Filing identity and reporting period
Important: The supplied filing is Chardan NexTech Acquisition 2 Corp.’s Form 10-K, not a Dragonfly Energy Holdings Corp. filing. It covers the fiscal year ended December 31, 2021; it does not provide standalone fourth-quarter results. The company was a blank-check SPAC and had not begun operating activities or identified a business combination target by year-end.
Financial results and liquidity
| Metric | FY 2021 |
|---|---|
| Operating revenue | None; the company reported no operating revenue. |
| Net income | $1.91 million, versus a $1,000 net loss from inception through December 31, 2020. |
| Key income items | $3.52 million gain from changes in warrant fair value and $23,715 net gain on trust investments; partially offset by a $1.25 million loss on sale of private warrants, $292,074 operating and formation costs, $65,600 franchise tax expense, and $18,797 warrant issuance costs. |
| Cash flow | $547,052 used in operating activities; $128.40 million used in investing activities, primarily trust funding; $129.72 million provided by financing activities. |
| Year-end liquidity | $799,808 cash outside the trust account; $128.42 million in trust-account investments; working capital surplus of $988,186. |
| Debt and liabilities | No long-term debt or outstanding related-party loans at year-end. Total liabilities were $2.15 million, including $2.04 million of warrant liabilities. |
| Equity and redemption shares | Stockholders’ deficit was $1.02 million. The 12.65 million redeemable public shares were classified as temporary equity at $128.40 million. |
The reported profit was driven principally by a non-cash change in warrant fair value, not operating performance. The prior-period comparison is limited: 2020 covers only the period from incorporation on June 23 through year-end.
Business, capital and material developments
- The August 2021 IPO and full over-allotment raised $126.5 million gross from 12.65 million units. A private placement of warrants raised approximately $4.30 million. At year-end, $128.40 million was held in trust.
- Management’s stated search focus included financial services, healthcare, real estate services, technology and software, with flexibility to consider other sectors.
- Chardan is entitled to a fee equal to 3.5% of IPO gross proceeds if an initial business combination is completed. The company also paid the Sponsor $10,000 per month for administrative and office services.
- The company reported a material weakness in internal control over financial reporting concerning accounting for complex financial instruments and redeemable shares. Management concluded controls were not effective at December 31, 2021 and described remediation efforts; completion and effectiveness were not assured.
- The filing reports an amended and restated warrant agreement dated March 28, 2022, described as correcting a scrivener’s error and conforming the agreement to the prospectus.
Outlook, risks and contingencies
- The company had until August 13, 2022 to complete a business combination, with up to two three-month extensions to February 13, 2023. Each extension required an insider deposit of $1.265 million; insiders were not obligated to fund extensions, and public stockholders would not vote on or redeem shares for an extension.
- The auditor’s report states that failure to raise funds and complete a combination by August 23, 2022 would require liquidation, while the main filing describes an August 13, 2022 deadline and possible extensions. This date discrepancy should be checked against the governing documents and subsequent filings.
- The auditor and management identified substantial doubt about the company’s ability to continue as a going concern if it did not complete a business combination. The company had limited cash outside the trust; it disclosed approximately $647,178 outside the trust as of March 18, 2022.
- If no transaction is completed within the applicable period, public shares are to be redeemed from the trust, subject to creditor claims and applicable law; warrants would expire worthless. The stated initial trust amount was approximately $10.15 per public share, but distributions could be lower.
- Key risks include target-search competition, redemptions reducing cash available for a deal, possible need for additional financing, management conflicts from affiliated SPACs, dilution from warrants or new securities, and potential creditor claims against trust assets. COVID-19, market volatility, inflation and the Russia-Ukraine conflict were cited as uncertainties.
Investor facts to verify
- Confirm the issuer: this document is for Chardan NexTech Acquisition 2 Corp., not Dragonfly Energy Holdings Corp.
- Reconcile the business-combination deadline discrepancy and verify any extension, subsequent transaction, liquidation or other post-year-end developments.
- Review the warrant-liability valuation and the material weakness, including remediation status and any restatements or later control assessments.
- Verify cash available outside the trust, expected operating costs, and whether financing or insider extension deposits were obtained.
- Assess redemption, dilution, sponsor incentives, related-party fees and conflicts before evaluating any eventual transaction.