighted-Average Fair Market Value

Weighted-Average

Fair Market Value

Unvested shares, January 1, 2024

Granted and unvested

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

Unvested shares, June 30, 2024

of June 30, 2024, there were 8,957,130 shares of unissued authorized and available for future awards under the 2022 Equity Incentive

Plan and Employee Stock Purchase Plan.

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

Stock Purchase Plan

Company maintains the Dragonfly Energy Corporation, Inc.

Employee Stock Purchase Plan which permits eligible employees to purchase shares

at not less than 85% of the market value of the Company’s common stock on the offering date or the purchase date of the applicable

offering period, whichever is lower.

The plan was adopted by the Company’s Board of Directors on May 13, 2022.

On April 24, 2024,

the Company issued 244,774 common shares in connection with its Employee Stock Purchase Plan for a total consideration of approximately

The ESPP allows employees to purchase shares at a 15 % discount to the lesser of the stock price at the beginning or the end of

the offering period, which was October 1, 2023, and April 1, 2024, respectively.

The discount resulted in an exercise price of $ 0.46

During the three and six months ended June 30, 2024, the Company did not recognize any compensation expense.

12 - SUPPLIER AGREEMENT

9 unchanged sentences

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:

OF NUMBER OF POTENTIAL SHARES OF COMMON STOCK

March 31, 2024

March 31, 2023

Restricted stock units

Weighted average number of common shares-basic

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

13 - 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

Company has revised the previously issued financial statements for the quarter ended June 30, 2023 for the underpayment of tariffs to

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

10 unchanged sentences

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.

this conclusion, management has revised the accompanying condensed consolidated financial statements for the quarter ended June 30, 2023

and related notes included herein to correct this error for the financial statements for the quarter ended June 30, 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

As previously

For the three months ended June 30, 2023

Consolidated Statements of Operations

As previously

Cost of Goods Sold

1 unchanged sentence

Interest Expense

Loss Before Taxes

Net Loss per share – Basic & Diluted

Consolidated Statements of Operations

As previously

For the six months ended June 30, 2023

Consolidated Statements of Operations

As previously

Cost of Goods Sold

Loss From Operations

Interest Expense

Income Before Taxes

Net Income per share - Basic

Net Income per share – Diluted

Net Loss per share – Basic & Diluted

Statements of Cash Flows

previously reported

For the Period Ended March 31, 2023

Consolidated Statements of Cash Flows

As previously

For the Period Ended June 30, 2023

Statements of Cash Flows

As previously reported

2 unchanged sentences

previously reported

For the Period Ended March 31, 2023

Consolidated Statements of Stockholders’ Equity

For the Period Ended June 30, 2023

Statements of Shareholder’s Equity

As previously reported

1 unchanged sentence

Accumulated Deficit - March 31, 2023

ENERGY HOLDINGS CORP.

to Unaudited Condensed Consolidated Financial Statements

thousands, except share and per share data)

Accumulated Deficit, balance

Net Income (Loss)

Accumulated Deficit - June 30, 2023

Accumulated Deficit, balance

14 - SUBSEQUENT EVENTS

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.

July 29, 2024, Battle Born Battery Products, LLC, a Delaware limited liability company (“Battle Born LLC”), was formed as

a wholly-owned subsidiary of Legacy Dragonfly.

July 29, 2024, the Company and Battle Born LLC entered into a License Agreement with Stryten Energy LLC.

Pursuant to the License

Agreement, Battle Born LLC granted Stryten an exclusive, worldwide license to use certain trademarks relating to the Company’s

lithium-ion battery brand, Battle Born Batteries® (the “Licensed Trademarks”) for business-to-business sales of

batteries to customers within certain markets as set forth in the License Agreement.

In exchange for the licensing rights, Stryten

agreed to pay Battle Born LLC an initial licensing fee of $ 5.0 million

dollars (the “Initial Licensing Fee”).

The License Agreement provides for mid-single digit royalty payments based on net

sales using the Licensed Trademarks, with a tiered structure reaching up to $ 25.0 million

dollars, at which point Stryten will be required to pay a nominal annual license fee.

License Agreement is perpetual in term, unless terminated by the parties as set forth in the License Agreement.

to and in connection with the License Agreement, on July 29, 2024, pursuant to a trademark transfer and license back agreement, DFE transferred

all of its intellectual property rights in the Licensed Trademarks to Battle Born LLC and DFE licensed back from Battle Born LLC all

rights in and to the Licensed Trademarks worldwide outside of the Stryten Market.

connection with the License Agreement, on July 29, 2024, the Company, Legacy Dragonfly and Battle Born LLC entered into a Limited

Waiver, Consent and Second Amendment to Term Loan Agreement (the “Second Amendment”) with the Term Loan Lenders, and

Alter Domus (US) LLC, as the agent to the Term Loan Lenders, in which the Term Loan Lenders (i) consented to

the transactions contemplated by the License Agreement and the Trademark Transfer Agreement and (ii) agreed to waive the mandatory

prepayment under the Loan Agreement that would have been due to the Term Loan Lenders under the Loan Agreement upon Battle Born

LLC’s receipt of the Initial Licensing Fee.

connection with the Second Amendment, Battle Born LLC entered into a Joinder Agreement with the Term Loan Lenders (the “Joinder”)

whereby Battle Born LLC became a guarantor and credit party to the Loan Agreement.

July 31, 2024, the Company received a waiver from its Administrative Agent and Term Loan Lenders (the “July 2024 Waiver”)

in regards to its compliance with the Liquidity test as of the last day of the fiscal month ended July 31, 2024 from the Term

Loan Lenders in regards to its compliance with the Liquidity test as of the last day of the fiscal month ended July 31, 2024.

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