TORONTO – October 30, 2026 -- NEO Battery Materials (TSXV: NBM) reported second-quarter revenue of $203,566 against a gross loss of $807,492 for the period ended August 31, 2026, as the drone and defense battery maker builds out a South Korean cell plant ahead of expected higher-volume orders. All figures are in Canadian dollars unless noted.

Six-month gross loss reaches $1.45 million as fixed costs outpace volume

Revenue for the six months ended August 31 was $382,530, with a gross loss of $1,450,753. NEO attributes the negative margins to early-stage commercial production at its cell manufacturing expansion facility, where volumes are not yet high enough to absorb the fixed cost base. The company expects the gap to narrow as output rises.

Cash stood at $2,062,498 at quarter-end. That balance reflects a non-brokered LIFE Offering closed August 14 for gross proceeds of $4,000,000, through 20,000,000 units at $0.20. Each unit carries one common share and one warrant exercisable at $0.30 for 36 months. Cash went mainly to equipment, infrastructure and operations at the expansion facility.

Qualified pipeline grows from 15 to more than 50 leads, with 10 converted

The pipeline spans drones, robotics, defense, automotive, energy storage and next-generation batteries. More than 10 leads have become active customers, and more than 20 product units and samples are confirmed for production or delivered for evaluation. NEO cautions that qualified leads carry no assurance of definitive orders.

CEO Spencer Huh said customers approached NEO for performance their current suppliers cannot deliver and for a secure, non-Chinese supply source.

Korean Army, automotive OEM and defense prime contracts anchor the quarter

• Automotive OEM: A North American Fortune 500 automaker issued a purchase order valued at about $392,000 (US$280,000), one of the largest in NEO's foundry portfolio, after several months of validation.
• Republic of Korea Army: A division placed NEO's first direct purchase order for military-grade drone battery packs, bypassing a traditional procurement intermediary. The packs are used in the Army's TIGER program.
• South Korean defense prime: NEO won a contract for custom batteries for an undisclosed defense project, starting at A-sample with a defined path to B-sample pilot orders and volume production.
• Preneu: An initial order for a custom 6Ah battery for a strike drone line became a formal strategic partnership.
• Liberaware (TYO: 218A): A letter of intent covers joint optimization of the Japanese drone maker's platforms and a possible joint venture or special-purpose vehicle for drone battery manufacturing in Japan.

NDAA-compliant contract talks could fill most of the new plant's capacity

NEO is in discussions with US battery and defense value-chain companies on high-volume contract manufacturing of NDAA-compliant defense drone batteries. Indicated demand would occupy most of the expansion facility's capacity, though no definitive contracts exist. The company is also opening 21700 cylindrical capacity for foundry services to US and NATO-aligned customers, citing procurement constraints from heavy drone-warfare consumption.

In Ukraine, NEO has begun direct engagement with drone and battery companies and frontline divisions. Requests include cells for loitering munitions, ISR drones and heavy-duty cargo drones, and pouch packs to replace China-based supply. First samples are expected to ship within a month.

21700 line targets 10,000 to 18,000 cells a month by end of 2026

The expansion facility sits on a 3.2-acre site next to NEO's first South Korean factory. Pouch de-gassing and end-of-line inspection equipment is installed and tested, while electrical upgrades and dry room construction continue. Pilot equipment for tabless 21700 cells is installed, with all equipment due by mid-November and full commissioning by the end of calendar 2026.

Phase 1 pouch capacity targets about 50 to over 75MWh, equal to 1 to 2 million cells a year. Average selling prices for 10 to 15Ah pouch cells have ranged from about US$15 to US$40. For production above 250MWh up to the GWh scale, NEO plans to pursue a joint venture or manufacturing partnership with US battery and defense players to localize production in North America. Meanwhile, the company has added shifts at the first factory and intends to maximize them until the new facility is fully commissioned.