Dragonfly Energy Holdings Corp. (NASDAQ:DFLI) Q2 2023 Results Conference Call August 21, 2023 5:00 PM ET Company Participants Denis Phares - CEO John Marchetti - CFO Conference Call Participants Vincent Anderson - Stifel George Gianarikas - Canaccord Brian Dobson - Chardan Operator Good afternoon. My name is J.P. and I'll be your operator today for Dragonfly Energy's Second Quarter Earnings Call. This call can be accessed along with the earnings press release and SEC filings on the Investor section of the D ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40730 DRAGONFLY ENERGY HOLDINGS CORP. (Exact name of registrant as specified in its charter) | Nevada | 85-1873463 | | --- | --- | | (Sta ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's analysis of financial condition and operations, and disclosures regarding market risk and internal controls [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) For the first quarter of 2023, Dragonfly Energy reported net sales of $18.8 million, a slight increase from $18.3 million in Q1 2022, shifting from a net loss of $2.3 million to a net income of $4.9 million primarily due to a significant positive change in warrant liabilities fair market value [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets were $90.5 million, a slight increase from year-end 2022, while total liabilities significantly decreased to $58.2 million primarily due to a reduction in warrant liabilities, leading to an increase in total equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $15,791 | $17,781 | | Inventory | $51,812 | $49,846 | | Total Current Assets | $75,016 | $73,489 | | **Total Assets** | **$90,509** | **$88,762** | | **Liabilities & Equity** | | | | Accounts payable | $18,824 | $13,475 | | Notes payable, current | $20,699 | $19,242 | | Warrant liabilities | $4,141 | $32,831 | | Total Current Liabilities | $50,483 | $40,566 | | **Total Liabilities** | **$58,194** | **$77,430** | | **Total Equity** | **$32,315** | **$11,332** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2023, net sales increased slightly to $18.8 million, but gross profit decreased, and operating expenses surged, resulting in a $9.8 million loss from operations, which was offset by an $18.5 million gain from warrant liability revaluation, leading to a net income of $4.9 million Condensed Consolidated Statements of Operations (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Sales | $18,791 | $18,303 | | Gross Profit | $4,743 | $5,495 | | Total Operating Expenses | $14,559 | $7,057 | | Loss From Operations | $(9,816) | $(1,562) | | Change in fair market value of warrant liability | $18,523 | - | | **Net Income (Loss)** | **$4,892** | **$(2,298)** | | **Income (Loss) Per Share- Diluted** | **$0.10** | **$(0.06)** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first quarter of 2023, net cash used in operating activities improved to $3.8 million, while net cash provided by financing activities increased to $2.4 million, resulting in a $2.0 million net decrease in cash, ending the quarter with $15.8 million Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(3,838) | $(11,110) | | Net Cash Used in Investing Activities | $(589) | $(4,524) | | Net Cash Provided by Financing Activities | $2,437 | $111 | | **Net Decrease in Cash** | **$(1,990)** | **$(15,523)** | | **Ending Cash** | **$15,791** | **$13,107** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes highlight the company's business, a significant "Going Concern" issue due to operational losses, negative cash flow, and probable debt covenant breaches, a shift in revenue disaggregation from retail to OEM sales, and details on its $75 million term loan, warrants, stock-based compensation, and related party transactions - **Going Concern:** The company has incurred operational losses and negative cash flows, and it is probable that the company will fail to meet its Term Loan covenants within the next twelve months, which raises substantial doubt about its ability to continue as a going concern[24](index=24&type=chunk)[25](index=25&type=chunk) Disaggregation of Revenue by Channel (in thousands) | Channel | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Retail | $7,069 | $13,035 | | Distributor | $2,968 | $2,087 | | Original equipment manufacturer (OEM) | $8,754 | $3,181 | | **Total** | **$18,791** | **$18,303** | - **Debt Covenants:** The company has a **$75 million** Term Loan with covenants for senior leverage ratio, liquidity, and fixed charge coverage, for which it obtained a waiver for Q1 2023 failures to satisfy the fixed charge coverage and senior leverage ratios, leading to the entire term loan being classified as a current liability due to uncertainty of future compliance[71](index=71&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) - **Warrant Liability:** The fair value of warrant liabilities decreased significantly from **$32.8 million** at year-end 2022 to **$4.1 million** at the end of Q1 2023, resulting in an **$18.5 million** gain recognized in the income statement due to both a change in fair value and the cashless exercise of a large number of warrants[51](index=51&type=chunk)[96](index=96&type=chunk)[11](index=11&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20the%20Results%20of%20Operations) Management attributes the 2.7% increase in Q1 2023 net sales to strong OEM growth offsetting DTC declines, notes a decrease in gross profit margin due to sales mix shift, highlights surging operating expenses from increased compensation and fees, and expresses substantial doubt about going concern due to probable debt covenant breaches, with future plans including significant R&D investment requiring additional capital [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Net sales for Q1 2023 increased by 2.7% to $18.8 million, driven by a $5.6 million rise in OEM revenue offsetting a $5.1 million decrease in DTC revenue, while gross profit fell by 13.7% to $4.7 million due to sales mix shift, and operating expenses significantly increased by 106.3% to $14.6 million, primarily from G&A expenses, leading to a net income of $4.9 million due to a $14.7 million other income from warrant liability revaluation - Net sales increased by **$0.5 million (2.7%)** year-over-year, primarily due to a **$5.6 million** increase in OEM revenue, which was offset by a **$5.1 million** decrease in DTC revenue attributed to rising interest rates and inflation[147](index=147&type=chunk) - Gross profit decreased by **$0.8 million (13.7%)** year-over-year, as the revenue mix shifted to include a larger percentage of lower-margin OEM sales[149](index=149&type=chunk) - General and administrative expenses increased by **$5.9 million (161.8%)** year-over-year, mainly due to a **$3.5 million** increase in stock-based compensation and a **$2.1 million** increase in professional, compliance, and insurance costs[151](index=151&type=chunk) - Total other income was **$14.7 million**, compared to an expense of **$1.3 million** in the prior year, primarily due to an **$18.5 million** positive change in the fair market value of warrant liability[153](index=153&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company had $15.8 million in cash and plans significant capital investment exceeding $50 million for solid-state battery development over the next 2-3 years, while facing substantial doubt about its ability to continue as a going concern due to probable future breaches of its $75 million term loan covenants, despite obtaining a waiver for Q1 2023 - The company had **$15.8 million** in cash as of March 31, 2023[169](index=169&type=chunk) - Significant capital investment is planned, with over **$50 million** expected to be spent on solid-state development and cell manufacturing technologies over the next two to three years[170](index=170&type=chunk) - The company obtained a waiver for its failure to satisfy the fixed charge coverage ratio and maximum senior leverage ratio covenants for the quarter ended March 31, 2023, and it is probable that the company will fail to meet these covenants within the next twelve months[173](index=173&type=chunk)[178](index=178&type=chunk) - These conditions, including probable future covenant breaches and the need to raise additional capital, raise substantial doubt about the company's ability to continue as a going concern[178](index=178&type=chunk)[179](index=179&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Adjusted EBITDA as a non-GAAP measure, reporting a loss of $5.0 million for Q1 2023, compared to a loss of $0.4 million in the prior-year period, after adjusting net income for interest, taxes, depreciation, amortization, stock-based compensation, and the change in fair value of warrant liabilities Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income (loss) | $4,892 | $(2,298) | | Interest Expense | $3,815 | $1,263 | | Taxes | $0 | $(527) | | Depreciation and Amortization | $297 | $192 | | **EBITDA** | **$9,004** | **$(1,370)** | | Stock-Based Compensation | $4,487 | $288 | | Change in fair market value of warrant liability | $(18,523) | $0 | | Other Adjustments | $0 | $702 | | **Adjusted EBITDA** | **$(5,032)** | **$(380)** | [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states this section is not applicable - Not applicable[186](index=186&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2023, due to un-remediated material weaknesses previously reported in the 2022 Annual Report, with ongoing remediation efforts - Management concluded that due to previously reported material weaknesses that have not yet been remediated, the company's disclosure controls and procedures were not effective as of March 31, 2023[189](index=189&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls, other than the ongoing remediation plan[190](index=190&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details legal proceedings, risk factors, recent securities sales, other disclosures, and a list of exhibits [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that are expected to have a material adverse effect on its business - The company is not currently a party to any litigation or legal proceedings that, in management's opinion, are likely to have a material adverse effect on the business[191](index=191&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Dragonfly Energy is not required to provide this information - As a smaller reporting company, the company is not required to provide the information for this item[192](index=192&type=chunk) [Recent Sales of Unregistered Securities](index=43&type=section&id=Item%202.%20Recent%20Sales%20of%20Unregistered%20Securities) None reported for the period - None[193](index=193&type=chunk) [Other Information](index=43&type=section&id=Item%205.%20Other%20Information) None reported for the period - None[196](index=196&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report, including certifications by the CEO and CFO, and various agreements and corporate documents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission file number 001-40730 DRAGONFLY ENERGY HOLDINGS CORP. (Exact name of registrant as specified in its charter) Nevada 85-1873463 (State or other jurisdict ...

Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, par value $0.0001 per share DFLI The Nasdaq Global Market Redeemable Warrants, exercisable for common stock at an exercise price of $11.50 per share, subject to adjustment DFLIW The Nasdaq Capital Market UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly p ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-40730 CHARDAN NEXTECH ACQUISITION 2 CORP. (Exact name of registrant as specified in its charter) Identification No.) 17 ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Condensed Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20CONDENSED%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) The blank check company's Q1 2022 financial statements reflect net income primarily from warrant revaluation, with assets held in trust for a future business combination, which was announced in May 2022 [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Summary | Account | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $647,178 | $799,808 | | Investments held in Trust Account | $128,437,281 | $128,421,215 | | **Total Assets** | **$129,380,541** | **$129,523,613** | | **Liabilities & Equity** | | | | Total Current Liabilities | $213,935 | $114,211 | | Warrant liabilities | $601,622 | $2,036,258 | | **Total Liabilities** | **$815,557** | **$2,150,469** | | Common stock subject to possible redemption | $128,397,500 | $128,397,500 | | Total Stockholders' Equity (Deficit) | $167,484 | ($1,024,356) | [Unaudited Condensed Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Statements%20of%20Operations) Condensed Statement of Operations (Three Months Ended March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Loss from operations | ($258,862) | $0 | | Change in fair value of warrant liabilities | $1,434,636 | $0 | | **Net income** | **$1,191,840** | **$0** | | Basic net income per common share | $0.08 | $0.00 | | Diluted net income per common share | $0.08 | $0.00 | [Unaudited Condensed Statements of Changes in Stockholders' (Deficit) Equity](index=5&type=section&id=Unaudited%20Condensed%20Statements%20of%20Changes%20in%20Stockholders%27%20%28Deficit%29%20Equity) - Total Stockholders' Equity (Deficit) improved from a deficit of **($1,024,356)** at the end of 2021 to a surplus of **$167,484** as of March 31, 2022, driven entirely by the **$1,191,840** net income recorded during the quarter[14](index=14&type=chunk) [Unaudited Condensed Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Statements%20of%20Cash%20Flows) Condensed Statement of Cash Flows (Three Months Ended March 31) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($152,630) | ($77,118) | | Net cash provided by financing activities | $0 | $125,000 | | **Net Change in Cash** | **($152,630)** | **$47,882** | | Cash - End of Period | $647,178 | $72,882 | [Notes to Unaudited Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) - The company is a blank check company (SPAC) formed to execute a business combination, with all activity to date relating to its formation and IPO in August 2021, and will not generate operating revenue until a business combination is complete[18](index=18&type=chunk)[19](index=19&type=chunk) - Management has identified conditions that raise substantial doubt about the Company's ability to continue as a going concern, primarily due to the requirement to consummate a business combination by August 13, 2022 (or up to February 13, 2023 with extensions) or face mandatory liquidation[35](index=35&type=chunk)[36](index=36&type=chunk) - The company accounts for its **4,627,858 Private Warrants** as liabilities, which are re-measured to fair value each reporting period with the change recognized in the statement of operations, while the **9,847,500 Public Warrants** are classified as equity[56](index=56&type=chunk)[88](index=88&type=chunk)[96](index=96&type=chunk) - On **May 16, 2022**, the company announced the execution of a definitive merger agreement with Dragonfly Energy Corp, a Nevada-based manufacturer of deep cycle lithium-ion batteries[107](index=107&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) The pre-business combination blank check company reported net income for Q1 2022, driven by a non-cash gain on warrant liabilities, with liquidity maintained by cash outside the trust account - The company has not engaged in any operations or generated any revenues to date, with its activities limited to organizational tasks and preparing for its Initial Public Offering[112](index=112&type=chunk) Results of Operations (Three Months Ended March 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income | $1,191,840 | $0 | | Key Drivers | Change in fair value of warrant liabilities ($1.43M gain), offset by operating costs ($0.21M) | N/A | Liquidity Position | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash held outside Trust Account | $647,178 | $799,808 | | Working Capital Surplus | $729,325 | $988,187 | - The company has a business combination marketing agreement with Chardan Capital Markets, LLC, which will be paid a cash fee equal to **3.5%** of the gross proceeds of the IPO upon consummation of an initial business combination[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As of March 31, 2022, the company reported no material market or interest rate risk - The company was not subject to any market or interest rate risk as of March 31, 2022, and December 31, 2021[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of March 31, 2022, due to a material weakness in accounting for complex financial instruments, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2022[146](index=146&type=chunk) - A material weakness in internal control over financial reporting was identified, relating to the accounting treatment for complex financial instruments, which could lead to a material misstatement of financial statements[147](index=147&type=chunk) - The company is implementing remediation plans, including providing enhanced access to accounting literature and increasing communication with third-party professionals to address the material weakness[148](index=148&type=chunk) [PART II - OTHER INFORMATION](index=37&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) The company reported no legal proceedings - There are no legal proceedings to report[150](index=150&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the annual report on Form 10-K filed on March 29, 2022 - As of the report date, there have been no material changes to the risk factors disclosed in the Company's annual report on Form 10-K[151](index=151&type=chunk) [Other Items (2-5)](index=37&type=section&id=Other%20Items%20%282-5%29) The company reported no unregistered equity sales, no defaults on senior securities, and no other material information, with mine safety disclosures being not applicable - The company reports 'None' for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 5 (Other Information), while Item 4 (Mine Safety Disclosures) is 'Not applicable'[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report, including officer certifications and XBRL data files

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-40730 CHARDAN NEXTECH ACQUISITION 2 CORP. | --- | --- | |--------------------------------------------------------------------- ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company, a blank check entity, presents its unaudited condensed financial statements for the period ended September 30, 2021, reflecting its IPO and the reclassification of redeemable common stock [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) The condensed balance sheets provide a snapshot of the company's financial position, highlighting cash, investments, liabilities, and stockholders' equity Condensed Balance Sheet Summary (as of Sep 30, 2021 vs Dec 31, 2020) | Metric | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $887,208 | $25,000 | | Investments held in Trust Account | $128,404,523 | $0 | | **Total Assets** | **$129,658,315** | **$25,000** | | **Liabilities & Equity** | | | | Total Liabilities | $1,505,949 | $1,000 | | Common stock subject to possible redemption | $128,397,500 | $0 | | Total Stockholders' (Deficit) Equity | ($245,134) | $24,000 | | **Total Liabilities & Equity** | **$129,658,315** | **$25,000** | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) The condensed statements of operations detail the company's net income, primarily influenced by the change in fair value of warrant liabilities Condensed Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Loss from operations | ($116,268) | ($117,102) | | Change in fair value of warrant liability | $4,072,514 | $4,072,514 | | **Net income (loss)** | **$2,690,543** | **$2,689,709** | | Basic net income (loss) per common share | $0.28 | $0.54 | | Diluted net income (loss) per common share | $0.28 | $0.50 | - The company's net income is primarily driven by a non-cash gain from the change in the fair value of warrant liabilities, as it has no operating revenues[13](index=13&type=chunk) [Condensed Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)) The condensed statements of changes in stockholders' equity illustrate the transition to a deficit, primarily due to common stock accretion post-IPO - Stockholders' equity transitioned to a **deficit of ($245,134)** as of September 30, 2021, from a positive equity of $24,000 at December 31, 2020, mainly due to the accretion of common stock to its redemption value following the IPO, partially offset by net income[15](index=15&type=chunk) [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) The condensed statements of cash flows detail cash movements, with significant inflows from financing activities and outflows into the Trust Account Cash Flow Summary for the Nine Months Ended September 30, 2021 (Unaudited) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($459,653) | | Net cash used in investing activities | ($128,397,500) | | Net cash provided by financing activities | $129,719,361 | | **Net Change in Cash** | **$862,208** | | **Cash - end of period** | **$887,208** | - Financing activities provided significant cash inflows from the IPO and private warrant sales, while investing activities consisted entirely of depositing these proceeds into the Trust Account[20](index=20&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) The notes detail the company's nature as a blank check company, its August 2021 IPO, significant accounting policies, and conditions raising substantial doubt about its going concern ability - The company is a blank check company incorporated on June 23, 2020, for the purpose of effecting a business combination, with all activity through September 30, 2021, relating to its formation and IPO[22](index=22&type=chunk)[23](index=23&type=chunk) - The company consummated its IPO on August 13, 2021, and with the full exercise of the over-allotment option, raised total **gross proceeds of $126.5 million** from the sale of 12,650,000 units[24](index=24&type=chunk)[26](index=26&type=chunk) - The company has **12 months from the IPO closing** (until August 13, 2022), with a possible extension up to 18 months, to consummate an initial Business Combination[31](index=31&type=chunk) - Management has identified conditions that raise substantial doubt about the Company's ability to continue as a going concern, which it plans to address through a Business Combination[35](index=35&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's non-operating status, attributing net income to warrant liability changes, and outlines liquidity sources and critical accounting policies - The company is a blank check company formed to effectuate a business combination and has not engaged in any operations or generated any operating revenues to date[113](index=113&type=chunk)[114](index=114&type=chunk) Results of Operations Summary | Period | Net Income / (Loss) | Key Drivers | | :--- | :--- | :--- | | Three months ended Sep 30, 2021 | $2,690,543 | Change in fair value of warrant liabilities ($4.1M gain) | | Nine months ended Sep 30, 2021 | $2,689,709 | Change in fair value of warrant liabilities ($4.1M gain) | | Period from Inception to Sep 30, 2020 | ($1,000) | Formation and operating costs | - As of September 30, 2021, the company had **$887,208 in cash** held outside the Trust Account and a **working capital surplus of $1,228,758** to fund its search for a business combination[119](index=119&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no exposure to market or interest rate risk as of September 30, 2021 - As of September 30, 2021, the company was not subject to any market or interest rate risk[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective due to a material weakness in accounting for redeemable common stock, with remediation efforts underway - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of September 30, 2021[151](index=151&type=chunk) - The ineffectiveness was due to a **material weakness** in internal control over financial reporting stemming from the misclassification of redeemable Class A common stock in permanent equity instead of temporary equity[151](index=151&type=chunk)[152](index=152&type=chunk) - Management has enhanced processes to better apply complex accounting standards, including providing enhanced access to accounting literature and increasing communication with personnel and third-party professionals[153](index=153&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides other information, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no legal proceedings - The company has no legal proceedings to report[155](index=155&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its IPO prospectus - There have been no material changes to the risk factors disclosed in the company's final IPO prospectus[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities - The company reports no information for this item[157](index=157&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - The company reports no information for this item[158](index=158&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - This item is not applicable[159](index=159&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) The company reports no other information - The company reports no information for this item[160](index=160&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including officer certifications and XBRL data - Exhibits filed with the report include certifications from the Principal Executive Officer and Principal Financial Officer, as well as XBRL instance documents[163](index=163&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-40730 | --- | --- | --- | |--------------------------------------------------------------------------------------------- ...