Dragonfly Energy(DFLI)2024-08-14 20:47Financial Performance - For the quarter ended June 30, 2024, the company sold 11,526 batteries, generating net sales of $13.2 million, compared to 20,966 batteries and $19.3 million in net sales for the same quarter in 2023, reflecting a decrease of approximately 30% in both sales volume and revenue [133]. - The company reported a net loss of $13.6 million for the quarter ended June 30, 2024, compared to a net loss of $11.9 million for the same quarter in 2023, indicating an increase in losses year-over-year [140]. - Net sales decreased by $6.1 million, or 31.5%, to $13.2 million for the three months ended June 30, 2024, compared to $19.3 million for the same period in 2023 [179]. - The company generated a net loss of $24.0 million for the six months ended June 30, 2024, compared to a net loss of $7.1 million for the same period in 2023 [202]. - Net cash used in operating activities for the six months ended June 30, 2024, was $7.4 million, primarily due to a net loss of $24.0 million [240]. Sales and Revenue Trends - The company reported a decrease in sales due to weaker demand from OEM and DTC customers in core RV and marine markets, attributed to rising interest rates and inflation [134]. - DTC revenue decreased by $8.3 million to $11.7 million, while OEM revenue decreased by $4.1 million to $14.0 million due to lower customer demand and changes in product offerings [193]. - Net sales decreased by $12.4 million, or 32.4%, to $25.7 million for the six months ended June 30, 2024, compared to $38.1 million for the same period in 2023 [193]. Cost and Expenses - Cost of goods sold decreased by $5.3 million, or 34.6%, to $10.0 million for the three months ended June 30, 2024, compared to $15.4 million for the same period in 2023 [181]. - Gross profit decreased by $0.7 million, or 19.3%, to $3.2 million for the three months ended June 30, 2024, compared to $3.9 million for the same period in 2023 [182]. - Research and development expenses increased by $0.4 million, or 43.5%, to $1.5 million for the three months ended June 30, 2024, compared to $1.1 million for the same period in 2023 [183]. - General and administrative expenses decreased by $1.9 million, or 25.1%, to $5.7 million for the three months ended June 30, 2024, compared to $7.6 million for the same period in 2023 [184]. - Selling and marketing expenses decreased by $1.1 million, or 29.6%, to $2.7 million for the three months ended June 30, 2024, compared to $3.8 million for the same period in 2023 [186]. Strategic Initiatives and Developments - The company achieved full certification for its energy storage products for use in oil & gas operations in North America, with expected deployment of the first systems in Q3 2024 and anticipated contribution to net sales by Q4 2024 [135]. - The company is developing solid-state cell technology, which is expected to enhance safety and production efficiency, with plans to scale production during 2025 [138]. - The company has made significant progress in distribution channels, receiving approvals for battery installations at major truck modification centers, enhancing product availability [154]. - A partnership with Highway Transport aims to transition their fleet of over 500 trucks to the company's all-electric APUs, marking a significant expansion in the commercial trucking sector [155]. - The company plans to expand into new markets, including medium and heavy-duty trucking, solar integration, and emergency power solutions, leveraging its LFP batteries [161]. Financing and Capital Structure - The company has entered into a $150 million equity facility with Chardan Capital Markets LLC to support ongoing operations and strategic investments [140]. - The company raised approximately $20.7 million from a public offering in June 2023, selling 10 million shares at a price of $2.00 per share [144]. - The company may need to raise additional debt and/or equity financing to fund operations and meet financial covenants [237]. - The company has received multiple waivers from lenders regarding compliance with financial covenants, indicating potential challenges in meeting obligations [236]. - Future debt or equity financings may be dilutive to current stockholders, impacting shareholder value [237]. Inventory and Supply Chain - The company relies on a limited number of suppliers for lithium iron phosphate cells, which poses a risk to its supply chain stability [127]. - The company relies on two cell manufacturers in China and has signed a Commercial Offtake Agreement for lithium supply, which is expected to help manage costs over time [163]. - The company reduced purchase activities in 2024 due to business contraction and uncertainty, impacting inventory levels [220]. - The company's inventory balance decreased by $10.1 million to $28.7 million as of June 30, 2024, compared to $38.8 million at December 31, 2023 [220]. Future Outlook - The company expects deployment of products for oil and gas operations in North America to begin contributing to net sales by the fourth quarter of 2024 [180]. - The company anticipates receiving an initial licensing fee of $5 million from Stryten Energy LLC by the end of August 2024 [219]. - The company expects to spend in excess of $50 million on solid-state battery development and cell manufacturing technologies over the next two to three years [220]. - The company is likely to fail to meet financial covenants within the next twelve months, raising substantial doubt about its ability to continue as a going concern [236].