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Chardan NexTech Acquisition 2 Corp. *

Chardan NexTech Acquisition 2 Corp. *

Mar 8, 2021 by Kristi Marvin

PROPOSED BUSINESS COMBINATION: Dragonfly Energy Corp.

ENTERPRISE VALUE: $501.4 million
ANTICIPATED SYMBOL: DFLI

Locust Walk Acquisition Corp. proposes to combine with Dragonfly Energy Corp., headquartered in Reno, Nevada, a manufacturer of deep-cycle lithium-ion batteries.

  • Dragonfly’s battery products are designed and assembled in the USA, and the Company’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 the Company’s proprietary and patented solid-state cell technology.

SUBSEQUENT EVENT – 10/3/22 – LINK

  • At the signing of the business combination, the SPAC and an investor signed a $5M PIPE Investment at $10.00/Share
  • As of September 30, 2022, the Assignee has acquired in the open market and continues to hold a total of 485,000 shares of Common Stock, which were purchased during the week of September 26, 2022, at purchase prices per share ranging from $10.33 to $10.38 (such shares, the “Purchase Shares”).
    • In accordance with the aforementioned offset provision provided in the Subscription Agreement, and assuming a per share redemption price of $10.32, the aggregate purchase price that the Assignee is obligated to pay under the Subscription Agreement will be reduced from $5 million to zero and the aggregate number of shares of the Common Stock that the Assignee is obligated to purchase under the Subscription Agreement will be reduced from 500,000 shares to an aggregate of 15,000 shares of Common Stock.
    • The Assignee has waived its right to redeem the Purchased Shares and may not cast votes with respect to the Purchased Shares at Chardan’s Special Meeting of Stockholders on October 6, 2022.
    • Chardan does not believe that the waiver of voting rights of the Assignee with respect to the Purchase Shares will materially impact the likelihood that the Business Combination will be approved at such meeting.

SUBSEQUENT EVENT – 9/29/22 – LINK

Tern Loan

  • Chardan Capital Markets and EICF Agent entered into a $75 million concurrently with the closing under the Business Combination Agreement.
    • The proceeds of the Term Loan will be used
      • (i) to refinance on the Closing Date, prior indebtedness
      • (ii) to support the combination under the Business Combination Agreement
      • (iii) for working capital purposes and other corporate purposes
      • (iv) to pay any fees associated with transactions contemplated under the definitive agreement for the Term Loan and the other loan documents entered into in connection therewith, including the transactions described in the foregoing clauses (i) and (ii) and fees and expenses related to the business combination.
  • The Term Loan will amortize in the amount of 5% per annum beginning 24 months after closing and mature on the fourth anniversary of the Closing Date (“Maturity Date”).
    • The Term Loan will accrue interest:
      • (i) until April 1, 2023, at a per annum rate equal to the adjusted Secured Overnight Financing Rate plus a margin equal to 13.5%, of which 7% will be payable in cash and 6.5% will be paid in-kind
      • (ii) thereafter until October 1, 2024, at a per annum rate equal to adjusted SOFR plus 7% payable in cash plus an amount ranging from 4.5% to 6.5%, depending on the senior leverage ratio of the consolidated company, which will be paid-in-kind and
      • (iii) at all times thereafter, at a per annum rate equal to adjusted SOFR plus a margin ranging from 11.5% to 13.5% payable in cash, depending on the senior leverage ratio of the consolidated company. In each of the foregoing cases, adjusted SOFR will be no less than 1%.
  • The Company may elect to prepay all or any portion of the amounts owed prior to the Maturity Date, provided that the Company provides notice to the Administrative Agent and the amount is accompanied by the applicable prepayment premium if any.
    • Prepayments of the Term Loan will be required to be accompanied by a premium of:
      • 5% of the principal amount so prepaid if made prior to the 1st anniversary of the Closing Date
      • 3% if made on and after the 1st anniversary but prior to the 2nd anniversary of the Closing Date
      • 1% if made after the 2nd anniversary of the Closing Date but prior to the 3rd anniversary of the Closing Date, and 0% if made on or after the 3rd anniversary of the Closing Date.
    • If the Term Loan is accelerated following the occurrence of an event of default, the Borrower will be required to immediately pay to lenders the sum of all obligations for principal, accrued interest, and the applicable prepayment premium.
  • The SPAC shall enter into
    • (i) the Penny Warrant to issue penny warrants to the Initial Term Loan Lenders under the Term Loan exercisable to purchase an aggregate number of shares equal to 5.6% of Holding’s common stock on a fully diluted basis
      • The Penny Warrants will have an exercise period of 10 years from the date of issuance.
    • (ii) the $10 Warrant to issue warrants to the Initial Term Loan Lenders under the Term Loan exercisable to purchase 1.6 million shares of Holding’s common stock at $10 per share.
      • The $10 Warrants will have an exercise period of 5 years from the date of issuance and will have customary cashless exercise provisions.
      • In the event the registration statement registering the shares of common stock related to Holdings’ planned $150 million equity line of credit has not been declared effective by the Securities and Exchange Commission on or before the date that is 121 days after the issuance date, the number of shares of common stock to be issued pursuant to the $10 Warrants shall increase by an additional 200,000 shares on such date and at the beginning of each subsequent 30 day period, until such registration statement is declared effective.
  • The amount of Penny Warrants was increased from 3.6% to 5.6% of Holding’s common stock on a fully basis as of the Closing Date.
  • The additional shares of common stock will dilute the pro forma ownership of the other Holdings stockholders proportionately.

EXTENSION – 9/6/22 – LINK

  • On September 6, 2022, Chardan NexTech Acquisition 2 Corp. notified Continental Stock Transfer & Trust Company that it was extending the time available to the Company to consummate its initial business combination for an additional one month from September 13, 2022 to October 13, 2022.
  • Extension No. 2 provides the Company with additional time to complete its proposed business combination with Dragonfly Energy Corp.
  • Extension No. 2 is the second of up to three one-month extensions permitted under the Company’s Second A&R Charter.
  • In connection with Extension No. 2, the Company’s officers, directors, initial stockholders and Chardan NexTech 2 Warrant Holdings, LLC, their affiliates or designees will deposit an aggregate of $200,000 into the Trust Account prior to September 12, 2022, on behalf of the Company.
  • In connection with its Second Extension Payment, the Insiders will receive a non-interest bearing, unsecured promissory note equal to the Second Extension Payment that will not be repaid if the Company is unable to close a business combination, unless there are funds available outside its Trust Account to do so.

EXTENSION – 8/5/22 – LINK

  • The SPAC approved the monthly extension for $200K per month. At the meeting, 9,556,652 (75.55%) shares were redeemed.

SUBSEQUENT EVENT – 8/2/22 – LINK

  • The SPAC announced today that the Company has amended its Definitive Proxy Statement, filed July 22, 2022, to increase the amount from $100,000 to $200,000 that the Company’s insiders, their affiliates or designees will deposit into the Trust Account upon five days’ advance notice prior to August 13, 2022, in order to extend the date by which the Company must complete an initial business combination

SUBSEQUENT EVENT – 7/12/22 – LINK

  • THOR Industries, Inc. agreed to purchase 1,267,502 shares of Dragonfly common stock for $15 million in cash ($11.83/Share)
    • In connection with the THOR Investment, THOR and Dragonfly will enter into a commercial arrangement pursuant to which:
      • (i) THOR and certain of THOR’s affiliates will, among other things, transition to lithium-ion batteries manufactured and sold by Dragonfly, and
      • (ii) Dragonfly will, among other things, grant certain board observer rights (with customary limitations) to THOR.

TRANSACTION

  • 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.

Chardan 2 Transaction Overview 2

PIPE

  • $230 million consisting of:
    • $75 million senior secured term loan (used in part to refinance approximately $45 million of outstanding Dragonfly indebtedness)
    • $5 million equity investment at $10.00 per share from CNTQ’s Sponsor, Chardan NexTech Investments 2 LLC
    • $150 million Chardan Equity Facility (ChEFTM) from Chardan, an affiliate of CNTQ’s sponsor.

LOCK-UP

  • Company and Sponsor
    • 6 months from the Closing Date

EARNOUT

  • 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.

NOTABLE CONDITIONS TO CLOSING

  • That Chardan have at least $5,000,001 of net tangible assets upon Closing

NOTABLE CONDITIONS TO TERMINATION

  • To the extent Closing has not occurred by August 10, 2022, then, pursuant to Chardan’s organizational documents, Chardan shall extend the deadline to consummate its initial business combination by an additional three months from the Termination Date; provided that if the Closing has not occurred by the date that is two business days prior to the Extended Termination Date, Chardan shall extend the deadline to consummate its initial business combination by an additional three months from the Extended Termination Date.

ADVISORS

  • 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.

MANAGEMENT & BOARD

Executive Officers

Jonas Grossman, 47
Co-Founder, Chief Executive Officer, President, Secretary, Treasurer, and Director

Since April 2020, Mr. Grossman has been the chief executive officer and president of Chardan Healthcare Acquisition 2 Corp., a special purpose acquisition company. He was the chief Executive officer and president of Chardan Healthcare Acquisition Corp. from March 2018 until its merger in October 2019 with BiomX (NYSE: PHGE). Mr. Grossman is currently a director of BiomX. He was a co-founder and director for LifeSci Acquisition Corp., a special purpose acquisition company from March 2020 until its merger with Vincera Pharma, Inc. in December of 2020. Since December 2020, Mr. Grossman has served as a director of Ventoux CCM Acquisition Corp., a special purpose acquisition company. He has served as managing partner and head of capital markets for Chardan, a New York headquartered broker/dealer, since December 2003, and has additionally served as president of Chardan since September 2015. Since 2003, Mr. Grossman has overseen the Chardan’s investment banking and capital markets activities and initiatives. He has extensive transactional experience having led or managed more than 400 transactions during his tenure at Chardan. Since December 2006, Mr. Grossman has served as a founding partner for Cornix Advisors, LLC, a New York based hedge fund. From 2001 until 2003, Mr. Grossman worked at Ramius Capital Group, LLC, a global multi-strategy hedge fund where he served as Vice President and Head Trader. Mr. Grossman served as a director for Ideanomics, Inc. (formerly China Broadband, Inc.) (NASDAQ: IDEX) from January 2008 until November 2010. He holds a B.A. in Economics from Cornell University and an M.B.A. from NYU’s Stern School of Business. Mr. Grossman has served on the board of directors for UNICEF since December 2016.

Steven Urbach, 45
Chief Financial Officer and Director Nominee

Mr. Urbach has served as chief executive officer of Chardan, a New York headquartered broker/dealer, since March 2003. Mr. Urbach is credited with co-founding Chardan and its focus on disruptive technology. With the help of his partners, executive team, and employees, Chardan has grown into an internationally-recognized investment bank specializing in special purpose acquisition companies, disruptive technology, and Healthcare investment banking. Since December 2006, Mr. Urbach has served as a founding partner of Cornix Advisors, LLC., a New York based multi-strategy hedge fund. From 2005 until 2008, Mr. Urbach served as a member of the board of director of Origin Agritech (NASDAQ: SEED). Prior to founding Chardan, Mr. Urbach was a Nasdaq Market Maker for Windsor Capital Advisors from 1999 until 2002 and an analyst at Chase Manhattan Bank from 1997 to 1999. He holds a B.S. in Finance from Ithaca College.

Alex Weil, 49
Chief Operating Officer and Director Nominee

Mr. Weil has served as managing director and co-head of FinTech investment banking at Chardan, a New York headquartered broker/dealer, since March 2020 and as a director of Ventoux CCM Acquisition Corp., a special purpose acquisition company, since December 2020. From January 2018 to March 2020, he served as managing director and head of insurtech investment banking at SenaHill Securities, LLC, a New York headquartered broker/dealer. From January 2013 to September 2017, Mr. Weil was a director at PricewaterhouseCoopers Inc., a network of firms providing assurance, advisory and tax services. Prior to 2012, Mr. Weil held positions as a director at Lazard Middle Market, LLC, an executive director at UBS Securities LLC and a director at Citigroup Global Markets Inc. Mr. Weil holds a B.A. in Business Administration from the University of Colorado, Boulder.

Board of Directors

Kerry Propper, 46
Co-Founder and Director (Chairman)

Mr. Propper was co-founder of Chardan and served as its chief executive officer and head of its investment bank from 2003 to 2015. He is a pioneer in the special purpose acquisition marketplace, as he was the executive vice president and director of the third-ever publicly listed special purpose acquisition company, Chardan China Acquisition Corp., and has been an executive or senior advisor for five additional special purpose acquisition companies. Since 2015 Mr. Propper has been the chairman of Chardan’s board of directors and the co-founder and managing partner of ATW Partners, a growth-focused investment firm. Since the inception of ATW Partners, Mr. Propper has invested approximately $90 million of capital through the ATW Partner’s fund and its affiliated opportunity vehicles across multiple geographies and sectors. Within HealthTech and FinTech, Mr. Propper has an extraordinary track record with 15 investments and average returns of over 100%. Mr. Propper is also the co-chairman of 340B Technologies, a healthcare technology group, and is on the board of China Networks International Holdings, a shell company, and China Cablecom Holdings Ltd., a joint-venture provider of cable television services in the Peoples Republic of China. Mr. Propper dedicates much of his time philanthropy and he is a founding member of Nadia’s Initiative. He also serves on the executive board for Voices of Rwanda, Yazda and Digital Citizens Fund and the board of trustees of the International Crisis Group. Mr. Propper earned his B.A. in Economics and International Studies from Colby College.

Perry Boyle, 57
Director

Mr. Boyle was with Point72 Asset Management, L.P., or Point 72, and Point 72 affiliates from 2004 through his retirement in March 2020. He helped lead Point72’s launch as a registered investment advisor, raising over $6 billion in external capital. He originally joined S.A.C. Capital Advisors in 2004 as the firm’s first director of research. In January 2013 he became head of equities and, in January 2015, he became head of discretionary investing at Point72. From June 2016 through December 2017 he served as the president and chief investment officer of Stamford Harbor Capital, L.P., a company owned by businessman Steven A. Cohen. He returned to Point72 in January 2018. In his various leadership roles at the firm, Mr. Boyle managed the long/short and macro portfolios. He created and led the firm’s professional development programs, including P72 Academy and the 9s Program, and helped drive the internationalization of the Point72, overseeing offices in London, Hong Kong, Tokyo and Singapore. Prior to joining S.A.C., Mr. Boyle was a founding partner of Thomas Weisel Partners from 2000 until 2004, and a managing director at Alex. Brown & Sons from 1992-2000. He began his career as an investment banker with Salomon Brothers Inc. Mr. Boyle is a member of the advisory board of the Center for a New American Security (CNAS), and a director of The US Friends of the International Institute for Strategic Studies (IISS). He was a 2018 and 2019 delegate from the IISS to the Shangri-La Dialogue in Singapore. He is a council member of the Hoover Institution and a Lionel Curtis member of Chatham House. Mr. Boyle helps lead the annual Ride For Our Vets, the major source of funding for the Connecticut Veterans Legal Center. He received his B.A. in Economics from Stanford University, his M.B.A. from Dartmouth College and a M.A. from the Fletcher School at Tufts University. He has lectured on investing at Brown, Yale, Dartmouth, Harvard, Cambridge and UNC, and delivered testimony to Congress on financial regulation.

Roderick Hardamon, 44
Director

Mr. Hardamon has served as chief executive officer of URGE Imprint LLC, a boutique management consulting firm headquartered in Detroit, Michigan, and URGE Development Group, a real estate development firm headquartered in Detroit, Michigan, since May 2016. From July 1998 to March 2016, Mr. Hardamon held various positions at Citigroup, a leading global bank, finally serving as managing director and North American head of Citigroup’s alternative investor services business. From March 2016 to April 2016, Mr. Hardamon briefly served as a managing director at SS&C Technologies, a global provider of services and software for the financial services and healthcare industries. Mr. Hardamon graduated from Morehouse College with B.A.s in accounting and Philosophy in 1998.

Jory Des Jardins, 49
Director

Ms. Jardins is the chief marketing officer of The @ Company, a position she has held since 2020. She has also served as VC-in-Residence at the W Fund since 2020. Ms. Jardins recently served as the head of global startup marketing at Amazon Web Services from 2019 to 2020. Before her time at Amazon Web Services, she served as the global head of community at ConsenSys from 2018 to 2019. Ms. Jardins served as an advisor at Tribal Advisors from 2016 to 2018. In 2005, she co-founded BlogHer and served as the company’s president until its acquisition in 2015. Ms. Jardins graduated from the University of Illinois at Urbana-Champaign in 1993 where she studied history, literature, and psychology.

Jonathan Biele, 51
Director

Mr. Biele recently joined PREEM Inc., a vertical technology platform, as head of business and corporate development after a 28-year career in investment banking serving in a variety of leadership roles. Most recently, Mr. Biele served as head of technology and services investment banking after rejuvenating the equity capital markets practice at SunTrust Robinson Humphrey, where he worked from July 2013 to February 2020. During his career, Mr. Biele focused on providing capital markets, strategic and tactical advice to companies, boards of directors, private equity and venture capitalists. In addition to his tenure at SunTrust Robinson Humphrey, Mr. Biele served as head of equity capital markets for Citadel Securities from 2010 to 2013, for Cowen and Co. from 2007 to 2010, and for Lazard Freres from 2005 to 2007, in addition to his contribution in a variety of capacities with the equity capital markets departments of Lehman Brothers, ABN Amro Rothschild, and UBS Securities. In these roles Mr. Biele originated and executed numerous public and private equity and debt financings and provided strategic advice. His vast experience in corporate finance and advisory spans across multiple sectors and asset classes both public and private. In addition to his professional activities, Mr. Biele most recently completed a third term as a trustee of Burke Mountain Academy, a premier ski academy in the United States, and remains the lead investor and advisor to the chief executive officer of inGamba Tours, a luxury cyclo-tourism business. Mr. Biele earned a B.A. in History in 1992 from St. Lawrence University.

Todd Thomson, 60
Director

He is currently the chief operating officer and chief financial officer of Kairos Ventures, an early-stage investment firm. He is an accomplished operating executive and entrepreneur, having served as Citigroup chief financial officer for five years and as chief executive officer of Citigroup’s nearly $10 billion global wealth management division for more than two years. Mr. Thomson is a leading practitioner on mergers and acquisitions and business strategy, having led the acquisition and strategy efforts for Citigroup and GE Capital, as well as serving as advisor to Fortune 500 firms while at Bain & Co., Booz Allen Hamilton, and Barents Group. He has extensive investing experience as chief executive officer of Citigroup alternative investments, chairman of the Citigroup pension investment committee, chairman of the dynasty investment committee, and a member of the investment committees for the Davidson College and World Resources Institute endowments. Prior to joining Kairos Ventures, Mr. Thomson served as co-founder and chairman of Dynasty Financial Partners, or Dynasty, a leading investment and technology platform for sophisticated independent advisors. Founded by Mr. Thomson and his colleagues in 2010, Dynasty serves nearly 50 registered investment advisor firms nationally, with $50 billion under management. In addition to serving as chairman, Todd served in several operating roles since Dynasty’s founding, including chairing the investment committee, serving as chief investment officer, and designing and leading Dynasty Capital Strategies. Mr. Thomson has also agreed to serve on the board of Chardan NexTech Acquisition Corp., a blank check company, upon the effectiveness of its registration statement.

Hitesh Thakrar, 59
Director

Mr. Thakrar is an experienced investor in the technology sector, having spent over 20 years investing in public equities in the life sciences, information technology and innovation sectors. Since 2015, he has been active in early stage venture investing. Mr. Thakrar is currently a Venture Partner at Syncona Limited, a Wellcome Trust backed early stage venture fund, a position he has held since February 2016. He has also served as a Governance Board Member of KQ Labs at the Francis Crick Institute since December 2018. Since August 2020, he has been the main Board Trustee of the Alan Turing Institute which is the UK National Institute for Artificial Intelligence and Data Science research. Additionally, since November 2016, Mr. Thakrar has been the Chair of the Investment Committee for Newable Ventures, a pre-Series A fund focused on deep technology. He has also served as an advisor to UKRI’s Science and Technology Funding Council (SFTC), which helps early stage companies spin out from UK universities, since July 2020. He has previously served as a non-executive director for Desktop Genetics and Tropic Biosciences since 2015 and 2017 respectively, both of which specialize in the use of CRISPR technology in gene editing. Previously, Mr. Thakrar held the position of Portfolio Manager, Global Innovation Fund with the Abu Dhabi Investment Authority (ADIA), from 2009 until 2015. He has worked at several other public market institutions in global equity research and fund management including JP Morgan, Aviva Group, Dresdner Bank and New Star Asset Management. He has previously held the position of Innovation Fellow at the University of Cambridge, recently joined as a Trustee of the Royal National Orthopaedic Hospital Charity and is a member of the commercial Board of the Institute and Audit committee. Mr. Thakrar has a degree in chemistry from Kings College, London, an MBA from Cranfield University and a CFA from the American Association of Investment Analysts.

ByKristi Marvin