Dragonfly Energy(DFLI) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Financial Statements (Unaudited) 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 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 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 - 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] Unaudited Condensed Statements of Cash Flows 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 - 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][19] - 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][36] - 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][88][96] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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] 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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] - 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] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings - There are no legal proceedings to report[150] Item 1A. Risk Factors 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] Other Items (2-5) 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][153][154][155] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report, including officer certifications and XBRL data files