Merger CNTQU

Dragonfly Energy to merge with Chardan NexTech Acquisition 2 Corp.

, SPAC Research

Dragonfly Energy Corp., a leader in energy storage and producer of deep cycle lithium-ion storage batteries, and Chardan NexTech Acquisition 2 Corp. (Nasdaq: CNTQ), a publicly traded special purpose acquisition company, today announced a definitive agreement for a business combination that will result in Dragonfly becoming a publicly listed company. Upon closing of the transaction, the combined company will be renamed Dragonfly Energy and is expected to be listed on the Nasdaq under the new ticker symbol "DFLI."

Dragonfly Energy Corp., headquartered in Reno, Nevada, is a leading manufacturer of deep cycle lithium-ion batteries. Dragonfly's battery products are designed and assembled in the USA, and Dragonfly's research and development initiatives are revolutionizing the energy storage industry through innovative technologies and manufacturing processes. Today, Dragonfly's non-toxic deep cycle lithium-ion batteries are displacing lead-acid batteries across a wide range of end-markets, including RVs, marine vessels, off-grid installations, and other storage applications. Dragonfly is also focused on delivering an energy storage solution that enables a more sustainable and reliable smart grid through the future deployment of Dragonfly's proprietary and patented solid-state cell technology.

The business combination values Dragonfly at an implied $500.1 million pro forma enterprise value. Estimated cash proceeds to the combined company are expected to consist of CNTQ's approximately $128 million of cash in trust (assuming no redemptions) and an additional $230 million consisting of $75 million senior secured term loan (used in part to refinance approximately $45 million of outstanding Dragonfly indebtedness), a $5 million equity investment at $10.00 per share from CNTQ's Sponsor, Chardan NexTech Investments 2 LLC, and a $150 million Chardan Equity Facility (ChEFTM) from Chardan, an affiliate of CNTQ's sponsor.

The transaction includes an earn-out provision for up to an additional 40 million shares as follows: 15 million issued if both 2023 audited Revenue and Operating Income reach $250 million and $35 million, respectively; 12.5 million issued at a price target of $22.50 by December 31, 2026; 12.5 million issued at a price target of $32.50 by December 31, 2028. All Dragonfly stockholders will roll 100% of their equity holdings into the new combined company.

A commitment letter and term sheet have been agreed in connection with the $75 million term loan and $150 million equity facility, respectively. The availability of these facilities is subject to the negotiation and execution of related definitive documentation, customary funding conditions and closing of the business combination.    

The Boards of Directors of each of Dragonfly and CNTQ have unanimously approved the transaction, the Board of Directors of CNTQ has unanimously recommended to CNTQ stockholders the approval of the transaction, and the requisite stockholders of Dragonfly have approved the transaction. The transaction will require the approval of the stockholders of CNTQ, and is subject to satisfaction or waiver of the conditions stated in the merger agreement and other customary closing conditions, including the receipt of certain regulatory approvals. The transaction is currently expected to close in the second half of 2022.

Stifel, Nicolaus & Company, Incorporated is serving as financial advisor. O'Melveny & Myers, LLP and Parsons Beble & Latimer are serving as legal counsel to Dragonfly. 

Chardan is serving as financial advisor, Stifel and Chardan are acting as joint placement agents, Skadden, Arps, Slate, Meagher & Flom LLP and Brownstein Hyatt Farber Schreck, LLP are serving as legal counsel to CNTQ.

Energy Impact Partners is serving as lead arranger of the senior secured term loan. Chapman and Cutler LLP is serving as legal counsel to Energy Impact Partners.

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