Business Context and Reporting Period
This Form 8-K, filed on May 16, 2022, reports on events occurring on May 15, 2022. Chardan NexTech Acquisition 2 Corp. (a Delaware special purpose acquisition company or "SPAC") entered into a definitive Merger Agreement with Dragonfly Energy Corp., a Nevada corporation focused on solid-state battery technology. Upon closing, Chardan will be renamed "Dragonfly Energy Holdings Corp." and Dragonfly will become a wholly-owned subsidiary.
Key Financial Metrics and Transaction Structure
The filing details the financial structure of the proposed business combination rather than historical operating results for the target company.
- Initial Equity Consideration: 40,000,000 shares of New Dragonfly Common Stock will be issued to existing Dragonfly shareholders and option holders at closing.
- Earnout Potential: Up to an additional 40,000,000 shares may be issued in three tranches based on performance milestones:
- First Tranche (15M shares): Contingent on 2023 audited revenue of at least $250 million and operating income of at least $35 million.
- Second Tranche (12.5M shares): Contingent on a 20-day VWAP of $22.50 or more by December 31, 2026.
- Third Tranche (12.5M shares): Contingent on a 20-day VWAP of $32.50 or more by December 31, 2028.
- PIPE Investment: The Sponsor (Chardan NexTech Investments 2 LLC) subscribed to purchase up to 500,000 shares at $10.00 per share, totaling up to $5,000,000.
- Debt Financing: A senior secured term loan facility of $75,000,000 is committed by EICF Agent LLC and CCM Investments 5 LLC. Proceeds will fund the merger, repay existing PIUS Debt, and provide growth capital. The loan matures four years post-closing with 5% annual amortization starting 24 months after closing.
- Equity Facility: An agreement was signed for a committed equity facility allowing the purchase of up to $150,000,000 of common stock over 36 months.
Material Changes and Conditions
The filing represents a material change in the registrant's status from a blank check company to a company in the process of a business combination. The transaction is subject to several closing conditions, including:
- Approval by stockholders of both Chardan and Dragonfly.
- Effectiveness of the Form S-4 registration statement.
- Chardan maintaining at least $5,000,001 in net tangible assets at closing.
- Refinancing or payoff of Dragonfly's existing PIUS Debt.
- Expiration of the HSR Act waiting period.
The filing text does not provide specific historical revenue, profit, or cash flow figures for Dragonfly Energy Corp. for any prior period.
Guidance, Outlook, and Risks
Management commentary is limited to the terms of the agreements and the strategic intent to combine. The filing includes extensive forward-looking statements regarding the ability to meet the earnout milestones and the success of the business combination.
Key Risks and Contingencies:
- Termination: The agreement may be terminated if closing does not occur within nine months (by February 15, 2023) or if stockholder approvals are not obtained.
- Operational Risks: Risks include the failure to optimize or mass-produce solid-state cells, loss of key suppliers (including in China), and inability to protect intellectual property.
- Financing Risks: The transaction relies on the successful consummation of the PIPE investment, the $75 million term loan, and the equity facility.
- Regulatory Risks: The deal requires Nasdaq listing approval and is subject to antitrust review.
Investor Verification Checklist
- Verify the final approval status of the merger by Chardan and Dragonfly stockholders.
- Confirm the effectiveness of the Form S-4 proxy statement/prospectus.
- Monitor the status of the $75 million debt commitment and the $5 million PIPE investment to ensure funding conditions are met.
- Review the specific terms of the PIUS Debt refinancing or payoff, as this is a condition to closing.
- Assess the feasibility of the 2023 revenue ($250M) and operating income ($35M) targets required for the first earnout tranche.