Dragonfly Energy Holdings (DFLI) risk factors, FY2024 10-K

Risks Related to Our Existing Lithium-Ion Battery Operations

1. 01Our business and future growth depends on the needs and success of our OEM’s and similar customers
2. 02We may not be able to engage target customers successfully and convert these customers into meaningful orders in the future
3. 03We currently rely on two carefully selected cell manufacturers located in China, and a single supplier, also located in China, to manufacture our proprietary battery management system, and we intend to continue to rely on these suppliers going forward
4. 04We may not be able to accurately estimate future demand for our LFP batteries, and our failure to accurately predict our production requirements could result in additional costs or delays
5. 05We are currently dependent on one manufacturing facility. If our facility becomes inoperable for any reason, or our automation and expansion plans do not yield the desired effects, our ability to produce our products could be negatively impacted
6. 06Lithium-ion battery cells have been observed to catch fire or release smoke and flame, which may have a negative impact on our reputation and business
7. 07We may be subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims

Risks Related to Our Solid-State Technology Development

1. 08We face significant engineering challenges in our attempts to develop and manufacture solid-state battery cells and these efforts may be delayed or fail which could reduce consumer spending which could negatively impact our business
2. 09We expect to make significant investments in our continued research and development of solid-state battery technology development, and we may be unable to adequately control the costs associated with manufacturing our solid-state battery cells
3. 10If our solid-state batteries fail to perform as expected, our ability to further develop, market and sell our solid-state batteries could be harmed

Risks Related to Supply Chain and Third-Party Vendors

1. 11We face risks associated with vendors from whom our products are sourced
2. 12Changes in geopolitical conditions, U.S.-China trade relations and other factors beyond our control may adversely impact our business and operating results
3. 13A significant disruption to the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits

Risks Related to Our Intellectual Property

1. 14We rely heavily upon our intellectual property portfolio. If we are unable to protect our intellectual property rights, our business and competitive position would be harmed
2. 15We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incur substantial costs
3. 16Our current and future patent applications may not result in issued patents or our patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours
4. 17The uncertainty in global and macroeconomic conditions, including economic, political and social instability, including the Russia-Ukraine conflict and Hamas’ attack on Israel, could reduce consumer spending and disrupt our supply chain which could negatively affect our results of operations
5. 18Global conditions, dislocations in the financial markets, any negative financial impacts affecting U.S. as a result of tax reform or changes to existing trade agreements or tax conventions, may adversely impact our business
6. 19The loss of one or more members of our senior management team, other key personnel or our failure to attract additional qualified personnel may adversely affect our business and our ability to achieve our anticipated level of growth
7. 20Our website, systems, and the data we maintain may be subject to intentional disruption, security incidents, or alleged violations of laws, regulations, or other obligations relating to data handling that could result in liability and adversely impact our reputation and future sales
8. 21If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges
9. 22We may expand our business through acquisitions in the future, and any future acquisition may not be accretive and may negatively affect our business
10. 23Our operations are subject to a variety of environmental, health and safety rules that can bring scrutiny from regulatory agencies and increase our costs
11. 24From time to time, we may be involved in legal proceedings and commercial or contractual disputes, which could have an adverse impact on our profitability and consolidated financial position
12. 25Environmental, social and governance matters may cause us to incur additional costs

Risks Related to Being a Public Company

1. 26We will continue to incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and operating results
2. 27Our management team has limited experience managing a public company

Risks Related to Our Financial Position and Capital Requirements

1. 28Our business is capital intensive, and we may not be able to raise additional capital on attractive terms, if at all. Any further indebtedness we incur may limit our operational flexibility in the future
2. 29As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our 2024 consolidated financial statements, with respect to this uncertainty
3. 30Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in acquisitions or other business activities necessary to achieve growth
4. 31Future resales of our outstanding securities may cause the market price of our securities to drop significantly, even if our business is doing well

Risks Related to Ownership of Our Common Stock

1. 32If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline
2. 33If we do not meet the expectations of investors, stockholders or securities analysts, the market price of our securities may decline. In addition, fluctuations in the price of our securities could contribute to the loss of all or part of your investment
3. 34An active trading market for our securities may not be available on a consistent basis to provide stockholders with adequate liquidity
4. 35The exercise of outstanding warrants to acquire our common stock would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders
5. 36Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide
6. 37Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations
7. 38Our Articles of Incorporation designates specific courts as the exclusive forum for substantially all stockholder litigation matters, which could limit the ability of our stockholders to obtain a favorable forum for disputes with us or our directors, officers or employees
8. 39Our Articles of Incorporation could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our management
9. 40We are an emerging growth company and any decision to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors
10. 41Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations
11. 42In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations
12. 43We have Series A Preferred Stock outstanding which securities have certain rights and provisions that could impact our ability to complete certain transactions and could impact the market price of our common stock
13. 44Our obligations to the holders of the Series A Preferred Stock could limit our ability to obtain additional financing or complete certain transactions or increase our borrowing costs, which could have an adverse effect on its financial condition and hinder the accomplishment of our corporate goals