PART I - FINANCIAL INFORMATION This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements 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 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 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 revenues13 Condensed Statements of Changes in Stockholders' Equity (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 income15 Condensed Statements of Cash Flows 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 Account20 Notes to Unaudited Condensed Financial Statements 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 IPO2223 - 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 units2426 - 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 Combination31 - 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 Combination35 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 date113114 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 combination119 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 risk148 Item 4. Controls and Procedures 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, 2021151 - 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 equity151152 - 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 professionals153 PART II - OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The company reports no legal proceedings - The company has no legal proceedings to report155 Item 1A. Risk Factors 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 prospectus156 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities - The company reports no information for this item157 Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - The company reports no information for this item158 Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable159 Item 5. Other Information The company reports no other information - The company reports no information for this item160 Item 6. Exhibits 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 documents163
Dragonfly Energy(DFLI) - 2021 Q3 - Quarterly Report