CHAN NEXT References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Chardan NexTech Acquisition 2 Corp References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Chardan NexTech Investments 2 LLC The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" that are not
historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements,
other than statements of historical fact included in this Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the
Overview
We are a blank check company incorporated on
Recent Developments
Special Meeting to Amend Charter and Investment Management Trust Agreement
On
At the Special Meeting, the Stockholders approved the proposal to amend the
Company's Amended and Restated Certificate of Incorporation (the "Charter") to
provide the Company's officers, directors, initial stockholders and Chardan
NexTech 2
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In connection with the Charter Amendment, Stockholders elected to redeem 9,556,652 shares of Chardan Common Stock, representing approximately 60.44% of the issued and outstanding shares of Chardan Common Stock and 75.55% of the issued outstanding Chardan Common Stock sold in the IPO.
In addition, at the Special Meeting, the Stockholders approved the proposal to
amend the Investment Management Trust Agreement, dated
Extension
In connection with the Extension, the Insiders notified the Company on
Also in connection with the Extension, the Company and Chardan NexTech 2
Business Combination Agreement
On
(i) at the closing of the transactions contemplated by the Merger Agreement (the "Closing"), upon the terms and subject to the conditions of the Merger Agreement, in accordance with applicable provisions of the Nevada Revised Statutes ("NRS") and the Delaware General Corporation Law ("DGCL"), Merger Sub will merge with and into Dragonfly, the separate corporate existence of Merger Sub will cease and Dragonfly will be the surviving corporation and a wholly owned subsidiary of Chardan (the "Merger");
(ii) at the Closing, Chardan will be renamed "
(iii) as a result of the Merger, among other things, all shares of capital stock
of Dragonfly outstanding as of immediately prior to the effective time of the
Merger will be canceled in exchange for the right to receive shares of common
stock, par value
(iv) as a result of the Merger, each Dragonfly option outstanding as of immediately prior to the effective time of the Merger will be converted into the right to receive a New Dragonfly option, subject to certain exceptions and conditions as set forth in the Merger Agreement;
(v) at the Closing, 40,000,000 shares of New Dragonfly Common Stock shall be issuable to existing holders of Dragonfly capital stock or pursuant to the aforementioned converted options; and
(vi) following the Closing, existing holders of Dragonfly capital stock will have the right to receive up to an aggregate of 40,000,000 additional shares of New Dragonfly Common Stock in three tranches as follows:
(A) New Dragonfly shall issue 15,000,000 shares of New Dragonfly common stock in
the aggregate, if, as disclosed in the Annual Report on Form 10-K for the fiscal
year ending
(B) New Dragonfly shall issue an additional 12,500,000 shares of New Dragonfly
common stock, in the aggregate (the "Second Earnout"), if at any time during the
period beginning on the Closing Date and ending on
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(C) New Dragonfly shall issue an additional 12,500,000 shares of New Dragonfly
common stock, in the aggregate (the "Third Earnout"), if at any time during the
period beginning on the Closing Date and ending on
Upon the occurrence of the Third Milestone, if the Second Milestone has yet to
occur, the Second Milestone will be deemed to have occurred simultaneously with
the Third Milestone and the holders of Dragonfly capital stock shall be entitled
to receive the Second Earnout as if the Second Milestone had occurred on or
prior to
The Board has unanimously (i) approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related matters by the stockholders of Chardan.
Upon the consummation of the business combination, the Board will be composed of seven members, five of whom will be designated by Dragonfly and two of whom will be designated by Chardan.
On
The Merger Agreement contains customary representations and warranties by Chardan, Merger Sub, and Dragonfly. The representations and warranties of the respective parties to the Merger Agreement generally will not survive the Closing.
The Merger Agreement contains additional covenants, including, among others,
providing for (i) the parties to conduct their respective businesses in the
ordinary course through the Closing, (ii) the parties to not initiate any
negotiations or enter into any agreements for certain alternative transactions,
(iii) Dragonfly to prepare and deliver to Chardan certain audited and unaudited
consolidated financial statements of Dragonfly, (iv) Chardan to prepare and file
a proxy statement/registration statement on Form S-4 and take certain other
actions to obtain the requisite approval of Chardan stockholders of certain
proposals regarding the Merger, (v) the parties to use commercially reasonable
efforts to obtain necessary approvals from governmental agencies and (vi) to the
extent Closing has not occurred by
Other Agreements
The Business Combination Agreement contemplates the execution of various additional agreements and instruments, on or before the Closing, including, among others, the following:
Registration Rights & Certain Restrictions on Transfer
The Merger Agreement contemplates that, at the Closing, New Dragonfly, Chardan
NexTech Investments 2 LLC, a
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Sponsor Support Agreement
On
Subscription Agreement
On
As set forth in the Subscription Agreement, the PIPE Investor may purchase shares of Chardan Common Stock in the open market, and reduce (i) its purchase price under the Subscription Agreement by an amount equal to the number of shares that the PIPE Investor purchased in the open market multiplied by the per share redemption amount received by public stockholders who elect to redeem their shares prior to the Closing and (ii) the number of shares it subscribed for by an amount equal to the number of Shares Subscriber purchased in the open market and not redeemed as contemplated above. The PIPE Investor agreed that it will not exercise its right to vote any shares it may purchase in the open market following the date of the Subscription Agreement and prior to the Closing, in connection with any vote to approve the Merger.
The Subscription Agreement will terminate with no further force and effect upon
the earliest to occur of: (i) such date and time as the Merger Agreement is
terminated in accordance with its terms, (ii) the mutual written agreement of
the parties to the Subscription Agreement, (iii) if the conditions to closing
set forth in the Subscription Agreement are not satisfied at, or are not capable
of being satisfied on or prior to, the Closing and, as a result thereof, the
transactions contemplated by the Subscription Agreement will not be or are not
consummated at the Closing and (iv)
Debt Commitment Letter
On
The proceeds of the Term Loan Facility will be used (i) to support the Merger, (ii) to repay all outstanding PIUS Debt and other obligations of Dragonfly, (iii) to pay for fees and expenses in connection with the foregoing, (iv) to provide additional growth capital and (v) for other general/corporate purposes. The Term Loan Facility must be fully drawn on the Closing Date, will mature four years from the Closing Date and will be subject to quarterly amortization of 5% per annum beginning 24 months after the Closing Date. Chardan will be a guarantor under the Term Loan Facility.
As part of the consideration for the Term Loan Facility, New Dragonfly will also
issue to the Initial Lenders (but not CCM 5 to the extent it has not backstopped
its commitment pursuant to the Backstop Commitment Letter) on the Closing Date:
(i) penny warrants (the "Penny Warrants") exercisable to purchase 3.6% of New
Dragonfly's common stock on a fully-diluted basis, calculated as of the Closing
Date, and (ii) warrants (the "
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Equity Facility Letter Agreement
On
The foregoing descriptions of the Merger Agreement, form of the Registration Rights Agreement, the Sponsor Support Agreement, the Subscription Agreement, the Debt Commitment Letter and the Equity Facility Letter Agreement and the transactions and documents contemplated thereby are not complete and are subject to and qualified in their entirety by reference to the Merger Agreement, form of the Registration Rights Agreement, the Sponsor Support Agreement, the Subscription Agreement, the Debt Commitment Letter and the Equity Facility Letter Agreement, copies of which are filed with this Current Report on Form 8-K, and the terms of which are incorporated by reference herein.
The Merger Agreement, the Registration Rights Agreement, the Sponsor Support Agreement, the Subscription Agreement, the Debt Commitment Letter and the Equity Facility Letter Agreement have been included to provide investors with information regarding their terms. They are not intended to provide any other factual information about Chardan, Dragonfly, or their affiliates. The representations, warranties, covenants and agreements contained in the Merger Agreement, the Registration Rights Agreement, the Sponsor Support Agreement, the Registration Rights Agreement, the Subscription Agreement, the Debt Commitment Letter and the Equity Facility Letter Agreement and the other documents related thereto were made only for purposes of such agreements as of the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, the Registration Rights Agreement, the Sponsor Support Agreement, the Subscription Agreement, the Debt Commitment Letter and the Equity Facility Letter Agreement, as applicable, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement, the Sponsor Support Agreement, the Subscription Agreement, the Debt Commitment Letter or the Equity Facility Letter Agreement, as applicable, instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Merger Agreement, the Registration Rights Agreement, the Sponsor Support Agreement, the Subscription Agreement, the Debt Commitment Letter or the Equity Facility Letter Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, the Registration Rights Agreement, the Sponsor Support Agreement, the Subscription Agreement, the Debt Commitment Letter or the Equity Facility Letter Agreement, as applicable, which subsequent information may or may not be fully reflected in Chardan's public disclosures.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities for the period from
For the three months ended
For the six months ended
For the three and six months ended
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Liquidity and Capital Resources
As of
The Company's liquidity needs prior to the consummation of the Initial Public
Offering were satisfied through the proceeds of
In addition, in order to finance transaction costs in connection with a business
combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required. As of
For the six months ended
For the six months ended
There were no cash flows from financing activities for the six months ended
For the six months ended
There were no cash flows from financing activities for the six months ended
On
Simultaneously with the closing of the Initial Public Offering,
On
Simultaneously with the closing of the exercise of the over-allotment option, we
consummated the sale of 266,402 Private Warrants at a purchase price of
A portion of the proceeds from the Private Warrants was added to the proceeds
from the Initial Public Offering to be held in the Trust Account. If we do not
complete our initial business combination by
We intend to use substantially all of the net proceeds from the Initial Public Offering, including the funds held in the Trust Account, to acquire a target business or businesses and to pay our expenses relating thereto. To the extent that our share capital is used in whole or in part as consideration to effect our initial business combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business' operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders' fees that we incur prior to the completion of our initial business combination, if the funds available to us outside of the Trust Account were insufficient to cover such expenses.
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We do not believe we will need to raise additional funds following our Initial Public Offering to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
Contractual Obligations
As of
Registration and Stockholder Rights Agreement
The holders of the Founder Shares and Private Warrants (and any shares of common stock issuable upon the exercise of the Private Warrants) will be entitled to registration rights pursuant to an agreement to be signed prior to or on the effective date of the Initial Public Offering. The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Private Warrants (and underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain "piggy-back" registration rights with respect to Registration Statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such Registration Statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option to purchase up to 1,650,000
additional Units to cover over-allotments at the Initial Public Offering price,
less the underwriting discounts and commissions. On
Business Combination Marketing Agreement
The Company has engaged
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Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants will be recognized as a non-cash gain or loss on the condensed statements of operations.
The Company accounts for the Private Warrants issued concurrently in connection with the Initial Public Offering in accordance with ASC 815-40, under which the Private Warrants will not meet the criteria for equity classification and must be recorded as liabilities. As the Private Warrants meet the definition of a derivative as contemplated in ASC 815, the Private Warrants will be measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement ("ASC 820"), with changes in fair value recognized in the condensed statements of operations in the period of change.
The Public Warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and each balance sheet date thereafter.
Common stock subject to possible redemption
The Company accounts for its common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Common stock subject to mandatory redemption (if any) is classified as
liability instruments and is measured at fair value. Conditionally redeemable
common stock (including common stock that feature redemption rights that is
either within the control of the holder or subject to redemption upon occurrence
of uncertain events not solely within the Company's control) is classified as
temporary equity. At all other times, common stock is classified as
stockholders' equity. The Company's common stock feature certain redemption
rights that is considered to be outside of the Company's control and subject to
the occurrence of uncertain future events. Accordingly, as of
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Increases or decreases in the carrying amount of redeemable common stock is affected by charges against additional paid in capital and retained earnings (accumulated deficit).
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Net Income (Loss) Per Share of Common Stock
Net income (loss) per common share is computed by dividing net earnings by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the effect of the Warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 14,115,358 shares in the calculation of diluted income (loss) per share, since the exercise of the Warrants are contingent upon the occurrence of future events.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company's condensed financial statements.
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