TORONTO, Oct. 29, 2026 /PRNewswire/ -- NEO Battery Materials Ltd. ("NEO" or the "Company") (TSXV: NBM) (OTC: NBMFF), a low-cost, silicon-enhanced battery manufacturer enabling high-performance capabilities for drones, robotics, and physical AI, today announced its financial and operational results for the second quarter ended August 31, 2026, and provided an update on its facility expansion, commercial pipeline, and growth initiatives. All amounts are in Canadian dollars unless otherwise specified.

"The second quarter marked a continued increase in our pipeline with qualified leads, and now, we are converting the pipeline into active customers," stated Spencer Huh, President & CEO of NEO. "Since reporting the first quarter, we received our first direct order from the Republic of Korea Army, our largest foundry contract to date from a Fortune 500 automotive OEM, and a development contract from a South Korean defense prime. Outside Korea, we have established direct inroads into Ukraine for battery development and are serving key U.S. battery and defense players that can potentially translate into concrete commercial contracts. Each came to NEO for the same two reasons: battery performance their current suppliers cannot deliver, and a secure, non-Chinese supply source. With certified products and validated manufacturing, our priority is scaling production to meet this demand. As we do so, we will continue to evaluate partnerships and other opportunities that strengthen our position as a secure, high-performance battery supplier to Western and allied customers."

FY2027 Q2 Financial and Recent Operational Highlights

- Revenue of $203,566 for the three months ended August 31, 2026, and revenue for the six months ended August 31, 2026, was $382,530.

- Gross loss of $807,492 for the quarter, and gross loss for the six months ended August 31, 2026, was $1,450,753. Margins continue to reflect early-stage commercial production and the scale-up phase for the cell manufacturing expansion facility, where volumes have not yet reached the level required to absorb the fixed cost base. The Company expects this gap to narrow as production volume increases.

- Cash balance of $2,062,498 as at August 31, 2026. The balance reflects the closing of the non-brokered LIFE Offering on August 14, 2026, for gross proceeds of $4,000,000 through the issuance of 20,000,000 units at $0.20 per unit, each comprising one common share and one warrant exercisable at $0.30 for 36 months. Cash was deployed primarily to finance equipment and infrastructure of the cell manufacturing expansion facility and operations.

- South Korean defense prime and tier-1 pack manufacturer: Won contract to develop and manufacture custom-built batteries for an undisclosed defense project, beginning with the A-sample phase and with a defined path to B-sample pilot orders and volume production upon successful evaluation.

- North American Fortune 500 automotive OEM: Recurring foundry orders translated into a purchase order agreement valued at approximately $392,000 (US$280,000), one of the largest contracts awarded to date within the Company's foundry portfolio, following several months of validation of NEO's manufacturing quality, efficiency, and cost competitiveness.

- Republic of Korea Army: First direct purchase order for military-grade drone battery packs from a division of the ROK Army for field validation and use, without a traditional procurement intermediary. NEO's products are being directly used in the Army's TIGER (Transformation of Infantry Generation via Enhanced Radios) program â an initiative to transition infantry units into an AI-enabled, network-centric, and highly mobile force.

- Major Korean defense drone manufacturer â Preneu: Initial order for a custom-developed 6Ah battery for field validation of the customer's upcoming strike drone line, designed to reduce weight and extend flight duration. Translated into a formal, strategic partnership to advance and supply Korea-made drone and battery solutions for industrial and defense applications.

- Leading Japanese drone manufacturer â Liberaware (TYO: 218A): Letter of intent to jointly optimize Liberaware's UAS platforms with NEO's battery technology and to evaluate a joint venture or special-purpose vehicle to establish drone battery manufacturing in Japan under the Japan Sovereign UAS Platform.

Sales Pipeline & Conversion

Since reporting the end of the first quarter, the Company's qualified pipeline for product development and manufacturing has grown from more than 15 leads to more than 50 leads across drone/unmanned aerial vehicles (UAV), robotics, defense, automotive, energy storage, and next-generation battery applications. For qualified leads, there is no assurance of definitive orders, and NEO will provide updates as contracts are secured.

- Pipeline Conversion: More than 10 leads have converted into active customers, and more than 20 different product units and samples have been confirmed for production or have been produced and delivered for evaluation. Customers are primarily South Korean dual-use drone manufacturers and US-based battery developers and manufacturers.

- Commercial-Volume Contract Manufacturing: NEO is currently in discussions for high-volume contract manufacturing orders for NDAA-compliant batteries for defense drone applications with US battery and defense value chain companies. The contemplated volumes are expected to occupy most of the capacity of the cell manufacturing expansion facility based on the indicated demand from the end-use customer. There is no assurance that these discussions will convert into definitive contracts, and the Company will provide status updates.

- Ukraine Drone Market: Direct engagement with Ukrainian drone and battery companies and frontline divisions has been initiated for custom development and battlefield integration of high-performance drone batteries. Cell development requests include tactical loitering munitions and ISR drones, heavy-duty cargo/bombing drones, and various pouch packs that require replacement for China-based supply. The Company expects to ship first samples into Ukraine for evaluation within the next month.

- Recurring & Increasing Foundry Contracts: Due to the Company's high standards of manufacturing quality and agile response framework, recurring foundry contracts are growing in value with new project additions and increased processing requests, and larger organizations such as the Korean defense prime customer are requesting NEO's expertise on cell development and manufacturing.

- Increased US Demand from Custom Battery Engineering: NEO's diverse engineering experience with various chemistries has allowed customer program additions in high-to-100% silicon anode, lithium-metal, specialty electrolyte, and sodium-ion chemistries. The Company is currently servicing major venture capital-backed, U.S. battery developers as part of this pipeline.

- Two requirements/demands recur across engagements: improved cell and pack performance within the constraints of customers' existing systems, and access to a reliable supply source outside adversarial jurisdictions. 21700 cylindrical format procurement, in particular, has been constrained by heavy consumption from drone warfare, and the Company is opening 21700 capacity for foundry services to U.S. and NATO-aligned defense and battery companies requiring NDAA compliance or similar regulatory limitations.

Pouch & Cylindrical Cell Assembly Expansion Facility

The Company's cell expansion manufacturing facility, on a 3.2-acre site adjacent to its first factory in South Korea, is being completed in phases to remove manufacturing bottlenecks and fulfill the anticipated higher-volume orders for both proprietary products and contract manufacturing.

- Pouch Assembly Update: Construction for the electrical capacity upgrade and dry room infrastructure at the Main Industrial Warehouse is underway, with the pouch de-gassing and end-of-line inspection equipment installed and tested. Concurrent with the build-out, the installed equipment will be utilized to resolve current process bottlenecks at the first factory.

- Cylindrical Assembly Update: Certain pilot equipment have been delivered and installed for the tabless-architecture 21700 cells. All equipment is expected to be delivered by mid-November, with full commissioning by the end of calendar 2026. The initial target capacity is approximately 10,000 to 18,000 cells per month, producing both energy- or power-focused variants.

- Capacity Roadmap: Phase 1 of pouch cell manufacturing targets approximately 50 to over 75MWh (megawatt-hours), equating to 1 to 2 million cells per year depending on the format/capacity. For a 10 to 15Ah (amp-hour) pouch-format cell, average selling prices to date range from approximately $15 USD to $40 USD, depending on performance, materials, processing, and yields. For larger-volume production of over 250MWh to the GWh scale, NEO intends to pursue a joint venture or manufacturing partnership with US battery and defense value chain players to localize production in North America.

- Near-Term Throughput: Due to the higher volume of drone battery and contract manufacturing requests from customers and leads, the Company has added working shifts at the first factory and intends to maximize the working shifts and production schedule until the full commissioning of the expansion facility.

"We are steadily proving out our foundry capability with tier-1 customers while expanding capacity to service contract manufacturing demand in the coming year. Our flexible manufacturing model has broadened the pipeline across applications and chemistries, and our objective is to convert sample evaluations into larger, long-term orders. The expansion facility is what allows us to fulfill them.