As filed with the Securities and Exchange Commission on July 21, 2022.

Registration No: 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CHARDAN NEXTECH ACQUISITION 2 CORP.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

6770

(Primary Standard Industrial
Classification Code Number)

85-1873463

(I.R.S. Employer
Identification Number)

17 State Street, 21^st Floor
New York, New York 10004
(646) 465-9000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Jonas Grossman
Chief Executive Officer
17 State Street, 21^st Floor
New York, New York 10004
(646) 465-9000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Jeffrey A. Brill
Peter D. Serating
Skadden, Arps,
Slate, Meagher & Flom LLP
One Manhattan West
New York, NY 10001
(212) 735-3000

Kurt J. Berney
Noah K. Kornblith
O’Melveny & Myers LLP
Two Embarcadero Center
28^thFloor

San Francisco, CA 94111
(415) 984-8700

Approximate date of commencement of proposed sale to the public: As soon as practicable after (i) this registration statement is declared effective and (ii) upon completion of the applicable transactions described in the enclosed proxy statement/prospectus.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction: ☐

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said section 8(a), may determine.

The information in this preliminary proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Table of Contents

SUBJECT TO COMPLETION, DATED JULY 21, 2022

PROXY STATEMENT FOR
SPECIAL MEETING OF STOCKHOLDERS OF
CHARDAN NEXTECH ACQUISITION 2 CORP.

PROSPECTUS FOR
51,147,777 SHARES OF COMMON STOCK OF CHARDAN NEXTECH ACQUISITION 2 CORP.,
WHICH WILL BE RENAMED “DRAGONFLY ENERGY HOLDINGS CORP.”

IN CONNECTION WITH THE BUSINESS COMBINATION DESCRIBED HEREIN

The board of directors (the “Chardan Board”) of Chardan NexTech Acquisition 2 Corp., a Delaware corporation (“Chardan”, “we”, “our” or the “Company”), has unanimously approved the transactions (collectively, the “Business Combination”) contemplated by that certain Agreement and Plan of Merger, dated May 15, 2022, as amended on July 12, 2022, (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among Chardan, Bronco Merger Sub, Inc., a Nevada corporation and a wholly owned direct subsidiary of Chardan (“Merger Sub”), and Dragonfly Energy Corp., a Nevada corporation (“Dragonfly”), a copy of which is attached to this proxy statement/prospectus as Annex A. As used in this proxy statement/prospectus, “New Dragonfly” refers to Chardan after giving effect to the Business Combination. As described in this proxy statement/prospectus, Chardan’s stockholders are being asked to consider a vote upon the Business Combination, among other items.

As a result of and upon the Closing, among other things, all (i) shares of Dragonfly common stock (after giving effect to the conversion of Dragonfly preferred stock into Dragonfly common stock pursuant to Dragonfly’s governing documents) and (ii) options to acquire shares of Dragonfly common stock (as defined below and as described further in the immediately succeeding paragraph), in each case outstanding as of immediately prior to the Closing, will be cancelled in exchange for the right to receive shares of New Dragonfly common stock or assumed and converted into options to acquire shares of New Dragonfly common stock totaling 41,500,000 shares (at a deemed value of $10.00 per share). The portion of the Aggregate Merger Consideration reflecting the conversion of the Dragonfly options is calculated assuming that all New Dragonfly options are net-settled. With respect to the New Dragonfly options received in respect of Dragonfly options that are outstanding immediately prior to the Closing and cash exercised after the Closing, up to 801,100 additional shares of New Dragonfly common stock may be issued. Based on Dragonfly’s outstanding shares and options as of July 20, 2022, at Closing approximately 38,189,691 shares of the Aggregate Merger Consideration will be allocated to holders of outstanding Dragonfly common stock with the balance allocated to holders of the assumed Dragonfly options. Accordingly, this proxy statement/prospectus relates to the issuance by Chardan of shares of New Dragonfly common stock issued in connection with the Merger described herein. The holders of these shares may from time to time sell, transfer or otherwise dispose of any or all of these shares in a number of different ways and at varying prices, and we will not receive any proceeds from such transactions.

All Dragonfly options outstanding as of immediately prior to the Merger will be converted into New Dragonfly options. Accordingly, this proxy statement/prospectus also relates to the issuance by New Dragonfly of shares of New Dragonfly common stock upon the exercise of the New Dragonfly options following the Merger. This proxy statement/ prospectus also relates to the issuance of 3,310,309 shares of New Dragonfly common stock pursuant to the exercise of the New Dragonfly options. See “Proposal No. 1 — The Business Combination Proposal — Consideration to Dragonfly Holders in the Business Combination.”

Table of Contents

Further, as a result of the Merger, existing holders of Dragonfly capital stock will have the right to receive, subject to achieving specified milestones, up to an aggregate of 40,000,000 additional shares of New Dragonfly common stock in three tranches. The first tranche of 15,000,000 shares is issuable if New Dragonfly’s 2023 total audited revenue is equal to or greater than $250 million and New Dragonfly’s 2023 audited operating income is equal to or greater than $35 million. The second tranche of 12,500,000 shares is issuable upon achieving a volume-weighted average trading price threshold of at least $22.50 on or prior to December 31, 2026, and the third tranche of 12,500,000 shares is issuable upon achieving a volume-weighted average trading price threshold of at least $32.50 on or prior to December 31, 2028. To the extent not previously earned, the second tranche is issuable if the $32.50 price target is achieved by December 31, 2028 (such shares, together, the “Earnout Shares”). This proxy statement/prospectus also relates to 40,000,000 New Dragonfly common stock issued as Earnout Shares.

Concurrently with the execution of the Business Combination Agreement, Chardan entered into a subscription agreement (the “Subscription Agreement”) with the Sponsor, pursuant to which, among other things, the Sponsor agreed to subscribe for and purchase, and Chardan agreed to issue and sell to the Sponsor, 500,000 newly issued shares of Chardan common stock (the “PIPE Securities”), for a price of $10.00 per share for gross proceeds of $5 million (the “PIPE Investment”). The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market provided such shares are not redeemed (as described below). Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Subscription Agreement” for additional information.

Concurrently with the execution of the Business Combination Agreement, Chardan and Dragonfly entered into a commitment letter (the “Debt Commitment Letter”) with CCM Investments 5 LLC, an affiliate of Chardan Capital Markets (“CCM 5”, and in connection with the Term Loan, the “Chardan Lender”), and EICF Agent LLC (“EIP” and, collectively with the Chardan Lender, the “Initial Term Loan Lenders”), pursuant to which the Initial Term Loan Lenders have agreed to provide Dragonfly with a senior secured term loan facility in an aggregate principal amount of $75 million (the “Term Loan”) on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The obligations of the Initial Term Loan Lenders to provide the Term Loan will terminate on October 31, 2022 (or such later date reasonably acceptable to the Initial Term Loan Lenders) if the Closing Date has not occurred by such date. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender”), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto.

The proceeds of the Term Loan may be used (i) to support the Business Combination, (ii) to repay outstanding indebtedness and other obligations of Dragonfly, (iii) to pay fees and expenses in connection with the foregoing, (iv) to provide additional growth capital and (v) for other general/corporate purposes. The Term Loan must be fully drawn on the Closing Date and will mature four years from the Closing Date.

The definitive documentation for the Term Loan has not been finalized and, accordingly, the actual terms of the Term Loan, may differ from those described in this proxy statement/prospectus. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Debt Commitment Letter” for additional information.

Table of Contents

Documentation, including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly common stock issued to it under the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility. The Equity Facility will be structured to allow New Dragonfly, on the terms and subject to the conditions thereof, to raise funds from the issuance of equity on a periodic basis outside the context of a traditional underwritten follow-on offering.

In connection with the Business Combination, the Sponsor and Chardan’s directors and executive officers have interests in the business combination that are different from, or in addition to, Chardan stockholders. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information. As of July 11, 2022, a total of 3,162,500 shares of Chardan’s common stock, or approximately 20% of the outstanding shares are owned by the Sponsor and Chardan’s directors and executive officers. As a result, only 4,743,750 shares of common stock held by the public stockholders will need to be present in person, via the virtual meeting platform, or represented by proxy, at the special meeting to satisfy the quorum requirement for the Meeting. Assuming only the minimum number of shares of common stock to constitute a quorum is present, only 3,953,126 shares of common stock, or approximately 31% of the 12,650,000 shares of Chardan common stock held by the public stockholders, must vote in favor of the Business Combination Proposal for it to be approved.

It is anticipated that upon completion of the Business Combination and assuming no redemptions by Chardan public stockholders, Chardan’s public stockholders will retain an ownership interest of approximately 22.4% of New Dragonfly, the Term Loan Lenders will own approximately 3.7% of New Dragonfly assuming the exercise of all Penny Warrants, the Sponsor, officers, directors and other affiliates will own approximately 6.5% of New Dragonfly (including the PIPE Investment), and the Dragonfly stockholders will own approximately 67.4% (excluding the 40,000,000 Earnout Shares) of New Dragonfly. These levels of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed weighted average VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

Chardan’s units, common stock and public warrants are currently listed on The Nasdaq Capital Market (the “Nasdaq”) under the symbols “CNTQU,” “CNTQ” and “CNTQW,” respectively. At the Closing, each Chardan unit will separate into its components consisting of one share of Chardan common stock and three-quarters of one warrant to purchase one share of Chardan common stock and, as a result, will no longer trade as a separate security.

This proxy statement/prospectus provides shareholders of Chardan with detailed information about the proposed business combination and other matters to be considered at the special meeting of Chardan. We encourage you to read this entire document, including the Annexes and other documents referred to herein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 49 of this proxy statement/prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/ PROSPECTUS, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

Table of Contents

This proxy statement/prospectus is dated [●], 2022, and
is first being mailed to Chardan’s shareholders on or about [●], 2022.

HOW TO OBTAIN ADDITIONAL INFORMATION

The proxy statement/prospectus incorporates important business and financial information about Chardan that is not included within or delivered herewith. If you would like to receive additional information or if you want additional copies of this document, agreements contained in the appendices or any other documents filed by Chardan with the SEC, such information is available without charge upon written or oral request. Please contact our proxy solicitor:

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower

Stamford, CT 06902

Individuals call toll-free: 800-662-5200

Banks and brokers call: 203-658-9400

Email: CNTQ.info@investor.morrowsodali.com

To obtain timely delivery of the documents, you must request them no later than five business days before the date of the Meeting, or no later than [●], 2022. Please be sure to include your complete name and address in your request. Please see “Where You Can Find Additional Information” to find out where you can find more information about Chardan and Dragonfly. You should rely only on the information contained in the proxy statement/prospectus in deciding how to vote on the Business Combination. Neither Chardan nor Dragonfly has authorized anyone to give any information or to make any representations other than those contained in the proxy statement/prospectus. Do not rely upon any information or representations made outside of the proxy statement/prospectus. The information contained in the proxy statement/prospectus may change after the date of the proxy statement/prospectus. Do not assume after the date of the proxy statement/prospectus that the information contained in the proxy statement/prospectus is still correct.

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.
17 STATE STREET, 21^ST FLOOR
NEW YORK, NY 10004

Dear Chardan NexTech Acquisition 2 Corp. Stockholders,

On behalf of the board of directors (the “Chardan Board”) of Chardan NexTech Acquisition 2 Corp., a Delaware corporation (“Chardan”, “we” or “our”), we cordially invite you to a special meeting (the “special meeting”) of stockholders of Chardan, which will be held at [•], 2022. In light of the COVID-19 pandemic and to protect the health of stockholders of Chardan and the community, the special meeting will be a completely virtual meeting of stockholders conducted via live webcast. You will be able to attend the special meeting by visiting https://www.cstproxy.com/cnaq/2022 and entering your control number as further explained in the accompanying proxy statement/prospectus. You may also attend the special meeting telephonically by dialing within the U.S. and Canada: +1 800-450-7155 (toll free) or outside of the U.S. and Canada: +1 857-999-9155 and when prompted enter the pin 5046958#.

The Chardan Board has unanimously approved the transactions (collectively, the “Business Combination”) contemplated by that certain Agreement and Plan of Merger, dated May 15, 2022, as amended on July 12, 2022, (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among Chardan, Bronco Merger Sub, Inc., a Nevada corporation and a wholly owned direct subsidiary of Chardan (“Merger Sub”), and Dragonfly Energy Corp., a Nevada corporation (“Dragonfly”), a copy of which is attached to this proxy statement/prospectus as Annex A. As described in this proxy statement/ prospectus, Chardan’s stockholders are being asked to consider a vote upon the Business Combination, among other items. As used in this proxy statement/prospectus, “New Dragonfly” refers to Chardan after giving effect to the Business Combination.

On the Closing Date, Merger Sub will merge with and into Dragonfly (the “Merger”), with Dragonfly as the surviving corporation in the Merger and, after giving effect to the Merger, Dragonfly will be a wholly- owned subsidiary of Chardan (the time that the Merger becomes effective being referred to as the “Effective Time”).

As a result of and upon the Closing, among other things, all (i) shares of Dragonfly common stock (after giving effect to the conversion of Dragonfly preferred stock into Dragonfly common stock pursuant to Dragonfly’s governing documents) and (ii) options to acquire shares of Dragonfly common stock (as defined below and as described further in the immediately succeeding paragraph), in each case outstanding as of immediately prior to the Closing, will be cancelled in exchange for the right to receive shares of New Dragonfly common stock or assumed and converted into options to acquire shares of New Dragonfly common stock totaling 41,500,000 shares (at a deemed value of $10.00 per share). The portion of the Aggregate Merger Consideration reflecting the conversion of the Dragonfly options is calculated assuming that all New Dragonfly options are net-settled. With respect to the New Dragonfly options received in respect of Dragonfly options that are outstanding immediately prior to the Closing and cash exercised after the Closing, up to 801,100 additional shares of New Dragonfly common stock may be issued. Based on Dragonfly’s outstanding shares and options as of July 20, 2022, at Closing approximately 38,189,691 shares of the Aggregate Merger Consideration will be allocated to holders of outstanding Dragonfly common stock and 3,310,309 shares of the Aggregate Merger Consideration will be allocated to holders of the assumed Dragonfly options. Accordingly, this proxy statement/prospectus relates to the issuance by Chardan of shares of New Dragonfly common stock issued in connection with the Merger described herein. The holders of these shares may from time to time sell, transfer or otherwise dispose of any or all of these shares in a number of different ways and at varying prices, and we will not receive any proceeds from such transactions.

Table of Contents

December 31, 2028 (such shares, together, the “Earnout Shares”). This proxy statement/prospectus also relates to 40,000,000 New Dragonfly common stock issued as Earnout Shares.

At the special meeting, Chardan stockholders will be asked to consider and vote upon:

(1)Proposal No. 1 — To consider and vote upon a proposal to approve the Business Combination, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in the accompanying proxy statement/prospectus — we refer to this proposal as the “Business Combination Proposal”;

(2)Proposal No. 2 — To consider and vote upon a proposal to approve and adopt, assuming the Business Combination Proposal is approved, the second amended and restated certificate of incorporation of Chardan in the form attached hereto as Annex B (the “second amended and restated certificate of incorporation”) — we refer to this proposal as the “Charter Proposal”;

(3)Proposal No. 3 — To consider and vote upon a proposal, for purposes of complying with the applicable rules of Nasdaq, to approve the issuance of shares of Chardan’s common stock in connection with the Business Combination, including, without limitation, the Aggregate Merger Consideration, the Earnout Shares, the PIPE Investment, the Term Loan Lender Warrants and the Equity Facility (as described below), assuming the Business Combination Proposal and the Charter Proposal are approved, for purposes of complying with the applicable rules of the Nasdaq — we refer to this proposal as the “Nasdaq Proposal”;

(4)Proposal No. 4 — To consider and vote on a proposal to approve and adopt, assuming the Business Combination Proposal, the Charter Proposal and the Nasdaq Proposal are approved, for purposes of complying with the applicable rules of the Nasdaq, the New Dragonfly 2022 Incentive Plan (the “2022 Plan”) — we refer to this proposal as the “Incentive Plan Proposal.” A copy of the 2022 Plan is attached to the accompanying proxy statement/ prospectus as Annex G;

(5)Proposal No. 5 — To consider and vote upon a proposal to approve, assuming the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal and the Incentive Plan Proposal are approved, the New Dragonfly Employee Stock Purchase Plan (the “ESPP”), a copy of which is attached to this proxy statement/prospectus as Annex H, including the authorization of the initial share reserve under the ESPP — we refer to this proposal as the “ESPP Proposal”;

(6)Proposal No. 6 — To consider and vote upon a proposal to elect seven (7) directors who will serve as directors of New Dragonfly until their successors are duly elected and qualified, subject to their earlier death, resignation, or removal — we refer to this proposal as the “Director Election Proposal”; and

(7)Proposal No. 7 — To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal or the Director Election Proposal — we refer to this proposal as the “Adjournment Proposal.”

Each of these proposals is more fully described in the accompanying proxy statement/prospectus, which we encourage you to read carefully and in its entirety before voting. Only holders of record of Chardan common stock at the close of business on July 11, 2022 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements thereof.

After careful consideration, the Chardan Board has determined that the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal, the Director Election Proposal and the Adjournment Proposal are fair to and in the best interests of Chardan and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” the Business Combination Proposal, “FOR” the Charter Proposal, “FOR” the Nasdaq Proposal, “FOR” the Incentive Plan Proposal, “FOR” the ESPP Proposal, “FOR” the Director Election Proposal and “FOR” the Adjournment Proposal, if presented. When you consider the Chardan Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Chardan stockholders generally. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information. The Chardan Board was aware of and considered these interests, among other matters, in evaluating and

Table of Contents

negotiating the Business Combination and in recommending to the Chardan stockholders that they vote in favor of the proposals presented at the special meeting.

Concurrently with the execution of the Business Combination Agreement, Chardan and Dragonfly entered into a commitment letter (the “Debt Commitment Letter”) with CCM Investments 5 LLC, an affiliate of Chardan Capital Markets (“CCM 5”, and in connection with the Term Loan, the “Chardan Lender”), and EICF Agent LLC (“EIP” and, collectively with the Chardan Lender, the “Initial Term Loan Lenders”), pursuant to which the Initial Term Loan Lenders have agreed to provide Dragonfly with a senior secured term loan facility in an aggregate principal amount of $75 million (the “Term Loan”) on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The obligations of the Initial Term Loan Lenders to provide the Term Loan will terminate on October 31, 2022 (or such later date reasonably acceptable to the Initial Term Loan Lenders) if the Closing Date has not occurred by such date. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender”), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto.

Concurrently with the execution of the Business Combination Agreement, Dragonfly and CCM 5 (CCM 5 in connection with the Equity Facility, or such other affiliate investor as it may designate, the “Equity Facility Investor”), entered into an equity facility letter agreement on May 15, 2022 (the “Equity Facility Letter Agreement”), pursuant to which Chardan and Dragonfly agreed to enter into definitive documentation (the “Equity Facility Definitive Documentation”) prior to the Closing Date to establish a committed equity facility (the “Equity Facility”). The Equity Facility Definitive Documentation will contain terms that are consistent with the Equity Facility Letter Agreement and customary for documentation of this nature. Pursuant to, on the terms of and subject to the satisfaction of the conditions to be set forth in the Equity Facility Definitive Documentation,including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly common stock issued to it under the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility.The Equity Facility will be structured to allow New

Table of Contents

Dragonfly, on the terms and subject to the conditions thereof, to raise funds from the issuance of equity on a periodic basis outside the context of a traditional underwritten follow-on offering.

All Chardan stockholders are cordially invited to attend the special meeting and we are providing the accompanying proxy statement/prospectus and proxy card in connection with the solicitation of proxies to be voted at the special meeting (or any adjournment or postponement thereof). To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the special meeting and vote, obtain a proxy from your broker or bank.

Chardan’s units, common stock and public warrants are currently listed on the Nasdaq Capital Market (the “Nasdaq”) under the symbols “CNTQU,” “CNTQ” and “CNTQW,” respectively. Chardan will apply for listing, to be effective at the time of the Business Combination, of New Dragonfly common stock and public warrants on the Nasdaq under the proposed symbols “DFLI” and “DFLIW,” respectively. It is a condition of the consummation of the Business Combination that Chardan receive confirmation from the Nasdaq that New Dragonfly has been conditionally approved for listing on the Nasdaq, but there can be no assurance such listing condition will be met or that Chardan will obtain such confirmation from the Nasdaq. If such listing condition is not met or if such confirmation is not obtained, the Business Combination will not be consummated unless the Nasdaq condition set forth in the Business Combination Agreement is waived by the applicable parties.

Pursuant to Chardan’s current certificate of incorporation, a holder of public shares may demand that Chardan redeem such shares for cash if the Business Combination is consummated. Holders of public shares will be entitled to receive cash for these shares only if they demand that Chardan redeem their shares for cash no later than the second business day prior to the originally scheduled vote on the Business Combination Proposal by delivering their stock to the Transfer Agent prior to the vote at the meeting. If the Business Combination is not completed, these shares will not be redeemed. The redemption rights include the requirement that a holder must identify himself, herself or itself in writing as a beneficial holder and provide his, her or its legal name, phone number and address to the Transfer Agent in order to validly redeem his, her or its shares. If a holder of public shares properly demands redemption and votes for or against the Business Combination Proposal, Chardan will redeem each public share for a full pro rata portion of the trust account (as defined in the accompanying proxy statement/prospectus), calculated as of two business days prior to the consummation of the Business Combination.

Chardan is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to comply with certain reduced public company reporting requirements.

The accompanying proxy statement/prospectus provides you with detailed information about the Business Combination and other matters to be considered at the special meeting of Chardan’s stockholders. We encourage you to carefully read the entire document, including the Annexes attached thereto. You should also carefully consider the risk factors described in section entitled “Risk Factors” beginning on page 51.

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

The transactions described in the accompanying proxy statement/prospectus have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the merits or fairness of the Business Combination or related transactions, or passed upon the accuracy or adequacy of the disclosure in the accompanying proxy statement/prospectus. Any representation to the contrary is a criminal offense.

Table of Contents

Thank you for your participation. We look forward to your continued support.


	By Order of the Board of Directors


	Kerry Propper
	Executive Chairman of the Board of Directors

[●], 2022

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST TENDER YOUR SHARES TO CHARDAN’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE ORIGINALLY SCHEDULED VOTE ON THE BUSINESS COMBINATION PROPOSAL AT THE SPECIAL MEETING. THE REDEMPTION RIGHTS INCLUDE THE REQUIREMENT THAT A HOLDER MUST IDENTIFY HIMSELF, HERSELF OR ITSELF IN WRITING AS A BENEFICIAL OWNER AND PROVIDE HIS, HER OR ITS LEGAL NAME, PHONE NUMBER AND ADDRESS TO CHARDAN’S TRANSFER AGENT IN ORDER TO VALIDLY REDEEM HIS, HER OR ITS SHARES. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO CHARDAN’S TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT AND WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. PLEASE SEE THE SECTION ENTITLED “SPECIAL MEETING OF CHARDAN STOCKHOLDERS — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.

The accompanying proxy statement/prospectus is dated [●], 2022 and is first being mailed to Chardan stockholders on or about [●], 2022.

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

17 STATE STREET, 21^ST FLOOR
NEW YORK, NY 10004

NOTICE OF

SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [●], 2022

TO THE STOCKHOLDERS OF CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTICE IS HEREBY GIVEN that a special meeting (the “Special Meeting”) of stockholders of Chardan NexTech Acquisition 2 Corp., a Delaware corporation (“Chardan”, “we” or “our”), will be held at [•], 2022. In light of the COVID-19 pandemic and to protect the health of stockholders of Chardan and the community, the Special Meeting will be a completely virtual meeting of stockholders conducted via live webcast. You will be able to attend the Special Meeting by visiting https://www.cstproxy.com/cnaq/2022 and entering your control number as further explained in the accompanying proxy statement/prospectus. You may also attend the Special Meeting telephonically by dialing within the U.S. and Canada: +1 800-450-7155 (toll free) or outside of the U.S. and Canada: +1 857-999-9155 and when prompted enter the pin 5046958#.

On behalf of Chardan’s board of directors (the “Chardan Board”), you are cordially invited to attend the special meeting, to conduct the following business items:

(1)Proposal No. 1 — To consider and vote upon a proposal to approve the transactions (collectively, the “Business Combination”) contemplated by that certain Agreement and Plan of Merger, dated May 15, 2022, as amended on July 12, 2022, (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among Chardan, Bronco Merger Sub, Inc., a Nevada corporation and a wholly owned direct subsidiary of Chardan (“Merger Sub”), and Dragonfly Energy Corp., a Nevada corporation (“Dragonfly”), a copy of which is attached to this proxy statement/prospectus as Annex A, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in this proxy statement/ prospectus — we refer to this proposal as the “Business Combination Proposal”;

(4)Proposal No. 4 — To consider and vote on a proposal to approve and adopt, assuming the Business Combination Proposal, the Charter Proposal and the Nasdaq Approval are approved, for purposes of complying with the applicable rules of the Nasdaq, the New Dragonfly 2022 Incentive Plan (the “2022 Plan”) — we refer to this proposal as the “Incentive Plan Proposal.” A copy of the 2022 Plan is attached to the accompanying proxy statement/ prospectus as Annex G;

Table of Contents

(7)Proposal No. 7 — To consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal or the ESPP Proposal — we refer to this proposal as the “Adjournment Proposal.”

After careful consideration, the Chardan Board has determined that the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal, the Director Election Proposal the Adjournment Proposal are fair to and in the best interests of Chardan and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” the Business Combination Proposal, “FOR” the Charter Proposal, “FOR” the Nasdaq Proposal, “FOR” the Incentive Plan Proposal, “FOR” the ESPP Proposal, “FOR” the Director Election Proposal and “FOR” the Adjournment Proposal, if presented. When you consider the Chardan Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Chardan stockholders generally. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information. The Chardan Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Chardan stockholders that they vote in favor of the proposals presented at the special meeting.

Concurrently with the execution of the Business Combination Agreement, Chardan and Dragonfly entered into a commitment letter (the “Debt Commitment Letter”) with CCM Investments 5 LLC, an affiliate of Chardan Capital Markets (the “Chardan Lender”), and EICF Agent LLC (“EIP” and, collectively with the Chardan Lender, the “Initial Term Loan Lenders”), pursuant to which the Initial Term Loan Lenders have agreed to provide Dragonfly with a senior secured term loan facility in an aggregate principal amount of $75 million (the “Term Loan”) on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The obligations of the Initial Term Loan Lenders to provide the Term Loan will terminate on October 31, 2022 (or such later date reasonably acceptable to the Initial Term Loan Lenders) if the Closing Date has not occurred by such date. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender”), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto.

Table of Contents

and (v) for other general/corporate purposes. The Term Loan must be fully drawn on the Closing Date and will mature four years from the Closing Date.

Concurrently with the execution of the Business Combination Agreement, Dragonfly and CCM Investments 5 LLC, an affiliate of Chardan Capital Markets (or such other affiliate investor as it may designate, the “Equity Facility Investor”), entered into an equity facility letter agreement on May 15, 2022 (the “Equity Facility Letter Agreement”), pursuant to which Chardan and Dragonfly agreed to enter into definitive documentation (the “Equity Facility Definitive Documentation”) prior to the Closing Date to establish a committed equity facility (the “Equity Facility”). The Equity Facility Definitive Documentation will contain terms that are consistent with the Equity Facility Letter Agreement and customary for documentation of this nature. Pursuant to, on the terms of and subject to the satisfaction of the conditions to be set forth in the Equity Facility Definitive Documentation, including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly common stock issued to it under the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility.The Equity Facility will be structured to allow New Dragonfly, on the terms and subject to the conditions thereof, to raise funds from the issuance of equity on a periodic basis outside the context of a traditional underwritten follow-on offering.

Pursuant to Chardan’s current certificate of incorporation, a holder of public shares may demand that Chardan redeem such shares for cash if the Business Combination is consummated. Holders of public shares will be entitled to receive cash for these shares only if they demand that Chardan redeem their shares for cash no later than the second business day prior to the originally scheduled vote on the Business Combination Proposal by delivering their stock to Chardan’s transfer agent prior to the vote at the meeting. If the Business Combination is not completed, these shares will not be redeemed. The redemption rights include the requirement that a holder must identify himself, herself or itself in writing as a beneficial holder and provide his, her or its legal name, phone number and address to Chardan’s transfer agent in order to validly redeem his, her or its shares. If a holder of public shares properly demands redemption and votes for or against the Business Combination Proposal, Chardan will redeem each public share for a full pro rata portion of the trust account (as defined in the accompanying proxy statement/prospectus), calculated as of two business days prior to the consummation of the business combination.

Table of Contents

Thank you for your participation. We look forward to your continued support.


	By Order of the Board of Directors


	Kerry Propper
	Executive Chairman of the Board of Directors

[●], 2022

IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST ELECT TO HAVE CHARDAN REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO CHARDAN’S TRANSFER AGENT AT LEAST TWO (2) BUSINESS DAYS PRIOR TO THE ORIGINALLY SCHEDULED VOTE ON THE BUSINESS COMBINATION PROPOSAL AT THE SPECIAL MEETING. THE REDEMPTION RIGHTS INCLUDE THE REQUIREMENT THAT A HOLDER MUST IDENTIFY HIMSELF, HERSELF OR ITSELF IN WRITING AS A BENEFICIAL OWNER AND PROVIDE HIS, HER OR ITS LEGAL NAME, PHONE NUMBER AND ADDRESS TO CHARDAN’S TRANSFER AGENT IN ORDER TO VALIDLY REDEEM HIS, HER OR ITS SHARES. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO CHARDAN’S TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT AND WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. PLEASE SEE THE SECTION ENTITLED “SPECIAL MEETING OF CHARDAN STOCKHOLDERS — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.

Table of Contents

TABLE OF CONTENTS


FREQUENTLY USED TERMS	1
SUMMARY OF THE MATERIAL TERMS OF THE TRANSACTIONS	7
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS	10
SUMMARY OF THE PROXY STATEMENT	25
SUMMARY HISTORICAL FINANCIAL INFORMATION OF DRAGONFLY	42
SUMMARY HISTORICAL FINANCIAL INFORMATION OF CHARDAN	44
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION	45
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	46
RISK FACTORS	49
FAIRNESS OPINION OF DUFF & PHELPS	93
SPECIAL MEETING OF CHARDAN STOCKHOLDERS	101
PROPOSAL NO. 1 – THE BUSINESS COMBINATION PROPOSAL	106
PROPOSAL NO. 2 – THE CHARTER PROPOSAL	139
PROPOSAL NO. 3 – THE NASDAQ PROPOSAL	143
PROPOSAL NO. 4 – THE INCENTIVE PLAN PROPOSAL	145
PROPOSAL NO. 5 – THE ESPP PROPOSAL	151
PROPOSAL NO. 6 – THE DIRECTOR ELECTION PROPOSAL	155
PROPOSAL NO. 7 – THE ADJOURNMENT PROPOSAL	156
U.S. FEDERAL INCOME TAX CONSIDERATIONS	157
OTHER INFORMATION RELATED TO CHARDAN	163
CHARDAN’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	174
INFORMATION ABOUT DRAGONFLY	179
MANAGEMENT OF DRAGONFLY	196
MANAGEMENT OF NEW DRAGONFLY AFTER THE BUSINESS COMBINATION	198
EXECUTIVE AND DIRECTOR COMPENSATION OF DRAGONFLY ENERGY CORP.	204
CERTAIN PROJECTED FINANCIAL INFORMATION OF DRAGONFLY	208
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION	212
DRAGONFLY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF STOCKHOLDERS’ RIGHTS	224
DESCRIPTION OF SECURITIES	246
PRICE RANGE OF SECURITIES AND DIVIDENDS	252
BENEFICIAL OWNERSHIP OF SECURITIES	253
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS	257
SECURITIES ACT RESTRICTIONS ON RESALE OF CHARDAN’S SECURITIES	260
APPRAISAL RIGHTS AND DISSENTER’S RIGHTS	262
LEGAL MATTERS	263
EXPERTS	263
SUBMISSION OF STOCKHOLDER PROPOSALS	263
FUTURE STOCKHOLDER PROPOSALS	263
OTHER STOCKHOLDER COMMUNICATIONS	263
DELIVERY OF DOCUMENTS TO STOCKHOLDERS	263
WHERE YOU CAN FIND MORE INFORMATION	264
INDEX TO FINANCIAL STATEMENTS	F-1
INFORMATION NOT REQUIRED IN PROSPECTUS	II-1

Table of Contents

ANNEXES

A	Agreement and Plan of Merger, dated as of May 15, 2022, by and among Chardan NexTech Acquisition 2 Corp., Bronco Merger Sub, Inc. and Dragonfly Energy Corp. and Amendment to the Merger Agreement, dated as of July 12, 2022, by and among Chardan NexTech Acquisition 2 Corp., Bronco Merger Sub, Inc. and Dragonfly Energy Corp.
B	Form of Second Amended and Restated Certificate of Incorporation of Dragonfly Energy Holdings Corp.
C	Form of Amended and Restated Bylaws of Dragonfly Energy Corp.
D	Form of Amended and Restated Registration Rights Agreement
E	Sponsor Support Agreement, dated as of May 15, 2022, by and among Chardan NexTech Investments 2 LLC, Dragonfly Energy Corp. and Chardan NexTech Investments 2 LLC
F	Subscription Agreement, dated as of May 15, 2022, between NexTech Acquisition 2 Corp. and Chardan NexTech Investments 2 LLC
G	Form of Dragonfly Energy Holdings Corp.’s 2022 Equity Incentive Plan
H	Form of Dragonfly Energy Holdings Corp.’s 2022 Share Incentive Plan
I	Opinion of Duff & Phelps
J	Commitment Letter, dated as of May 15, 2022, by and among Chardan NexTech Acquisition 2 Corp., Dragonfly Energy Corp., and EICF Agent LLC
K	Equity Facility Letter Agreement, dated as of May 15, 2022, by and among Dragonfly Energy Corp., Chardan NexTech Acquisition 2 Corp. and CCM Investments 5 LLC

Table of Contents

FREQUENTLY USED TERMS

Unless otherwise stated in this proxy statement or the context otherwise requires, references to:

“$10 Warrants” are to the warrants to acquire 1,600,000 shares of New Dragonfly common stock at per share exercise price of $10.00 issued to the Term Loan Lenders;

“2022 Plan” are to the Chardan NexTech Acquisition 2 Corp. 2022 Equity Incentive Plan to be adopted by Chardan prior to the Closing;

“Aggregate Fully Diluted Company Common Shares” are to, without duplication, (a) the aggregate number of shares of Dragonfly common stock that are (i) the Dragonfly Conversion Shares or (ii) issuable upon, or subject to, the exercise of Dragonfly options (whether or not then vested or exercisable) that are outstanding immediately prior to the Effective Time, minus (b) a number of shares of Dragonfly common stock equal to (A) the aggregate exercise price of such Dragonfly options divided by (B) the Per Share Merger Consideration;

“Aggregate Merger Consideration” are to the number of Chardan common stock equal to the quotient obtained by dividing (i) $415,000,000 by (ii) $10.00;

“Backstop Commitment Letter” are to that certain backstop commitment letter, dated as of May 20, 2022, by and between the Chardan Lender and the Backstop Lender;

“Backstop Lender” are to that certain third-party financing source party to the Backstop Commitment Letter;

“Backstopped Loans” are to the aggregate amount of the Term Loan that the Backstop Lender has committed to purchase from the Chardan Lender immediately following the issuance of the Term Loan on the Closing Date;

“Business Combination” are to the Merger, together with the other transactions contemplated by the Business Combination Agreement (including the consummation of the PIPE Investment) and the related agreements;

“Business Combination Agreement” are to that certain Agreement and Plan of Merger, dated as of May 15, 2022, as amended on July 12, 2022, by and among Chardan, Merger Sub and Dragonfly, as it may be amended, supplemented or otherwise modified from time to time;

“Business Combination Marketing Agreement” are to that certain business combination marketing agreement, dated as of August 10, 2021, between Chardan and Chardan Capital Markets;

“change of control” are to any transaction or series of transactions (a) following which any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, governmental authority or instrumentality or other entity of any kind (each of the foregoing, a “Person”) or “group” (within the meaning of Section 13(d) of the Exchange Act) of persons (other than New Dragonfly, the Surviving Corporation or any of their respective subsidiaries), has direct or indirect beneficial ownership of securities (or rights convertible or exchangeable into securities) representing fifty percent (50%) or more of the voting power of or economic rights or interests in New Dragonfly, the Surviving Corporation or any of their respective subsidiaries, (b) constituting a merger, consolidation, reorganization or other business combination, however effected, following which either (i) the members of the New Dragonfly Board or the Surviving Corporation immediately prior to such merger, consolidation, reorganization or other business combination do not constitute at least a majority of the board of directors of the company surviving the combination or, if the surviving company is a subsidiary, the ultimate parent thereof or (ii) the voting securities of New Dragonfly, the Surviving Corporation or any of their respective subsidiaries immediately prior to such merger, consolidation, reorganization or other business combination do not continue to represent or are not converted into fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Person resulting from such combination or, if the surviving company is a subsidiary, the ultimate parent thereof, or (c) the result of which is a sale of all or substantially all of the assets of New Dragonfly or the Surviving Corporation to any Person;

“Chardan” are to Chardan NexTech Acquisition 2 Corp., a Delaware corporation;

Table of Contents

“Chardan Capital Markets” are to Chardan Capital Markets, LLC, a Delaware limited liability company and representative of the underwriters of the Chardan IPO;

“Chardan common stock” are, prior to consummation of the Business Combination, to Chardan common stock, par value $0.0001 per share, and, following consummation of the Business Combination, to the common stock, par value $0.001 per share, of New Dragonfly;

“Chardan IPO” are to the initial public offering by Chardan, which closed on August 13, 2021;

“Chardan Lender” are to CCM Investments 5 LLC, an affiliate of Chardan Capital Markets;

“Chardan option” are to options to purchase Chardan common stock;

“Chardan Organizational Documents” are to the bylaws and certificate of incorporation of Chardan, each as amended;

“Chardan unit” are to the units of Chardan sold as part of the Chardan IPO;

“Chardan Transaction Expenses” are to the following out-of-pocket fees and expenses paid or payable by Chardan or its affiliates (whether or not billed or accrued for) as a result of or in connection with the negotiation, documentation and consummation of the transactions contemplated hereby or Chardan’s initial public offering: (a) all documented fees, costs, expenses, brokerage fees, commissions, finders’ fees and disbursements of financial advisors, investment banks, data room administrators, attorneys, accountants and other advisors and service providers (including any deferred underwriting commissions), (b) fifty percent (50%) of the filing fees incurred in connection with making any filings under Section 8.1 of the Business Combination Agreement, (c) fifty percent (50%) of the filing fees incurred in connection with filing the registration statement, the proxy statement or the proxy statement/registration statement under Section 8.2 of the Business Combination Agreement and the application fees incurred in connection with obtaining approval of the Nasdaq under Section 7.3 of the Business Combination Agreement, (d) repayment of any Working Capital Loans (as defined in the Business Combination Agreement) and (e) any other fees and expenses as a result of or in connection with the negotiation, documentation and consummation of the transactions contemplated hereby, in each case of clauses (a) through (e), solely to the extent such fees and expenses are incurred and unpaid as of the Closing. Chardan Transaction Expenses shall not include any fees and expenses of Chardan’s stockholders (other than Working Capital Loans);

“Closing” are to the consummation of the Business Combination;

“Closing Date” are to the date on which the Business Combination is consummated;

“completion window” are to the period following the completion of the Chardan IPO at the end of which, if Chardan has not completed an initial business combination, it will redeem 100% of the public shares at a per share price, payable in cash, equal to (a) the aggregate amount then on deposit in the trust account, including interest earned and not previously released to us for Chardan’s working capital requirements as well as to pay Chardan’s taxes, divided by (b) the number of then-outstanding public shares, subject to applicable law and certain conditions. The completion window ends on August 13, 2022, or as extended by the Insiders up to two times by an additional three months each time (to February 13, 2023, for a total of up to 18 months to complete a business combination);

“Debt Commitment Letter” are to that certain commitment letter dated as of May 15, 2022, by and among Chardan, Dragonfly and the Initial Term Loan Lenders;

“DGCL” are to the Delaware General Corporation Law, as amended;

“current certificate of incorporation” are to Chardan’s amended and restated certificate of incorporation in effect as of the date of this proxy statement;

“Dragonfly” are to Dragonfly Energy Corp., a Nevada corporation;

“Dragonfly Charter” are to the Articles of Incorporation of Dragonfly, dated April 11, 2016, as amended;

“Dragonfly common stock” are to a share of Dragonfly’s common stock, par value $0.001 per share;

Table of Contents

“Dragonfly Conversion Shares” are to the aggregate number of shares of Dragonfly common stock that are (i) issued and outstanding immediately prior to the Effective Time and (ii) issuable upon the conversion of the Dragonfly preferred stock immediately prior to the Effective Time in accordance with the governing documents of Dragonfly;

“Dragonfly Incentive Plan” are to either or both of Dragonfly’s 2019 Stock Incentive Plan, as amended, and/or Dragonfly’s 2021 Stock Incentive Plan, as amended, as the context requires;

“Dragonfly option” are to an option to purchase Dragonfly stock granted under either Dragonfly Incentive Plan;

“Dragonfly preferred stock” are to the Series A preferred stock of Dragonfly, par value $0.001 per share;

“Dragonfly stock” are to, collectively, the Dragonfly common stock and the Dragonfly preferred stock;

“Dragonfly Transaction Expenses” are to the following out-of-pocket fees and expenses paid or payable by Dragonfly or any of its subsidiaries (whether or not billed or accrued for) as a result of or in connection with the negotiation, documentation and consummation of the transactions contemplated hereby: (a) all documented fees, costs, expenses, brokerage fees, commissions, finders’ fees and disbursements of financial advisors, investment banks, data room administrators, attorneys, accountants and other advisors and service providers, (b) fifty percent (50%) of the filing fees incurred in connection with making any filings under Section 8.1 of the Business Combination Agreement, (c) fifty percent (50%) of the filing fees incurred in connection with filing the registration statement, the proxy statement or the proxy statement/registration statement under Section 8.2 of the Business Combination Agreement and the application fees incurred in connection with obtaining approval of the Nasdaq under Section 7.3 of the Business Combination Agreement, (d) change-in-control payments, transaction bonuses, retention payments, severance or similar compensatory payments payable by Dragonfly or any of its subsidiaries to any current or former employee (including any amounts due under any consulting agreement with any such former employee), independent contractor, officer, or director of Dragonfly or any of its subsidiaries as a result of the transactions contemplated hereby (and not tied to any subsequent event or condition, such as a termination of employment), including the employer portion of payroll taxes arising therefrom, (e) amounts owing or that may become owed, payable or otherwise due, directly or indirectly, by Dragonfly or any of its subsidiaries to any affiliate of Dragonfly or any of its subsidiaries in connection with the consummation of the transactions contemplated hereby, including fees, costs and expenses related to the termination of any Affiliate Agreement (as defined in the Business Combination Agreement), and (f) any fees and expenses as a result of or in connection with the negotiation, documentation and consummation of the transactions contemplated hereby, in each case of clauses (a) through (f), solely to the extent such fees and expenses are incurred and unpaid as of the Closing. Dragonfly Transaction Expenses shall not include any fees and expenses of Dragonfly’s stockholders;

“Earnout Consideration” or “Earnout Shares” are to the additional 40,000,000 shares of New Dragonfly common stock that may be issued to the Dragonfly stockholders;

“Effective Time” are to the date and time at which the Merger becomes effective in accordance with the terms of the Business Combination Agreement, the DGCL and the NRS;

“EIP” are to EICF Agent LLC and shall include any affiliated funds of EICF which may provide the Term Loan;

“Equity Facility” are to the committed equity facility to be established with the Equity Facility Investor pursuant to the Equity Facility Definitive Documentation;

“Equity Facility Commitment Shares” are to the shares of New Dragonfly common stock having a value of $1 million determined based on the applicable trading price at the time of issuance that New Dragonfly will agree to issue to the Equity Facility Investor as consideration for its irrevocable commitment to purchase the shares of New Dragonfly common stock upon the terms of and subject to the satisfaction of the conditions set forth in the Equity Facility Definitive Documentation;

“Equity Facility Definitive Documentation” are to the purchase agreement and registration rights agreement to be entered into between Chardan and the Equity Facility Investor after the signing of the Business Combination Agreement and prior to the Closing Date pursuant to which, and on the terms of and subject to the satisfaction of the conditions set forth therein, including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly common stock issued to it under the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option

Table of Contents

to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36- month term of the Equity Facility;

“Equity Facility Investor” are to CCM Investments 5 LLC, an affiliate of Chardan Capital Markets;

“Equity Facility Letter Agreement” are to the letter agreement, together with the Summary of Indicative Terms attached as an exhibit thereto, entered into among Chardan, Dragonfly and the Equity Facility Investor on May 15, 2022, pursuant to which Chardan and Dragonfly agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date to establish the Equity Facility;

“Exchange Ratio” are to the quotient obtained by dividing the number of (a) Chardan common stock constituting the Aggregate Merger Consideration, by (b) Aggregate Fully Diluted Company Common Shares;

“Founder Shares” are to shares of Chardan common stock held by the Sponsor, Chardan’s directors, and affiliates of Chardan’s management team;

“Holdings” are to Chardan NexTech 2 Warrant Holdings LLC, an affiliate of Chardan Capital Markets;

“Initial Term Loan Lenders” are to CCM Investments 5 LLC and EICF Agent LLC;

“Insiders” are to Chardan’s officers, directors, initial stockholders, and Chardan NexTech 2 Warrant Holdings LLC, an affiliate of the Sponsor;

“Investment Management Trust Agreement” are to the Investment Management Trust Agreement, dated as of August 10, 2021, by and between Chardan and Continental Stock Transfer & Trust Company;

“LFP batteries” are to lithium-ion batteries using lithium iron phosphate (LiFePO₄);

“Merger” are to the merger of Merger Sub with and into Dragonfly with Dragonfly being the surviving company in the merger;

“Merger Sub” are to Bronco Merger Sub, Inc., a Nevada corporation;

“Minimum Cash Balance After Fees” are to cash held by New Dragonfly after payment of Dragonfly Transaction Expenses and deferred underwriter and other fees from the Chardan IPO and receipt of proceeds of the PIPE Investment and the Term Loan;

“Nevada Dissenter’s Rights Statutes” are to NRS 92A.300 through 92A.500, inclusive;

“New Dragonfly” are to Chardan after the Business Combination;

“NRS” are to the Nevada Revised Statutes, as amended;

“our common stock” are, prior to consummation of the Business Combination, to Chardan common stock, and, following consummation of the Business Combination, to the common stock, par value $0.001 per share, of New Dragonfly;

“Penny Warrants” are to the warrants issued to the Term Loan Lenders exercisable to purchase for nominal consideration 3.6% of Chardan common stock on a fully diluted basis, calculated as of the Closing Date;

“PIPE Investment” are to the private placement pursuant to which Chardan entered into the Subscription Agreement with the Sponsor whereby the Sponsor agreed to subscribe for 500,000 shares of Chardan common stock at a purchase price of $10.00 per share for an aggregate purchase price of $5 million. The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market provided such shares are not redeemed;

“PIPE Investment Amount” are to the aggregate gross purchase price received by the PIPE Investor pursuant to the PIPE Investment;

“PIPE Investor” are to Sponsor (or an affiliate of Sponsor if assigned pursuant to the Subscription Agreement);

Table of Contents

“PIPE Securities” are to the newly issued shares of Chardan common stock to be sold to the PIPE Investor pursuant to the Subscription Agreement;

“private warrants” are to Chardan’s warrants issued to an affiliate of the Sponsor in a private placement simultaneously with the closing of the Chardan IPO;

“proxy statement” are to this proxy statement/prospectus;

“public shares” are to shares of Chardan common stock sold as part of the units in the Chardan IPO (whether they were purchased in the Chardan IPO or thereafter in the open market);

“public stockholders” are to the holders of Chardan’s public shares, including the Sponsor and Chardan’s officers and directors to the extent the Sponsor and Chardan’s officers or directors purchase public shares, provided that each of their status as a “public stockholder” shall only exist with respect to such public shares;

“public warrants” are to Chardan’s warrants sold as part of the units in the Chardan IPO (whether they were purchased in the Chardan IPO or thereafter in the open market);

“Purchase Date” are to any trading day on which New Dragonfly timely delivers written notice to the Equity Facility Investor in accordance with the terms, conditions and limitations of the Equity Facility Definitive Documentation;

“Registration Rights Agreement” are to the Amended and Restated Registration Rights Agreement, to be dated the Closing Date, by and among New Dragonfly and the stockholders named therein;

“Sponsor” are to Chardan NexTech Investments 2 LLC, a Delaware limited liability company and an affiliate of Chardan Capital Markets;

“Sponsor Support Agreement” are to the Sponsor Support Agreement, dated May 15, 2022, by and among Chardan, Dragonfly and the Sponsor;

“Subscription Agreement” are to the common stock subscription agreement entered into by and between Chardan and the Sponsor, dated as of May 15, 2022, and entered into in connection with the PIPE Investment;

“Surviving Corporation” are to, at and after the Effective Time, Dragonfly, as the surviving corporation of the Merger;

“Term Loan” are to the senior secured term loan facility in an aggregate principal amount of $75 million in connection with the Debt Commitment Letter;

“Term Loan Lenders” are to EIP and, upon the consummation of the Backstop Lender’s purchase of the Backstopped Loans, the Backstop Lender;

“Term Loan Lender Warrants” are to the Penny Warrants and the $10 Warrants;

“Trading Day” are to any day on which shares of Chardan common stock are actually traded on the principal securities exchange or securities market on which shares of Chardan common stock are then traded;

“Transfer Agent” are to Continental Stock Transfer & Trust Company, Chardan’s transfer agent;

“trust account” are to the trust account of Chardan that holds the proceeds from the Chardan IPO;

“VWAP” are to, for any security as of any day or multi-day period, the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then traded during the period beginning at 9:30:01 a.m., New York time on such day or the first day of such multi-day period (as applicable), and ending at 4:00:00 p.m., New York time on such day or the last day of such multi-day period (as applicable), as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market

Table of Contents

on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time on such day or the first day of such multi-day period (as applicable), and ending at 4:00:00 p.m., New York time on such day or the last day of such multi-day period (as applicable), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. during such day or multi-day period (as applicable). If the VWAP cannot be calculated for such security for such day or multi-day period (as applicable) on any of the foregoing bases, the VWAP of such security shall be the fair market value per share at the end of such day or multi-day period (as applicable) as reasonably determined by the Board of Directors of Acquiror;

“VWAP Purchase Price” are to the purchase price for the shares of New Dragonfly common stock that New Dragonfly may elect to sell to the Equity Facility Investor pursuant to the Equity Facility Definitive Documentation, which will be determined by reference to the VWAP on the applicable Purchase Date, less a fixed 3.5% discount. For purposes of this definition, references to “VWAP” are to the volume-weighted average price of the shares of New Dragonfly common stock on the applicable trading day(s), adjusted to exclude block trades and trades that individually exceed 20,000 shares of New Dragonfly common stock;

“warrants” are to the public warrants and the private warrants; and

“Warrant Agreement” are to the Warrant Agreement (as amended), dated as of August 10, 2021, by and between Chardan and Continental Stock Transfer & Trust Company.

Table of Contents

SUMMARY OF THE MATERIAL TERMS OF THE TRANSACTIONS

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement and in the Business Combination Agreement, but does not contain all of the information that is important to you. You should carefully read this entire proxy statement, including the attached Annexes, which are incorporated herein by reference, for a more complete understanding of the matters to be considered at the special meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

●

Chardan NexTech Acquisition 2 Corp., a Delaware corporation, which we refer to as “Chardan,” “we,” “us” or “our,” is a special purpose acquisition company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

●

On August 13, 2021, Chardan consummated its initial public offering of 11,000,000 units, with each unit consisting of one share of Chardan common stock and three-quarters of one warrant to purchase one share of Chardan common stock. On August 18, 2021, the underwriters fully exercised their over-allotment option and Chardan sold an additional 1,650,000 units. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $126,500,000. Simultaneously with the consummation of the Chardan IPO, Chardan consummated the private placement of 4,361,456 warrants at a price of $0.93 per warrant, generating total proceeds of $4,052,000. Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Chardan consummated the sale of an additional 266,402 private warrants at a purchase price of $0.93 per private warrant in a private placement to Holdings, generating gross proceeds of $247,500. Chardan Capital Markets will receive a cash fee for such services upon the consummation of the Merger in an amount equal to, in the aggregate, $4,427,500, being 3.5% of the gross proceeds of the Chardan IPO. Chardan Capital Markets will also receive a cash fee of $1,170,000 for other financial advisory services, including for advisory services provided with respect to placement of potential PIPE investments, and identifying and negotiating lender financing.

●

Following the consummation of the Chardan IPO, $128,397,500 was deposited into a U.S.-based trust account with Continental Stock Transfer & Trust Company acting as trustee. Except as described in the prospectus for the Chardan IPO, these proceeds will not be released until the earlier of the completion of an initial business combination and Chardan’s redemption of 100% of the outstanding public shares upon its failure to consummate a business combination within the completion window.

●

Dragonfly Energy Corp., a Nevada corporation, which we refer to as “Dragonfly,” is a manufacturer of non-toxic deep cycle lithium-ion batteries that caters to customers in the recreational vehicle, marine vessel and off-grid residence industries. See the sections entitled “Information About Dragonfly,” “Dragonfly’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management of New Dragonfly After the Business Combination.”

●

On May 15, 2022, Chardan entered into an Agreement and Plan of Merger with Dragonfly and Merger Sub, which, among other things, provides for Merger Sub to be merged with and into Dragonfly with Dragonfly being the surviving company in the Merger and on July 12, 2022, Chardan entered into the Amendment to the Agreement and Plan of Merger with Dragonfly and Merger Sub to increase the “Base Purchase Price” from $400,000,000 to $415,000,000.

●

Subject to the terms of the Business Combination Agreement, the aggregate consideration to be paid to equityholders of Dragonfly will be equal to the sum of (a) the Aggregate Merger Consideration plus (b) the Earnout Consideration, if any.

●

Pursuant to the PIPE Investment, Chardan has agreed to issue and sell to the Sponsor, and the Sponsor has agreed to buy from Chardan, 500,000 shares of Chardan common stock at a purchase price of $10.00 per share for an aggregate commitment of $5 million. The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Subscription Agreement” for additional information.

Table of Contents

●

Pursuant to the Debt Commitment Letter, the Initial Term Loan Lenders have agreed to provide to Dragonfly the $75 million Term Loan on the Closing Date, subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into the Backstop Commitment Letter with the Backstop Lender, pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the Backstopped Loans (which represent the aggregate amount of the Term Loan to be held by the Chardan Lender on the Closing Date) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto.

●

New Dragonfly will also issue to EIP and, upon the consummation of the Backstop Lender’s purchase of the Backstopped Loans, the Backstop Lender the Penny Warrants, exercisable to purchase 3.6% of Dragonfly’s common stock on a fully diluted basis, calculated as of the Closing Date, and the $10 Warrants, which are exercisable to purchase 1.6 million shares of Dragonfly’s common stock at $10 per share.

●

Pursuant to the Equity Facility Letter Agreement, Chardan and Dragonfly agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date reflecting the terms in the Equity Facility Letter Agreement. Pursuant to, on the terms of and subject to the satisfaction of the conditions set forth in the Equity Facility Definitive Documentation, the Equity Facility Investor will commit to purchase up to an aggregate of $150,000,000 in shares of New Dragonfly’s common stock from time to time at the request of the New Dragonfly, subject to certain limitations and the satisfaction of certain conditions.

●

It is anticipated that upon completion of the Business Combination and assuming no redemptions by Chardan public stockholders, Chardan’s public stockholders will retain an ownership interest of approximately 22.4% of New Dragonfly, the Term Loan Lenders will own approximately 3.7% of New Dragonfly assuming the exercise of all Penny Warrants, the Sponsor, officers, directors and other holders of Founder Shares will retain an ownership interest of approximately 6.5% of New Dragonfly (including the PIPE Investment), and the Dragonfly stockholders will own approximately 67.4% (excluding the 40,000,000 Earnout Shares) of New Dragonfly. These levels of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and I assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

●

Chardan management and the Chardan Board considered various factors in determining whether to approve the Business Combination Agreement and the Business Combination contemplated thereby, including the Merger. For more information about the reasons that the Chardan Board considered in determining its recommendation, please see the section entitled “Proposal No. 1 — The Business Combination Proposal.” When you consider the Chardan Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Chardan stockholders generally. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information. The Chardan Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Chardan stockholders that they vote “FOR” the proposals presented at the special meeting.

Table of Contents

●

At the special meeting, Chardan’s stockholders will be asked to consider and vote on the following proposals:

●

a proposal to approve the Business Combination, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in the accompanying proxy statement / prospectus. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal”;

●

a proposal to approve and adopt changes to the certificate of incorporation of Chardan reflected in the second amended and restated certificate of incorporation of Chardan in the form attached hereto as Annex B. Please see the section entitled “Proposal No. 2 — The Charter Proposal”;

●

a proposal to approve, for purposes of complying with the applicable rules of the Nasdaq, the issuance of shares of Chardan’s common stock in connection with the Business Combination, including, without limitation, the Aggregate Merger Consideration, the Earnout Shares, the PIPE Investment, the Term Loan Lender Warrants and the Equity Facility. Please see the section entitled “Proposal No. 3 — The Nasdaq Proposal”;

●

a proposal to approve and adopt the 2022 Plan. A copy of the 2022 Plan is attached to the accompanying proxy statement /prospectus as Annex G. Please see the section entitled “Proposal No. 4 — The Incentive Plan Proposal”;

●

a proposal to approve and adopt the ESPP, a copy of which is attached to this proxy statement/ prospectus as Annex H, including the authorization of the initial share reserve under the ESPP. Please see the section entitled “Proposal No. 5 — The ESPP Proposal”;

●

a proposal to approve and elect seven (7) directors to the New Dragonfly board. Please see the section entitled “Proposal No. 6 — The Director Election Proposal”; and

●

a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, Incentive Plan Proposal, the ESPP Proposal or the Director Election Proposal. Please see the section entitled “Proposal No. 7 — The Adjournment Proposal.”

Table of Contents

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

The questions and answers below highlight only selected information from this proxy statement and only briefly address some commonly asked questions about the special meeting and the proposals to be presented at the special meeting, including with respect to the proposed business combination. The following questions and answers do not include all the information that is important to Chardan stockholders. Stockholders are urged to carefully read this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed business combination and the voting procedures for the special meeting.

Q: Why am I receiving this proxy statement?

A: Chardan and Dragonfly have agreed to a business combination under the terms of the Business Combination Agreement that is described in this proxy statement. A copy of the Business Combination Agreement is attached to this proxy statement as Annex A, and Chardan encourages its stockholders to read it in its entirety. Chardan’s stockholders are being asked to consider and vote upon a proposal to adopt the Business Combination Agreement and approve the transactions contemplated thereby, which, among other things, includes provisions for Merger Sub to be merged with and into Dragonfly with Dragonfly being the surviving company in the Merger as a wholly owned subsidiary of Chardan. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal.”

This proxy statement and its Annexes contain important information about the proposed business combination and the other matters to be acted upon at the special meeting. You should read this proxy statement and its Annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its Annexes.

Q: When and where is the special meeting?

A: The special meeting will be held on [•] at [•] Eastern Time at the offices of [-] located at [-]. In light of the COVID-19 pandemic and to protect the health of stockholders of Chardan and the community, the Special Meeting will be a completely virtual meeting of stockholders conducted via live webcast. You will be able to attend the Special Meeting by visiting https://www.cstproxy.com/cnaq/2022 and entering your control number as further explained in the accompanying proxy statement/prospectus. You may also attend the Special Meeting telephonically by dialing within the U.S. and Canada: +1 800-450-7155 (toll free) or outside of the U.S. and Canada: +1 857-999-9155 and when prompted enter the pin 5046958#.

Q: What are the proposals on which I am being asked to vote at the special meeting?

A: The stockholders of Chardan will be asked to consider and vote on the following proposals at the special meeting:

a proposal to approve the Business Combination, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in this proxy statement. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal”;

a proposal to approve and adopt the 2022 Plan. Please see the section entitled “Proposal No. 4 — The Incentive Plan Proposal”;

a proposal to approve and adopt the ESPP. Please see the section entitled “Proposal No. 5 — The ESPP Proposal”;

Table of Contents

a proposal to approve and elect seven (7) directors to the New Dragonfly board. Please see the section entitled “Proposal No. 6 — The Director Election Proposal”; and

a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal or the Director Election Proposal. Please see the section entitled “Proposal No. 7 — The Adjournment Proposal.”

Chardan will hold the special meeting of its stockholders to consider and vote upon these proposals. This proxy statement contains important information about the proposed business combination and the other matters to be acted upon at the special meeting. Stockholders should read it carefully.

Consummation of the Business Combination is conditioned on the approval of each of the Business Combination Proposal, the Charter Proposal, the Incentive Plan Proposal, the Nasdaq Proposal, the ESPP Proposal and the Director Election Proposal. If any of those proposals are not approved, we will not consummate the Business Combination.

The vote of stockholders is important. Stockholders are encouraged to vote as soon as possible after carefully reviewing this proxy statement.

Q: How will the COVID-19 pandemic impact in-person voting at the special meeting?

A: In light of the COVID-19 pandemic and to protect the health of stockholders of Chardan and the community, the Special Meeting will be a completely virtual meeting of stockholders conducted via live webcast.

Q: Why is Chardan proposing the Business Combination?

A: Chardan was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.

On August 13, 2021, Chardan completed its initial public offering of units, with each unit consisting of one share of its Chardan common stock and three-quarters of one warrant to purchase one share of Chardan common stock at a price of $11.50 per whole share.

Simultaneously with the closing of the Chardan IPO, Chardan NexTech 2 Warrant Holdings LLC, a Delaware limited liability company and an affiliate of the Sponsor (“Holdings”), purchased an aggregate of 4,361,456 private warrants at a price of $0.93 per warrant ($4,052,000 in the aggregate). Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Holdings purchased an additional 266,402 private warrants at a purchase price of $0.93 per private warrant. Each private warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share.

On August 18, 2021, in connection with the underwriters’ election to fully exercise their over-allotment option, Chardan sold an additional 1,650,000 units. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $16,500,000. A total of $16,747,500, comprised of the proceeds of the sale of the units and the private warrants, in connection with the underwriters full exercise of their over-allotment option, was placed in the trust account.

Simultaneously with the closing of the exercise of the over-allotment option, we consummated the sale of 266,402 warrants (the “Over-Allotment Private Warrants”) at a purchase price of $0.93 per Over-Allotment Private Warrant in a private placement to Holdings, generating gross proceeds of $247,500. Since the Chardan IPO, Chardan’s activity has been limited to the evaluation of business combination candidates.

Chardan Capital Markets will receive a cash fee for such services upon the consummation of the Merger in an amount equal to, in the aggregate, $4,427,500, being 3.5% of the gross proceeds of the Chardan IPO. Chardan Capital Markets will also receive a cash fee of $1,170,000 for other financial advisory services, including for advisory services provided with respect to placement of potential PIPE investments, and identifying and negotiating lender financing.

Table of Contents

Dragonfly is a manufacturer of non-toxic deep cycle lithium-ion batteries that caters to customers in the recreational vehicle (“RV”), marine vessel and off-grid residence industries, with disruptive solid-state cell technology currently under development. See the sections entitled “Information About Dragonfly,” “Dragonfly’s Management’s Discussion and Analysis of Financial Condition and Result of Operations” and “Management of New Dragonfly After The Business Combination”

The Chardan Board considered the results of the due diligence review of Dragonfly’s business, including its current prospects for growth in executing upon and achieving its business plan. As a result, Chardan believes that a business combination with Dragonfly will provide Chardan’s stockholders with an opportunity to participate in the ownership of a company with significant growth potential. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — The Chardan Board’s Reasons for Approval of the Business Combination.”

Q: Why is Chardan providing stockholders with the opportunity to vote on the Business Combination?

A: Under our current certificate of incorporation, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of the Business Combination Proposal in order to allow our public stockholders to effectuate redemptions of their public shares in connection with the Closing.

Q: Why is Chardan proposing the Nasdaq Proposal?

A: Assuming a $10.15 share price, we may issue up to an aggregate of 97,281,232.00 shares of Chardan common stock, representing up to 615% of the shares of common stock outstanding on the date of this proxy statement, in connection with the Business Combination, including, without limitation, the Aggregate Merger Consideration, the Earnout Shares, the PIPE Investment, the Term Loan Lender Warrants and the Equity Facility. Nasdaq Listing Rule 5635(a) requires stockholder approval of certain transactions that result in the issuance of 20% or more of a company’s outstanding voting power or shares of common stock outstanding before the issuance of stock or securities. Because we may issue 20% or more of our outstanding voting power and outstanding common stock in connection with the Business Combination, we are required to obtain stockholder approval of such issuances pursuant to the Nasdaq Listing Rules. The Closing is conditioned on the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Director Election Proposal at the special meeting.

Q: What will happen in the Business Combination?

A: Pursuant to the Business Combination Agreement, and upon the terms and subject to the conditions set forth therein, Chardan will acquire Dragonfly in a transaction we refer to as the Business Combination. At the Closing, among other things, Merger Sub will merge with and into Dragonfly with Dragonfly being the surviving company in the Merger as a wholly owned subsidiary of Chardan. As a result of the Merger, at the Closing, Chardan will own 100% of the outstanding common stock of Dragonfly and each share of common stock of Dragonfly will have been cancelled and converted into the right to receive a portion of the Merger consideration.

Q: Following the Business Combination, will Chardan’s securities continue to trade on a stock exchange?

A: Yes. We intend to apply to continue the listing of New Dragonfly’s common stock and public warrants on Nasdaq. In connection with the Business Combination, Chardan will change its name to Dragonfly Energy Holdings Corp. and its common stock and warrants will begin trading on the Nasdaq under the symbols “DFLI” and “DFLIW”, respectively. As a result, our publicly traded units will separate into the component securities upon consummation of the Business Combination and will no longer trade as a separate security.

Q: How will the holders of Chardan’s units be impacted by the Business Combination?

A: As part of the Chardan IPO and the underwriters’ exercise of their over-allotment option, Chardan issued 12,650,000 units, each consisting of one share of common stock and three-quarters of one warrant to purchase one share of common stock, which currently trade on the Nasdaq under the symbol “CNTQU”. As of the consummation of the Business Combination, Chardan’s outstanding units will be mandatorily separated into their component parts — one share of common stock and three-quarters of one warrant to

Table of Contents

purchase one share of common stock — and the units will cease trading. As a result, following the Business Combination each unitholder’s account, in lieu of units, will reflect ownership of the number of shares of common stock and warrants underlying such holder’s units. If any unitholder would, upon such separation, be entitled to receive a fractional interest in a warrant, the number of warrants the holder will be entitled to receive will be rounded down to the nearest whole number of warrants.

Q: How will the Business Combination impact the shares of Chardan outstanding after the Business Combination?

A: As a result of the Business Combination and the consummation of the transactions contemplated by the Business Combination Agreement and the related agreements, including, without limitation, the PIPE Investment, the amount of common stock outstanding will increase to 56,567,623 shares of Chardan common stock (assuming that no shares of Chardan common stock are elected to be redeemed by Chardan stockholders and excluding the Earnout Shares). Additional shares of New Dragonfly common stock may be issuable in the future as a result of the issuance of additional shares that are not currently outstanding, including issuance of shares of New Dragonfly common stock upon exercise of the warrants (including the Chardan public warrants, Chardan private warrants and Term Loan Lender Warrants), pursuant to the Equity Facility and upon exercise of options exercisable by the Dragonfly equityholders from time to time after the Business Combination. The issuance and sale of such shares in the public market could adversely impact the market price of Chardan common stock, even if its business is doing well. Pursuant to the 2022 Plan, a copy of which is attached to this proxy statement as Annex G, following the Closing and subject to the approval of the applicable award agreements by the board of directors of the post-combination entity (or a committee thereof), Chardan may initially grant a number of shares of Chardan common stock equal to 4% of the outstanding shares of Chardan common stock determined on a fully diluted basis as of the Closing.

Q: Will the management of Dragonfly change in the Business Combination?

A: Upon consummation of the Business Combination it is expected that the current directors and officers of Dragonfly will continue as directors and officers of New Dragonfly.

Q: What are the interests of Chardan’s directors and officers in the Business Combination?

A: In considering the recommendation of the Chardan Board to vote in favor of approval of the Business Combination Proposal and the other proposals, stockholders should keep in mind that the Sponsor and the Insiders have interests in such proposals that are different from, or in addition to, those of Chardan stockholders generally. In particular:

●

None of Chardan’s officers and directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various business activities.

●

Each of Chardan’s officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. We do not believe, however, that the pre-existing fiduciary duties or contractual obligations of our officers and directors will materially undermine our ability to complete the Business Combination, and such pre- existing fiduciary duties and contractual obligations did not materially affect our search for an acquisition target.

●

Mr. Grossman is the sole member of Sponsor and Holdings. Mr. Grossman is the Chief Executive Officer of, and Mr. Weil is Managing Director and Co-Head of Fintech Investment Banking of, Chardan Capital Markets, an affiliate of the Sponsor. Mr. Grossman and Mr. Propper are also members of the board of directors of Chardan Capital Markets. Mr. Grossman is also the managing member of Chardan International Investments, LLC, an affiliate of the Sponsor.

●

Table of Contents

Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

●

If the Business Combination or another business combination is not consummated by August 13, 2022 (unless this deadline is extended pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents), Chardan will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares for cash and, subject to the approval of its remaining stockholders and the Chardan Board, dissolving and liquidating. In such event, the Founder Shares and the private warrants and all underlying securities held by the Sponsor and Insiders would be worthless because the holders thereof are not entitled to participate in any redemption or distribution with respect to such shares. Chardan Capital Markets would also not be entitled to receive the fees described below in such an event.

●

On July 23, 2020, the Sponsor purchased 1,000,000 shares of common stock of Chardan for an aggregate purchase price of $25,000. On March 4, 2021, Chardan effected a 2.875-for-1 stock split, resulting in 2,875,000 shares of common stock being held by the Sponsor (an affiliate of Chardan Capital Markets). On August 10, 2021, Chardan effectuated a 1.1-for-1 stock split, resulting in an aggregate of 3,162,500 shares of common stock outstanding. On August 18, 2021, the underwriters’ exercised the over-allotment option in full, thus the Founder Shares are no longer subject to forfeiture. Such shares had an aggregate market value of approximately $32,067,750 based upon the closing price of $10.14 per share on the Nasdaq on July 19, 2022. In May and June 2021, the Sponsor transferred 20,000 Founder Shares to each of Messrs. Biele, Boyle, Hardamon, Thakrar and Thomson and Ms. Jardins in consideration for serving as a Chardan independent director.

●

Pursuant to the terms of the Business Combination Marketing Agreement Chardan engaged Chardan Capital Markets, an affiliate of Sponsor, as an advisor in connection with its business combination. Chardan Capital Markets will receive a cash fee for such services upon the consummation of the Merger in an amount equal to, in the aggregate, $4,427,500, being 3.5% of the gross proceeds of the Chardan IPO. Chardan Capital Markets will also receive a cash fee of $1,170,000 for other financial advisory services, including for advisory services provided with respect to placement of potential PIPE investments, and identifying and negotiating lender financing.

●

Simultaneously with the closing of the Chardan IPO, Holdings (an affiliate of Sponsor and Chardan Capital Markets) purchased an aggregate of 4,361,456 private warrants at a price of $0.93 per private warrant ($4,052,000 in the aggregate). Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Holdings purchased an additional 266,402 private warrants at a purchase price of $0.93 per private warrant. Each private warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share. The proceeds from the private warrants were added to the proceeds from the Chardan IPO to be held in the Trust Account. The private warrants had an aggregate market value of $1,156,964.50 based upon the closing price of approximately $0.25 per share on the Nasdaq on July 19, 2022. The private warrants will become worthless if Chardan does not consummate a business combination by August 13, 2022 (unless this deadline is extended pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents).

●

Perry Boyle, current director of Chardan, will become a director of New Dragonfly after the Closing. As such, in the future he may receive cash fees, stock options or stock awards that the post-combination board of directors determines to pay to its executive and non-executive directors.

●

If Chardan is unable to complete an initial business combination within the completion window, the Sponsor will be liable under certain circumstances to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Chardan for services rendered or contracted for or products sold

Table of Contents

to Chardan. If Chardan consummates an initial business combination, on the other hand, Chardan will be liable for all such claims.

●

Chardan’s officers and directors and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Chardan’s behalf, such as identifying and investigating possible business targets and business combinations. However, if Chardan fails to consummate an initial business combination within the completion window, they will not have any claim against the trust account for reimbursement. Accordingly, Chardan may not be able to reimburse these expenses if the Business Combination or another initial business combination, is not completed within the completion window.

●

The current directors and officers will continue to be indemnified and the liability insurance of the directors and officers will continue.

●

In connection with the Business Combination, Chardan and the Sponsor, an affiliate of Chardan Capital Markets, entered into the Subscription Agreement, which provides for the Sponsor to purchase an aggregate of 500,000 shares of Chardan common stock upon the terms as set forth in the Subscription Agreement. The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Subscription Agreement” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

In addition, pursuant to the Equity Facility Letter Agreement, Chardan and Dragonfly agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date reflecting the terms in the Equity Facility Letter Agreement. Pursuant to and on the terms of the Equity Facility Definitive Documentation, the Equity Facility Investor will commit to purchase up to an aggregate of $150,000,000 in shares of New Dragonfly’s common stock from time to time at the request of the New Dragonfly, subject to certain limitations and the satisfaction of certain conditions. Further, New Dragonfly will agree to issue Equity Facility Commitment Shares having a value of $1 million determined based on the applicable trading price at the time of issuance to the Equity Facility Investor as consideration for its irrevocable commitment to purchase the shares of New Dragonfly common stock upon the terms and subject to the satisfaction of the conditions set forth in the Equity Facility Definitive Documentation. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Equity Facility Letter Agreement” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

Pursuant to the Debt Commitment Letter, the Chardan Lender has agreed to provide 60% of the commitment with respect to the Term Loan on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into the Backstop Commitment Letter with the Backstop Lender. The Chardan Lender is entitled to payment of fees in connection with the Term Loan pursuant to the fee letter entered into in connection with the Debt Commitment Letter, but, in accordance with the terms of the Backstop Commitment Letter,such fees are to be paid to the Backstop Lenders on the Closing Date. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Debt Commitment Letter” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

Given the difference in the purchase price the Sponsor and our directors paid for the Founders Shares as compared to the price of the units sold in the Chardan IPO, the Sponsor and our directors may earn a positive rate of return on their investment even if New Dragonfly common stock trades below the price paid for the units in the Chardan IPO and the public stockholders experience a negative rate of return following the completion of the Business Combination.

●

The Sponsor will benefit from the completion of a business combination and may be incentivized to complete an acquisition of a less favorable target company or on terms less favorable to the public stockholders rather than liquidating Chardan.

Table of Contents

●

The Sponsor and the initial stockholders, among others, will enter into the Registration Rights Agreement which will provide them with registration rights.

Q: What interests do Dragonfly’s current officers and directors have in the Business Combination?

A: Certain officers and directors of Dragonfly have interests in the Business Combination that are different from, or in addition to, those of Chardan stockholders generally. In particular:

●

In connection with the Business Combination, based on the Minimum Cash Balance after fees at closing, Mr. Denis Phares and Sean Nichols, Dragonfly’s co-founders and its Chief Executive Officer and Chief Operating Officer, respectively, are each entitled to a transaction cash bonus. The bonus amount ranges from (i) 5% of the exercise proceeds from the exercise of Chardan’s public warrants (split evenly between them) to (ii) $4,000,000 each. Assuming maximum redemptions and no redemptions of Chardan stock, respectively, Mr. Phares and Nichols would (i) receive a cash bonus tied to future public warrant exercises and (ii) $4,000,000 each. See “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

●

As an inducement to hire Mr. John Marchetti as Dragonfly’s Chief Financial Officer, Dragonfly loaned Mr. Marchetti $350,000 to repay amounts owed by him to his former employer and entered into a related Promissory Note with a maturity of March 1, 2026. In consideration of the Business Combination and Dragonfly’s obligations as a publicly traded company, Dragonfly forgave all amounts owed under the Promissory Note effective March 2022.

Q: What equity stake will current stockholders of Chardan and Dragonfly hold in the New Dragonfly after the closing?

A: It is anticipated that upon completion of the Business Combination and assuming no redemptions by Chardan public stockholders, Chardan’s public stockholders will retain an ownership interest of approximately 22.4% of New Dragonfly, the Term Loan Lenders will own approximately 3.7% of New Dragonfly assuming the exercise of all Penny Warrants, the Sponsor, officers, directors and other holders of Founder Shares will retain an ownership interest of approximately 6.5% of New Dragonfly (including the PIPE Investment), and the Dragonfly stockholders will own approximately 67.4% (excluding the 40,000,000 Earnout Shares) of New Dragonfly. These levels of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable. See the section entitled “Proposal No. 4 — The Incentive Plan Proposal” for additional information on the Dragonfly Incentive Plan and the 2022 Plan. If the actual facts are different from these assumptions (which they are likely to be), the percentage ownership retained by the Chardan stockholders will be different.

Table of Contents

The following table illustrates varying ownership levels in New Dragonfly, assuming consummation of the Business Combination and no redemptions by Chardan public stockholders, 10% redemption by Chardan public stockholders, 50% redemption by Chardan public stockholders, 75% redemption by Chardan public stockholders and the maximum redemptions by Chardan public stockholders:

	No			10%			50%			75%			Maximum
	Redemptions⁽¹⁾	%		Redemption⁽²⁾	%		Redemption⁽³⁾	%		Redemption⁽⁴⁾	%		Redemption⁽⁵⁾	%
Dragonfly existing shareholders⁽⁶⁾⁽⁷⁾	38,189,691	67.4	%	38,189,691	69.1	%	38,189,691	76.4	%	38,189,691	81.7	%	38,189,691	87.9	%
Chardan existing public stockholders⁽⁸⁾	12,650,000	22.4	%	11,385,000	20.6	%	6,325,000	12.6	%	3,162,500	6.8	%	—	—	%
Initial Stockholders^(9)(10)	3,662,500	6.5	%	3,662,500	6.6	%	3,662,500	7.3	%	3,662,500	7.8	%	3,662,500	8.4	%
Term Loan Lender^(11)(12)	2,065,432	3.7	%	2,018,238	3.7	%	1,829,465	3.7	%	1,711,481	3.7	%	1,593,498	3.7	%
Pro forma Common Stock⁽¹³⁾	56,567,623	100.0	%	55,255,429	100.0	%	50,006,656	100.0	%	46,726,172	100.0	%	43,445,689	100.0	%

(1)	Assumes that no Chardan public stockholders are redeemed.

(2)	Assumes that 1,265,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $12,843,728, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(3)	Assumes that 6,325,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $64,218,641, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(4)	Assumes that 9,487,500 Chardan public shares are redeemed for aggregate redemption payments of approximately $96,327,961, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(5)	Assumes that 12,650,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $128,437,281, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(6)

Excludes 40,000,000 Earnout Shares payable in three tranches subject to achievement of specified financial information milestones for 2023 or post-Closing trading price milestones for New Dragonfly Common Stock and assumes that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan.

(7)	Includes shares of Dragonfly common stock issued pursuant to the THOR Investment.

(8)	Excludes 9,487,500 shares of Common Stock underlying the Public Warrants.

(9)

Excludes 4,627,858 shares of Common Stock underlying the Private Warrants. Additionally, the Sponsor has agreed that the Private Warrants may not be exercised to the extent an affiliate of the Sponsor is deemed, or it would cause such affiliate to be deemed to beneficially own, more than 4.99% of the New Dragonfly Common Stock.

(10)

Includes 500,000 shares of Common Stock purchased by the Sponsor pursuant to the PIPE Subscription Agreement and 3,162,500 outstanding founder shares. The 3,162,500 outstanding founder shares include 3,052,500 founder shares held by the Sponsor and 110,000 founder shares held by officers and directors of Chardan. Please see the section titled “Beneficial Ownership of Securities.”

(11)

Assumes the exercise and conversion of the Penny Warrants into common stock due to their nominal exercise price. The Penny Warrants are exercisable for 3.6% of fully-diluted outstanding shares of Common Stock post closing. For purposes of such calculation, ownership of Common Stock “on a fully diluted basis” includes (i) all outstanding Common Stock, (ii) shares of Common Stock issuable upon conversion of outstanding convertible bonds, preferred stock and other securities convertible to Common Stock on an as-converted to Common Stock basis, and (iii) all shares of Common Stock subject to outstanding options.

(12)	Excludes 1,600,000 shares of Common Stock underlying the $10 Warrants.

(13)	Excludes shares of Common Stock issuable pursuant to the Equity Facility after Closing.

The following table illustrates ownership levels in New Dragonfly across varying redemption levels, assuming consummation of the Business Combination and taking into consideration all potentially dilutive securities, which are comprised of: (a) $10 Warrants, (b)

Table of Contents

shares issuable in connection with outstanding Dragonfly options, (c) shares available for issuance pursuant to the 2022 Plan, (d) Chardan public and private warrants, and (e) Earnout Shares.

	No Redemptions⁽¹⁾	%		10% Redemption⁽²⁾	%		50% Redemption⁽³⁾	%		75% Redemption⁽⁴⁾	%		Maximum Redemption⁽⁵⁾	%
Dragonfly existing shareholders⁽⁶⁾	85,382,139	71.5	%	85,527,439	72.2	%	85,108,789	75.6	%	84,972,039	77.8	%	84,835,389	80.2	%
Chardan existing public stockholders⁽⁷⁾	22,137,500	18.5	%	20,872,500	17.7	%	15,812,500	14.0	%	12,650,000	11.6	%	9,487,500	9.0	%
Initial Stockholders⁽⁸⁾⁽⁹⁾	8,290,358	6.9	%	8,290,358	7.0	%	8,290,358	7.4	%	8,290,358	7.6	%	8,290,358	7.8	%
Term Loan Lender⁽¹⁰⁾	3,665,432	3.1	%	3,618,238	3.1	%	3,429,465	3.0	%	3,311,481	3.0	%	3,193,498	3.0	%
Pro forma fully diluted Common Stock⁽¹¹⁾	119,475,429	100.0	%	118,108,535	100.0	%	112,641,112	100.0	%	109,223,878	100.0	%	105,806,745	100.0	%

(1)	Assumes that no Chardan public stockholders are redeemed.

(2)	Assumes that 1,265,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $12,843,728, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(3)	Assumes that 6,325,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $64,218,641, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(4)	Assumes that 9,487,500 Chardan public shares are redeemed for aggregate redemption payments of approximately $96,327,961, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(5)	Assumes that 12,650,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $128,437,281, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(6)

Includes (i) 36,689,691 shares of Common Stock issued at Closing and inclusive of the THOR Investment, (ii) 40,000,000 Earnout Shares payable in three tranches subject to achievement of specified financial information milestones for 2023 or post-Closing trading price milestones for New Dragonfly Common Stock, (iii) shares issuable in connection with outstanding Dragonfly options, and (iv) shares initially available for issuance pursuant to the 2022 Plan. The shaves available for issuance pursuant to the 2022 Plan is assumed to be 4% of fully-diluted shares of Common Stock at Closing resulting in a varying number of fully-diluted shares of Common Stock owned by Dragonfly existing shareholders across the varying redemption scenarios.

(7)	Includes 9,487,500 shares of Common Stock underlying the public warrants.

(8)

Includes 3,162,500 Founder Shares, 4,627,858 private warrants and 500,000 shares of Common Stock purchased by the Sponsor pursuant to the PIPE Subscription Agreement. Although the shares underlying the Private Warrants are included, the Sponsor has agreed that the Private Warrants may not be exercised to the extent an affiliate of the Sponsor is deemed to beneficially own, or it will cause such affiliate to be deemed to beneficially own, more than 4.99% of the New Dragonfly Common Stock.

(9)	Total of 3,162,500 outstanding Founder Shares includes 3,052,500 Founder Shares held by the Sponsor, and 110,000 Founder Shares held by officers and directors of Chardan. Please see the section titled “Beneficial Ownership of Securities.”

(10)

Assumes the exercise and conversion of the Penny Warrants and the $10 Warrants into Common Stock. The Penny Warrants are exercisable for 3.6% of fully-diluted outstanding shares of Common Stock at Closing. For purposes of such calculation, ownership of Common Stock “on a fully diluted basis” includes (i) all outstanding Common Stock, (ii) shares of Common Stock issuable upon conversion of outstanding convertible bonds, preferred stock and other securities convertible to Common Stock on an as-converted to Common Stock basis, and (iii) all shares of Common Stock subject to outstanding options. The $10 Warrants are exercisable for 1,600,000 shares of Common Stock.

(11)	Excludes shares of common stock issuable pursuant to the Equity Facility after Closing.

Table of Contents

Q: Will Chardan obtain new financing in connection with the Business Combination?

A: Yes. Chardan has entered into the Subscription Agreement, under which it agreed to issue and sell to the Sponsor, and the Sponsor has agreed to buy from Chardan, 500,000 shares of Chardan common stock at a purchase price of $10.00 per share for an aggregate commitment of $5 million. The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Subscription Agreement” for additional information. Chardan and Dragonfly have also entered into the Debt Commitment Letter, pursuant to which the Initial Term Loan Lenders have agreed to provide Dragonfly the $75 million Term Loan. The Initial Term Loan Lenders’ obligations to provide such financing are subject to a number of specified conditions set forth in the Debt Commitment Letter. In addition, pursuant to the Equity Facility Letter Agreement, Chardan and Dragonfly agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date reflecting the terms in the Equity Facility Letter Agreement. Pursuant to and on the terms of the Equity Facility Definitive Documentation, the Equity Facility Investor will commit to purchase up to an aggregate of $150,000,000 in shares of New Dragonfly’s common stock from time to time at the request of the New Dragonfly, subject to certain limitations and the satisfaction of certain conditions. For more information, please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Equity Facility Letter Agreement.”

Q: What conditions must be satisfied to complete the Business Combination?

A: There are a number of closing conditions in the Business Combination Agreement, including the approval by the Chardan stockholders of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Director Election Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section entitled “Proposal No. 1 — The Business Combination Proposal — The Business Combination Agreement.”

Q: What happens if I sell my shares of Chardan common stock before the special meeting?

A: The record date for the special meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of Chardan common stock after the record date, but before the special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting. However, you will not be able to seek redemption of your shares of Chardan common stock because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of Chardan common stock prior to the record date, you will have no right to vote those shares at the special meeting or redeem those shares for a pro rata portion of the proceeds held in our trust account.

Q: What constitutes a quorum at the special meeting?

A: A majority of the voting power of all issued and outstanding shares of common stock entitled to vote as of the record date at the special meeting must be present in person, via the virtual meeting platform, or represented by proxy, at the special meeting to constitute a quorum and in order to conduct business at the special meeting. Abstentions will be counted as present for the purpose of determining a quorum. As of the record date for the special meeting, 7,906,251 shares of our common stock would be required to be present at the special meeting to achieve a quorum.

Q: What vote is required to approve the proposals presented at the special meeting?

A: The approval of each of the Business Combination Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal, the Director Election Proposal and the Adjournment Proposal requires the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal, the ESPP Proposal , the Director Election Proposal and the Adjournment Proposal will have the same effect as a vote “AGAINST” such proposals.

The approval of the Charter Proposal requires the affirmative vote of holders of a majority of Chardan’s outstanding shares of common stock. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the Charter Proposal will have the same effect as a vote “AGAINST” such proposal.

Table of Contents

Q: How many votes do I have at the special meeting?

A: Our stockholders are entitled to one vote on each proposal presented at the special meeting for each share of common stock held of record as of July 11, 2022, the record date for the special meeting. As of the close of business on the record date, there were 15,812,500 outstanding shares of Chardan common stock.

Q: Did the Chardan Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

A: Chardan retained Duff & Phelps as its financial advisor in connection with the Business Combination. In connection with this engagement, the Chardan Board requested that Duff & Phelps evaluate the fairness, from a financial point of view, of the consideration to be paid by Chardan to the Dragonfly shareholders. Duff & Phelps delivered a written fairness opinion to the Chardan Board dated May 13, 2022, in which it concluded that, as of such date and based upon and subject to the assumptions made, scope of analysis considered, matters evaluated and other qualifications and limitations set forth therein, the consideration to be paid by Chardan to the Dragonfly shareholders was fair to Chardan, from a financial point of view. See the section of this proxy statement/prospectus entitled “Fairness Opinion of Duff & Phelps.”

Q: Do I have redemption rights?

A: If you are a holder of public shares, you have the right to demand that Chardan redeem such shares for a pro rata portion of the cash held in Chardan’s trust account. We sometimes refer to these rights to demand redemption of the public shares as “redemption rights.”

Notwithstanding the foregoing, a holder of public shares, together with any of its affiliates or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption with respect to more than 20% of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed.

Under Chardan’s current certificate of incorporation, the Business Combination may be consummated only if Chardan has at least $5,000,001 of net tangible assets after giving effect to all holders of public shares that properly demand redemption of their shares for cash.

Q: How do I exercise my redemption rights?

A: If you are a holder of public shares and wish to exercise your redemption rights, you must demand that Chardan redeem your shares in cash no later than the second business day preceding the vote on the Business Combination Proposal by delivering your stock to the Transfer Agent physically or electronically using the Depository Trust Company’s DWAC (Deposit and Withdrawal at Custodian) system prior to the vote at the special meeting. Any holder of public shares will be entitled to demand that such holder’s shares be redeemed for a full pro rata portion of the amount then in the trust account (which, for illustrative purposes, was approximately $128,437,281, or approximately $10.15 per share, as of March 31, 2022). Such amount, less any owed but unpaid taxes on the funds in the trust account, will be paid promptly upon consummation of the Business Combination. However, under Delaware law, the proceeds held in the trust account could be subject to claims which could take priority over those of Chardan’s public stockholders exercising redemption rights, regardless of whether such holders vote for or against the Business Combination Proposal. Therefore, the per-share distribution from the trust account in such a situation may be less than originally anticipated due to such claims. Your vote on any proposal other than the Business Combination Proposal will have no impact on the amount you will receive upon exercise of your redemption rights.

Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the time the vote is taken with respect to the Business Combination Proposal at the special meeting. If you deliver your shares for redemption to the Transfer Agent and later decide prior to the special meeting not to elect redemption, you may request that the Transfer Agent return the shares (physically or electronically). You may make such request by contacting the Transfer Agent at the address listed at the end of this section.

Table of Contents

Any corrected or changed proxy card or written demand of redemption rights must be received by the Transfer Agent prior to the vote taken on the Business Combination Proposal at the special meeting. No demand for redemption will be honored unless the holder’s stock has been delivered (either physically or electronically) to the transfer agent prior to the vote at the special meeting.

If a holder of public shares properly demands their shares be redeemed as described above, then, if the Business Combination is consummated, Chardan will redeem these shares for a pro rata portion of funds deposited in the trust account. If you exercise your redemption rights, then you will be exchanging your shares of Chardan common stock for cash.

Q: Do I have appraisal rights if I object to the proposed business combination?

A: Neither Chardan stockholders nor its unit or warrant holders, solely in their capacity as unit or warrant holders, have appraisal rights in connection with the Business Combination under the DGCL.

Please see the section entitled “Appraisal Rights and Dissenter’s Rights” for additional information.

Q: What happens to the funds deposited in the trust account after consummation of the Business Combination?

A: The net proceeds of the Chardan IPO and its related transactions (including the exercise of the underwriters’ overallotment option and the sale of private warrants to the Sponsor affiliate), a total of $128,397,500, were placed in the trust account immediately following the Chardan IPO and such related transactions. A portion of the funds in the trust account may be used to pay holders of the public shares who exercise redemption rights prior to the consummation of the Business Combination. After the consummation of the Business Combination, the funds in the trust account will be released to the Company and used to pay fees and expenses incurred in connection with the Business Combination and for working capital purposes of New Dragonfly.

Please see the section entitled “Proposal No. 1 — The Business Combination — Sources and Uses for the Business Combination” for additional information.

Q: What happens if a substantial number of public stockholders vote in favor of the Business Combination Proposal and exercise their redemption rights?

A: Chardan’s public stockholders may vote in favor of the Business Combination Proposal and still exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the trust account and the number of public stockholders are substantially reduced as a result of redemptions by public stockholders. Notwithstanding the foregoing, under Chardan’s current certificate of incorporation, the Business Combination may be consummated only if Chardan has at least $5,000,001 of net tangible assets after giving effect to all redemptions by holders of public shares that properly demand redemption of their shares for cash.

Q: What happens if the Business Combination is not consummated?

A: If Chardan does not complete the Business Combination with Dragonfly for whatever reason, Chardan would search for another target business with which to complete an initial business combination. If Chardan does not complete a business combination with Dragonfly or another target business by August 13, 2022, or as extended by the Insiders up to two times by an additional three months each time (to February 13, 2023 for a total of up to 18 months to complete a business combination), Chardan must redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to (a) the aggregate amount then on deposit in the trust account, including interest earned and not previously released to us for Chardan’s working capital requirements as well as to pay Chardan’s taxes, divided by (b) the number of then-outstanding public shares, subject to applicable law and certain conditions. Purusant to a letter agreement among Chardan, the Sponsor and the Insiders in connection with the Chardan IPO, the Sponsor and the Insiders have no redemption rights in the event an initial business combination is not effected in the completion window and, accordingly, their Founder Shares will be worthless. Pursuant to the Subscription Agreement, the Sponsor may purchase shares of Chardan common stock in the open market and reduce (i) its purchase price under the Subscription Agreement by the per share redemption amount received by public stockholders who elect to redeem their shares of Chardan common stock prior to the closing of the Business Combination and (ii) the number of shares of Chardan common stock it subscribed for under the Subscription Agreement by an amount equal to the number of shares of Chardan common stock the Sponsor purchased in the open market and not redeemed. Pursuant to the Sponsor Support Agreement, the Sponsor has also agreed to waive redemption rights with respect to any shares purchased in the open market. No specific consideration was ascribed to the waiver of redemption

Table of Contents

rights in the Sponsor Support Agreement. Additionally, in the event of such liquidation, there will be no distribution with respect to Chardan’s outstanding warrants. Accordingly, the warrants will be worthless.

Q: How do the Sponsor and Insiders intend to vote on the proposals?

A: The Sponsor and the Insiders collectively own of record and are entitled to vote an aggregate of approximately 20% of the outstanding shares of Chardan common stock as of the record date. The Sponsor and the Insiders have agreed to vote any Founder Shares and any public shares held by them as of the record date in favor of the Business Combination. The Sponsor and Insiders may have interests in the Business Combination that may conflict with your interests as a stockholder. See the sections entitled “Summary of the Proxy Statement — Interests of Certain Persons in the Business Combination” and “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information.

Q: What are the factors that the Chardan Board considered when determining to enter into the Business Combination Agreement and its rationale for approving the transactions?

A: The Chardan Board considered a number of factors that are generally supportive of the Business Combination, including, without limitation, Dragonfly’s development of potentially disruptive technology, the experience possessed by Dragonfly’s officers regarding solid-state and lithium technologies, the fairness opinion of Duff and Phelps and Chardan’s management’s financial analysis and Chardan’s officers’ consultation with technical experts. The Chardan Board also considered a variety of uncertainties and risks, including, without limitation, the possibility that the potential benefits of the Business Combination may not achieved, the conflicts of Chardan’s directors and officers in the Business Combination and the fact that the Business Combination Agreement includes exclusivity restrictions. The Chardan Board concluded that the potential benefits outweighed the potentially negative factors and therefore recommends the approval of the Business Combination. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — The Chardan Board’s Reasons for Approval of the Business Combination.”

Q: When do you expect the Business Combination to be completed?

A: It is currently anticipated that the Business Combination will be consummated promptly following the special meeting which is set for [●], subject to the satisfaction of customary closing conditions; however, such meeting could be postponed or adjourned, as described above. For a description of the conditions to the completion of the Business Combination, please see the section entitled “Proposal No. 1 — The Business Combination Proposal — The Business Combination Agreement — Conditions to the Closing.”

Q: What do I need to do now?

A: Chardan urges you to read carefully and consider the information contained in this proxy statement, including the Annexes, and to consider how the Business Combination will affect you as a stockholder, unit holder and/or warrant holder of Chardan. Stockholders should then vote as soon as possible in accordance with the instructions provided in this proxy statement and on the enclosed proxy card, or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or other nominee.

Q: How do I vote?

A: The special meeting will be held at [●] Eastern Time, on [●].

If you are a holder of record of Chardan common stock on July 11, 2022, the record date for the meeting, you may submit your proxy in any of the follow ways:

●

use the toll-free number shown on your proxy card;

●

visit the website shown on your proxy card to vote via the Internet; or

●

complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

Table of Contents

If you are a Chardan stockholder of record as of the record date , you may also cast your vote virtually at the Special Meeting. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or obtain a proxy from your broker, bank or nominee.

Q: If I am not going to attend the special meeting virtually, should I submit my proxy card instead?

A: Yes. Whether you plan to attend the special meeting or not, please read the enclosed proxy statement carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Q: If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

A: No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. We believe the proposals presented to the stockholders at the special meeting will be considered non- routine and, therefore, your broker, bank or nominee cannot vote your shares without your instruction on any of the proposals presented at the special meeting. If you do not provide instructions with your proxy, your broker, bank or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

Q: How will a broker non-vote impact the results of each proposal?

A: Broker non-votes will count as a vote “AGAINST” the Charter Proposal but will not have any effect on the outcome of any other proposals.

Q: May I change my vote after I have mailed my signed proxy card?

A: Yes. Stockholders of record may send a later-dated, signed proxy card to the Transfer Agent at the address set forth at the end of this section so that it is received prior to the vote at the special meeting or attend the special meeting and vote. Stockholders also may revoke their proxy by sending a notice of revocation to the Transfer Agent, which must be received prior to the vote at the special meeting.

Q: What happens if I fail to take any action with respect to the special meeting?

A: If you fail to take any action with respect to the special meeting and the Business Combination is approved by stockholders, the Business Combination will be consummated in accordance with the terms of the Business Combination Agreement. If you fail to take any action with respect to the special meeting and the Business Combination is not approved, we will not consummate the Business Combination.

Q: What will happen if I sign and return my proxy card without indicating how I wish to vote?

A: Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the special meeting.

Q: What should I do if I receive more than one set of voting materials?

A: Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your Chardan common stock.

Table of Contents

Q: Who can help answer my questions?

A: If you have questions about the Business Combination or if you need additional copies of the proxy statement or the enclosed proxy card you should contact:

Chardan NexTech Acquisition 2 Corp.

17 Stat^e Street, 21st Floor

New York, NY 10004

Tel: (646) 465-9001

You may also contact the proxy solicitor for Chardan at:

Morrow Sodali LLC

333 Ludl^ow Street, 5th

Floor, South Tower,

Stamford, CT 06902

Individuals call toll-free: 800-662-5200

Banks and brokers call: 203-658-9400

Email: CNTQ.info@investor.morrowsodali.com

To obtain timely delivery, our stockholders must request any additional materials no later than five business days prior to the special meeting. You may also obtain additional information about Chardan from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of public shares and you intend to seek redemption of your public shares, you will need to deliver your stock (either physically or electronically) to the Transfer Agent at the address below no later than the second business day prior to the originally scheduled date of the special meeting. See the section entitled “Special Meeting of Chardan Stockholders — Redemption Rights.”

If you have questions regarding the certification of your position or delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

1 Sta^te Street 30th Floor

New York, New York 10004

Attention: Mark Zimkind

Email: mzimkind@continentalstock.com

Q: Who will solicit and pay the cost of soliciting proxies?

A: The Chardan Board is soliciting your proxy to vote your shares of Chardan common stock on all matters scheduled to come before the special meeting. We will pay the cost of soliciting proxies for the special meeting. We have engaged Morrow Sodali LLC to assist in the solicitation of proxies for the special meeting. We will pay Morrow Sodali LLC a fee of $27,500. We will reimburse Morrow Sodali LLC for reasonable out-of-pocket expenses and will indemnify Morrow Sodali LLC and its affiliates against certain claims, liabilities, losses, damages and expenses. We will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Chardan common stock for their expenses in forwarding soliciting materials to beneficial owners of Chardan common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Q: What are the U.S. federal income tax consequences of exercising my redemption rights?

A: It is expected that a holder of public shares that exercises its redemption rights to receive cash from the trust account in exchange for public shares will generally be treated as selling such public shares. There may be certain circumstances, however, in which the redemption may be treated as a distribution for U.S. federal income tax purposes, depending on the amount of public shares that such holder owns or is deemed to own (including through the ownership of warrants). For a more complete discussion of U.S. federal income tax considerations of an exercise of redemption rights, see the section entitled “U.S. Federal Income Tax Considerations.”

Table of Contents

SUMMARY OF THE PROXY STATEMENT

This summary highlights selected information from this proxy statement and does not contain all of the information that is important to you. To better understand the proposals to be submitted for a vote at the special meeting, including the Business Combination Proposal, you should read this entire document carefully, including the Annexes and other documents referred to herein. The Business Combination Agreement is the legal document that governs the Business Combination. It is also described in detail in this proxy statement in the section entitled “Proposal No. 1 — The Business Combination Proposal — Business Combination Agreement.”

Unless otherwise specified, all share calculations (a) exclude the impact of the shares of Chardan common stock underlying warrants, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account and (c) assume that no shares are issued pursuant to the 2022 Plan.

The Parties

Chardan

Chardan NexTech Acquisition 2 Corp. is a blank check company formed under the laws of Delaware on June 23, 2020. Chardan was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

On August 13, 2021, Chardan closed its initial public offering of 11,000,000 units, with each unit consisting of one share of its common stock and three-quarters of one warrant to purchase one share of its common stock at a purchase price of $11.50 per share, subject to adjustment as provided in Chardan’s final prospectus filed with the SEC on August 5, 2021 (File No. 333-254010). On August 18, 2021, the underwriters fully exercised their over-allotment option and purchased 1,650,000 additional units. At $10.00 per unit, the units from the Chardan IPO and exercise of the underwriters’ over-allotment option generated total gross proceeds of $126,500,000.

Simultaneously with the consummation of the Chardan IPO, Chardan consummated the private sale of 4,361,456 warrants at $0.93 per warrant for an aggregate purchase price of $4,052,000. Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Chardan consummated the sale of an additional 266,402 private warrants at a purchase price of $0.93 per private warrant in a private placement to Holdings, generating gross proceeds of $247,500. A total of $128,397,500 was deposited into the trust account and the remaining net proceeds became available to be used as working capital to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. The Chardan IPO was conducted pursuant to a registration statement on Form S-1 that became effective on August 10, 2021. As of March 31, 2022, there was approximately $128,437,281 held in the trust account.

Chardan’s units, common stock and warrants are listed on the Nasdaq under the symbols “CNTQU,” “CNTQ” and “CNTQW,” respectively.

The mailing address of Chardan’s principal executive office is 17 State Street, 21^stFloor, New York, NY 10004. Its telephone number is (646) 465-9000. After the consummation of the Business Combination, its principal executive office will be that of Dragonfly.

Merger Sub

Merger Sub is a wholly owned subsidiary of Chardan formed solely for the purpose of effectuating the Merger described herein (“Merger Sub”). Merger Sub was incorporated under the laws of Nevada as a corporation on May 10, 2022. Merger Sub owns no material assets and does not operate any business.

Table of Contents

The mailing address of Merger Sub’s principal executive office is 17 State Street, 21^stFloor, New York, NY 10004. Its telephone number is (646) 465-9000. After the consummation of the Business Combination, Merger Sub will cease to exist as a separate legal entity.

Dragonfly

Dragonfly, which was originally formed on October 15, 2012 as Dragonfly Energy LLC, a Nevada limited liability company, converted into a Nevada corporation by filing articles of conversion and articles of incorporation under the laws of Nevada on April 11, 2016. Dragonfly is based in Reno, Nevada and is a manufacturer of non-toxic deep cycle lithium-ion batteries that caters to customers in the recreational vehicle (“RV”), marine vessel and off-grid residence industries, with disruptive solid-state cell technology currently under development. Dragonfly believes that green energy is more than just a trend. Dragonfly’s goal is to develop technology to deliver environmentally impactful solutions for energy storage to everyone globally. Dragonfly believes that the innovative design of our lithium-ion batteries is ideally suited for the demands of modern customers who rely on consumer electronics, connected devices and smart appliances that require continuous, reliable electricity, regardless of location. Dragonfly has a dual-brand strategy, Dragonfly Energy (“Dragonfly Energy”) and Battle Born Batteries (“Battle Born”). Battle Born branded products are primarily sold direct to consumers, while the Dragonfly Energy brand is primarily sold to original equipment manufacturers (“OEMs”). Dragonfly’s principal executive office is 1190 Trademark Dr. #108, Reno, Nevada 89521. Its telephone number is (775) 622-3448.

Emerging Growth Company

Chardan is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933 (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, it is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find Chardan’s securities less attractive as a result, there may be a less active trading market for Chardan’s securities and the prices of its securities may be more volatile or otherwise impacted.

New Dragonfly could remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of the Chardan IPO. However, if (a) New Dragonfly’s total annual gross revenue exceed $1.07 billion, (b) New Dragonfly is deemed to be a large accelerated filer, which means the market value of New Dragonfly common stock that is held by non-affiliates exceeds $700.0 million as of the end of the prior fiscal year’s second fiscal quarter, or (c) New Dragonfly’s non-convertible debt issued within a three-year period exceeds $1.0 billion, New Dragonfly would cease to be an emerging growth company as of the following fiscal year. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

The Business Combination Proposal

As discussed elsewhere in this proxy statement/prospectus, Chardan is asking its stockholders to approve the Business Combination Agreement, pursuant to which, among other things, on the Closing Date, Merger Sub will merge with and into Dragonfly, with Dragonfly as the surviving company in the Merger and, after giving effect to such Merger, Dragonfly will be a wholly owned subsidiary of Chardan. The Aggregate Merger Consideration to be received by equityholders of Dragonfly as of immediately prior to the Closing will be 41,500,000 shares of Chardan common stock (at a deemed value of $10.00 per share) or, as applicable, shares underlying options based on Dragonfly common stock. The portion of the Aggregate Merger Consideration reflecting the conversion of the Dragonfly options is calculated assuming that all New Dragonfly options are net-settled. With respect to the New Dragonfly options received in respect of Dragonfly options that are outstanding immediately prior to the Closing and cash exercised after the Closing, up to 3,474,256 additional shares of New Dragonfly common stock may be issued. Dragonfly stockholders will also have the contingent right to receive up to 40,000,000 Earnout Shares. For further details, see “Business Combination Proposal — Consideration to Dragonfly Holders in the Business Combination.”

The Earnout Shares (up to 40,000,000 shares) will be issued, if at all, to the Dragonfly stockholders in three tranches. The first tranche of 15,000,000 shares is issuable if New Dragonfly’s 2023 total audited revenue is equal to or greater than $250,000,000 and New Dragonfly’s 2023 audited operating income is equal to or greater than $35,000,000. The second tranche of 12,500,000 shares is issuable upon achieving a volume- weighted average trading price threshold of at least $22.50 on or prior to December 31, 2026, and

Table of Contents

the third tranche of 12,500,000 shares is issuable upon achieving a volume-weighted average trading price threshold of at least $32.50 on or prior to December 31, 2028. To the extent not previously earned, the second tranche is issuable if the $32.50 price target is achieved by December 31, 2028 (such shares, together, the “Earnout Shares”).

After consideration of the factors identified and discussed in the section entitled “Business Combination Proposal — The Chardan Board’s Reasons for the Approval of the Business Combination,” the Chardan Board concluded (i) that the terms and conditions of the Business Combination Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Chardan and its stockholders and (ii) that it would recommend that its stockholders adopt the Business Combination Agreement and approve the Business Combination. For more information about the transactions contemplated by the Business Combination Agreement, see “Business Combination Proposal.”

The consummation of the Business Combination is conditioned upon, among other things, (i) the approval by our stockholders of the proposals set forth herein and approval of Dragonfly’s stockholders of the transactions contemplated by the Business Combination Agreement (which such approval by Dragonfly’s stockholders was obtained and delivered by execution of a written consent by the requisite equityholders of Dragonfly); (ii) this proxy statement/prospectus receiving SEC clearance; (iii) applicable waiting periods under the HSR act expiring or terminating (the waiting period expired on June 27, 2022); (iv) the Company Preferred Conversion occurring immediately prior to the Effective Time; (v) Dragonfly (x) if the debt financing as contemplated by the Debt Commitment Letter is consummated, delivering the Payoff Consent (as defined in the Business Combination Agreement) and the Payoff Letter (as defined below) and repaying all outstanding PIUS Debt (as defined in the Business Combination Agreement) or (y) if the debt financing as contemplated by the Debt Commitment Letter is not consummated, refinancing the PIUS Debt on mutually agreeable terms; (vi) the amendment of the Key Employment Agreements, which shall continue to be in full force and effect and shall not have been terminated for any reason; and (vii) the approval by Nasdaq of our initial listing application in connection with the Business Combination. Therefore, unless these conditions are waived by the applicable parties to the Business Combination Agreement, the Business Combination Agreement could terminate and the Business Combination may not be consummated. For further details, see “Business Combination Proposal — Conditions to Closing of the Business Combination.”

Matters Being Voted On

The stockholders of Chardan will be asked to consider and vote on the following proposals at the special meeting:

(1)a proposal to approve the Business Combination, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in this proxy statement. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal” for additional information;

(2)a proposal to approve and adopt changes to the certificate of incorporation of Chardan reflected in the second amended and restated certificate of incorporation of Chardan in the form attached hereto as Annex B. Please see the section entitled “Proposal No. 2 — The Charter Proposal” for additional information;

(3)a proposal to approve, for purposes of complying with the applicable rules of the Nasdaq, the issuance of shares of Chardan’s common stock in connection with the Business Combination, including, without limitation, the Aggregate Merger Consideration, the Earnout Shares, the PIPE Investment, the Term Loan Lender Warrants and the Equity Facility. Please see the section entitled “Proposal No. 3 — The Nasdaq Proposal” for additional information;

(4)a proposal to approve and adopt the 2022 Plan. Please see the section entitled “Proposal No. 4 — The Incentive Plan Proposal” for additional information;

(5)a proposal to approve the ESPP. Please see the section entitled “Proposal No. 5 — The ESPP Proposal” for additional information;

(6)a proposal to approve and elect seven (7) directors to the New Dragonfly board. Please see the section entitled “Proposal No. 6 — The Director Election Proposal” for additional information; and

(7)a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal,

Table of Contents

the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal or the Director Election Proposal. Please see the section entitled “Proposal No. 7 — The Adjournment Proposal” for additional information.

Date, Time and Place of Special Meeting of Chardan’s Stockholders

The special meeting of stockholders of Chardan will be held at [●] Eastern Time, on [●] via a virtual meeting.

At the special meeting, stockholders will be asked to consider and vote upon the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Director Election Proposal and, if necessary, the Adjournment Proposal to permit further solicitation and vote of proxies if Chardan is not able to consummate the Business Combination.

Registering for the Special Meeting

If you are a registered stockholder, you will receive a proxy card from the Transfer Agent. The card will contain instructions on how to attend the Special Meeting, including how to register for the virtual Special Meeting.

If you do not have access to Internet, you can listen only to the meeting by dialing +1 800-450-7155 (or +1 857-999-9155 if you are located outside the United States and Canada (standard rates apply)) and when prompted enter the pin number. Please note that you will not be able to vote or ask questions at the Special Meeting if you choose to participate telephonically.

Voting Power; Record Date

Stockholders will be entitled to vote or direct votes to be cast at the special meeting if they owned shares of Chardan common stock at the close of business on July 11, 2022, which is the record date for the special meeting. Stockholders will have one vote for each share of Chardan common owned at the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. Chardan warrants do not have voting rights. On the record date, there were 15,812,500 shares of Chardan common stock outstanding, of which 12,650,000 were public shares with the rest being held by the Sponsor and certain Insiders.

Quorum and Vote of Chardan Stockholders

A quorum of Chardan stockholders is necessary to hold a valid meeting. A quorum will be present at the special meeting if a majority of the outstanding shares entitled to vote at the meeting are represented in person (via the virtual meeting platform) or by proxy. Proxies that are marked “ABSTAIN” will be treated as shares present for purposes of determining the presence of a quorum on all matters. Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting.

The Sponsor and certain Insiders own of record and are entitled to vote approximately 20% of the outstanding shares of Chardan common stock as of the record date. Such shares, as well as any shares of common stock acquired in the aftermarket by the Sponsor, will be voted in favor of the proposals presented at the special meeting.

The proposals presented at the special meeting will require the following votes:

●

The approval of each of the Business Combination Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal, the Director Election Proposal and the Adjournment Proposal requires the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal, the ESPP Proposal, the Director Election Proposal and the Adjournment Proposal will have the same effect as a vote “AGAINST” such proposals.

Table of Contents

Redemption Rights

Pursuant to Chardan’s current certificate of incorporation, a holder of public shares may demand that Chardan redeem such shares for cash if the Business Combination is consummated. Holders of public shares will be entitled to receive cash for these shares only if they demand that Chardan redeem their shares for cash no later than the second business day prior to the originally scheduled vote on the Business Combination Proposal by delivering their stock to the Transfer Agent prior to the vote at the meeting. The redemption rights include the requirement that a holder must identify himself, herself or itself in writing as a beneficial holder and provide his, her or its legal name, phone number and address to the transfer agent in order to validly redeem his, her or its shares. If the Business Combination is not completed, these shares will not be redeemed. If a holder of public shares properly demands redemption, Chardan will redeem each public share for a full pro rata portion of the trust account, calculated as of two business days prior to the consummation of the Business Combination. As of March 31, 2022, this would amount to approximately $10.15 per share. If a holder of public shares exercises its redemption rights, then it will be exchanging its shares of Chardan common stock for cash and will no longer own the shares. Please see the section entitled “Special Meeting of Chardan Stockholders — Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your shares for cash.

Notwithstanding the foregoing, a holder of public shares, together with any of its affiliates or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 20% of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or was a “group,” will not be redeemed for cash.

The Business Combination will not be consummated if Chardan has net tangible assets of less than $5,000,001 after taking into account holders of public shares that have properly demanded redemption of their shares for cash.

Holders of Chardan warrants will not have redemption rights with respect to such securities.

Appraisal Rights / Dissenter’s Rights

Chardan stockholders, Chardan unitholders and Chardan warrant holders do not have appraisal rights in connection with the Business Combination under the DGCL.

Under the Nevada Dissenter’s Rights Statutes (NRS 92A.300 through NRS 92A.500, inclusive), any Dragonfly stockholder who does not vote or sign a written consent (and who does not cause or permit the stockholder’s shares to be voted) in favor of the Merger will have the right to dissent from the Merger and, in lieu of receiving the Per Share Merger Consideration with respect to the stockholder’s Dragonfly shares, obtain payment of the fair value (as defined in NRS 92A.320) of the stockholder’s Dragonfly shares, but only if the stockholder complies with all other applicable requirements under the Nevada Dissenter’s Rights Statutes. The Dragonfly stockholders must also approve the Merger, and the Dragonfly Stockholder Approval must be obtained and delivered to Chardan (which such approval was obtained and delivered by execution of a written consent by the requisite equityholders of Dragonfly).

Please see the section entitled “Appraisal Rights and Dissenter’s Rights” for additional information.

Proxy Solicitation

Proxies may be solicited by mail, telephone or in person. Chardan has engaged Morrow Sodali LLC to assist in the solicitation of proxies. If a stockholder grants a proxy, it may still vote its shares during the meeting if it revokes its proxy before the special meeting. A stockholder may also change its vote by submitting a later-dated proxy as described in the section entitled “Special Meeting of Chardan Stockholders — Revoking Your Proxy.”

Table of Contents

Interests of Certain Persons in the Business Combination

In considering the recommendation of the Chardan Board to vote in favor of approval of the Business Combination Proposal and the other proposals, stockholders should keep in mind that the Sponsor and the Insiders have interests in such proposals that are different from, or in addition to, those of Chardan stockholders generally. In particular:

●

Each of Chardan’s officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. We do not believe, however, that the pre-existing fiduciary duties or contractual obligations of our officers and directors will materially undermine our ability to complete the Business Combination, and such pre-existing fiduciary duties and contractual obligations did not materially affect our search for an acquisition target.

●

It is anticipated that upon completion of the Business Combination and assuming no redemptions by Chardan public stockholders, the Sponsor, officers, directors and other affiliates and holders of Founder Shares will own approximately 6.5% of New Dragonfly (including the PIPE Investment). This level of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

●

Table of Contents

In May and June 2021, the Sponsor transferred 20,000 Founder Shares to each of Messrs. Biele, Boyle, Hardamon, Thakrar and Thomson and Ms. Jardins.

●

Simultaneously with the closing of the Chardan IPO, Holdings (an affiliate of Sponsor and Chardan Capital Markets) purchased an aggregate of 4,361,456 private warrants at a price of $0.93 per private placement warrant ($4,052,000 in the aggregate). Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Holdings purchased an additional 266,402 private warrants at a purchase price of $0.93 per private placement warrant. Each private placement warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share. The proceeds from the private warrants were added to the proceeds from the Chardan IPO to be held in the Trust Account. The private warrants had an aggregate market value of $1,156,964.50 based upon the closing price of approximately $0.25 per share on the Nasdaq on July 19, 2022. The private warrants will become worthless if Chardan does not consummate a business combination by August 13, 2022 (unless this deadline is extended pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents).

●

The current directors and officers will continue to be indemnified and the liability insurance of the directors and officers will continue.

●

In connection with the Business Combination, Chardan and the Sponsor, an affiliate of Chardan Capital Markets, entered into the Subscription Agreement, which provides for the Sponsor to purchase an aggregate of 500,000 shares of Chardan common stock upon the terms as set forth in the Subscription Agreement. The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Subscription Agreement” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

Table of Contents

an aggregate of $150,000,000 in shares of New Dragonfly’s common stock from time to time at the request of the New Dragonfly, subject to certain limitations and the satisfaction of certain conditions. Further, New Dragonfly will agree to issue Equity Facility Commitment Shares having a value of $1 million determined based on the applicable trading price at the time of issuance to the Equity Facility Investor as consideration for its irrevocable commitment to purchase the shares of New Dragonfly common stock upon the terms and subject to the satisfaction of the conditions set forth in the Equity Facility Definitive Documentation. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Equity Facility Letter Agreement” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

Pursuant to the Debt Commitment Letter, the Chardan Lender has agreed to provide 60% of the commitment with respect to the Term Loan on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into the Backstop Commitment Letter with the Backstop Lender. The Chardan Lender is entitled to payment of fees in connection with the Term Loan pursuant to the fee letter entered into in connection with the Debt Commitment Letter, but, in accordance with the terms of the Backstop Commitment Letter, such fees are to be paid to the Backstop Lenders on the Closing Date. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Debt Commitment Letter” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

The Sponsor and the initial stockholders, among others, will enter into the Registration Rights Agreement which will provide them with registration rights.

Stockholders should also keep in mind that certain officers and directors of Dragonfly have interests in the Business Combination that are different from, or in addition to, those of Chardan stockholders generally.

●

Board of Directors following the Business Combination

Upon completion of the Business Combination, New Dragonfly’s board of directors will be composed of seven members. New Dragonfly expects that six of its directors will meet the independence requirements under the Nasdaq Listed Company Manual. In accordance with the Business Combination Agreement, Perry Boyle was designated as a director designated by Chardan, and Luisa

Table of Contents

Ingargiola and Brian Nelson were designated as directors by Dragonfly’s board of directors. Please see the section entitled “Management of New Dragonfly After the Business Combination” for additional information.

Other Agreements Relating to the Business Combination

Subscription Agreement

Concurrently with the execution of the Business Combination Agreement, Chardan entered into the Subscription Agreement with the Sponsor, pursuant to which, among other things, the Sponsor agreed to subscribe for and purchase, and Chardan agreed to issue and sell to the Sponsor, 500,000 shares of PIPE Securities, immediately prior to or substantially concurrently with the Closing, for a price of $10.00 per share for gross proceeds of $5 million. The Subscription Agreement contains customary representations, warranties, covenants and agreements of Chardan and the Sponsor. The obligation of the parties to consummate the PIPE Investment is conditioned upon, among other things, (i) satisfaction or waiver of the conditions precedent to the closing of the transactions set forth in the Business Combination Agreement and (ii) there not being any amendment or modification to the Business Combination Agreement that would reasonably be expected to materially and adversely affect the economic benefits that the Sponsor would reasonably expect to receive under the Subscription Agreement. The closing under the Subscription Agreement will occur substantially concurrently with the Closing.

Registration Rights Agreement

At the consummation of the Business Combination, New Dragonfly intends to enter into the Registration Rights Agreement with the Sponsor, the Insiders, certain Dragonfly stockholders, the Sponsor and Holdings, substantially in the form attached as Annex H to this proxy statement, pursuant to which, among other things, New Dragonfly will agree to register for resale, pursuant to Rule 415 under the Securities Act, the registrable securities that are held by the holders party to the Registration Rights Agreement from time to time. Pursuant to the Registration Rights Agreement, New Dragonfly will be required to submit to or file with the SEC, within 30 calendar days after the Closing, a shelf registration statement covering the issuance and the resale of all such registrable securities on a delayed or continuous basis, and to use commercially reasonable efforts to have such shelf registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) 90 calendar days after the filing thereof if the SEC notifies New Dragonfly that it will “review” the shelf registration statement and (ii) the 10th business day after the date New Dragonfly is notified (orally or in writing, whichever is earlier) by the SEC that the shelf registration statement will not be “reviewed” or will not be subject to further review.

Sponsor Support Agreement

Concurrently with the execution of the Business Combination Agreement, Chardan, Dragonfly and the Sponsor entered into a sponsor support agreement (the “Sponsor Support Agreement”), pursuant to which the Sponsor agreed, among other things, (i) to vote, or cause to be voted, at any meeting of the stockholders of Chardan all of its shares of Chardan common stock held of record or acquired after the date of the Sponsor Support Agreement (excluding shares of any common stock acquired in public market) (a) in favor of the proposals set forth in this proxy statement and (b) against any proposal that would reasonably be expected to result in (x) a breach of any of Chardan’s or Merger Sub’s covenants, agreements or obligations under the Business Combination Agreement or in any Ancillary Agreements or (y) any Closing conditions set forth in Section 9.1 or 9.3 of the Business Combination Agreement not being satisfied; (ii) to not redeem any of such Chardan common stock; (iii) to be bound by certain other covenants and agreements related to the Business Combination and (iv) to be bound by certain transfer restrictions with respect to such shares of Chardan common stock, in each case, on the terms and subject to the conditions set forth in the Sponsor Support Agreement. Pursuant to the Sponsor Support Agreement, the Sponsor has also agreed to waive redemption rights with respect to any shares purchased in the open market.

Debt Commitment Letter and Backstop Commitment Letter

Table of Contents

into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender”), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto.

Equity Facility Letter Agreement

On May 15, 2022, Chardan, Dragonfly and the Equity Facility Investor entered into the Equity Facility Letter Agreement pursuant to which Chardan and Dragonfly agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date to establish the Equity Facility. Pursuant to, on the terms of and subject to the satisfaction of the conditions to be set forth in the Equity Facility Definitive Documentation, including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly common stock issued to it under the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility.

Recommendation to Stockholders

The Chardan Board believes that the Business Combination Proposal and the other proposals to be presented at the special meeting are fair to and in the best interest of Chardan’s stockholders and unanimously recommends that its stockholders vote “FOR” the Business Combination Proposal, “FOR” the Charter Proposal, “FOR” the Nasdaq Proposal, “FOR” the Incentive Plan Proposal, “FOR” the ESPP Proposal, “For” the Director Election Proposal and “FOR” the Adjournment Proposal, if presented.

When you consider the Chardan Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of Chardan stockholders generally. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information. The Chardan Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Chardan stockholders that they vote “FOR” the proposals presented at the special meeting.

Conditions to the Closing

Conditions to Each Party’s Obligations

The respective obligations of each party to the Business Combination Agreement to consummate the transactions contemplated by the Business Combination are subject to the satisfaction or, if permitted by applicable law, written waiver by the party whose benefit such condition exists of the following conditions:

●

no governmental authority shall have enacted, issued, promulgated, enforced or entered any law, judgment, decree, executive order or award which is then in effect and has the effect of making the transactions, including the Merger, illegal or otherwise prohibiting or enjoining consummation of the transactions, including the Merger;

●

this proxy statement shall have received SEC clearance;

●

the waiting period or periods under the HSR Act applicable to the transactions contemplated by the Business Combination Agreement and the Ancillary Agreements (as defined in the Business Combination Agreement) shall have expired or been terminated (the waiting period expired on June 27, 2022);

●

the Chardan common stock to be issued in connection with the transactions shall have been approved for listing on Nasdaq;

●

Chardan shall have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act and inclusive of the PIPE Investment Amount actually received by Chardan prior to or substantially concurrently with the Closing);

Table of Contents

●

the Business Combination Agreement and, to the extent required, the transactions contemplated by the Business Combination Agreement (including the Merger) shall have been approved by the affirmative vote of the holders of the requisite number of Chardan common stock being obtained in accordance with Chardan’s current certificate of incorporation and bylaws, applicable law, and the rules and regulations of Nasdaq; and

●

the Business Combination Agreement and, to the extent required, the transactions contemplated by the Business Combination Agreement (including the Merger) shall have been approved by the requisite number of stockholders of Dragonfly in accordance with the Nevada Revised Statutes, Dragonfly’s governing documents and agreements between Dragonfly and its stockholders (“Dragonfly Stockholder Approval”). The Dragonfly Stockholder Approval was obtained and delivered to Chardan immediately following the execution of the Business Combination Agreement by execution of a written consent by the requisite equityholders of Dragonfly.

Other Conditions to the Obligations of Chardan

The obligations of Chardan to consummate the transactions contemplated by the Business Combination Agreement are subject to the satisfaction or, if permitted by applicable law, written waiver by Chardan of the following further conditions:

●

certain of the representations and warranties of Dragonfly pertaining to the capitalization of Dragonfly must be true and correct in all but de minimis respects as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties shall be true and correct in all but de minimis respects at and as of such date;

●

each of the Dragonfly Fundamental Representations (other than those portions of the capitalization representations referenced in the preceding bullet point) must be true and correct in all material respects, in each case as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties shall be true and correct in all material respects at and as of such date;

●

the other representations and warranties of Dragonfly shall be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” or any similar limitation set forth in the Business Combination Agreement) as of the Closing Date (or, if given as of an earlier date, as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect;

●

Dragonfly shall have performed and complied in all material respects with the covenants and agreements required to be performed or complied with by it under the Business Combination Agreement as of or prior to the Closing;

●

the Company Preferred Conversion shall have occurred or will occur immediately prior to the Effective Time;

●

The Key Employment Agreements shall have been amended in accordance with the terms of the applicable amendments, and shall continue to be in full force and effect and shall not have been terminated for any reason;

●

Dragonfly shall have (x) if the debt financing as contemplated by the Debt Commitment Letter is consummated, delivered the Payoff Consent (as defined in the Business Combination Agreement) and Payoff Letter (as defined below) and repaid all outstanding PIUS Debt (as defined in the Business Combination Agreement) or (y) if the debt financing as contemplated by the Debt Commitment Letter is not consummated, refinanced the PIUS Debt on mutually agreeable terms; and

●

no Material Adverse Effect shall have occurred since the date of the Business Combination Agreement.

Table of Contents

Other Conditions to the Obligations of Dragonfly

The obligations of Dragonfly to consummate the transactions contemplated by the Business Combination Agreement are subject to the satisfaction or, if permitted by applicable law, written waiver by Dragonfly of the following further conditions:

●

certain of the representations and warranties of Chardan regarding the capitalization of Chardan, must be true and correct in all but de minimis respects as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties shall be true and correct in all but de minimis respects at and as of such date, except for changes after the date of the Business Combination Agreement which are contemplated or expressly permitted by the Business Combination Agreement;

●

the other representations and warranties regarding Chardan and Merger Sub shall be true and correct (without giving effect to any limitation of “materiality” or “material adverse effect” or any similar limitation set forth in the Business Combination Agreement) as of the Closing Date, except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, would not reasonably be expected to result in a material adverse effect on Chardan’s ability to consummate the transactions contemplated by the Business Combination Agreement; and

●

Chardan shall have performed and complied in all material respects with the covenants and agreements required to be performed or complied with by it under the Business Combination Agreement.

U.S. Federal Income Tax Considerations of the Exercise of Redemption Rights

For a discussion of U.S. federal income tax considerations of (i) the exercise of redemption rights to holders of Chardan public shares and (ii) the Merger to Dragonfly stockholders, please see the information set forth in the section entitled “U.S. Federal Income Tax Considerations.”

Anticipated Accounting Treatment

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. generally accepted accounting principles. Under this method of accounting, Chardan is treated as the “acquired” company for financial reporting purposes. Dragonfly has been determined to be the accounting acquirer because Dragonfly, as a group, will retain a majority of the outstanding shares of New Dragonfly as of the closing of the Business Combination, they will nominate five of the seven members of the board of directors as of the closing of the Business Combination, Dragonfly’s management will continue to manage New Dragonfly and Dragonfly’s business will comprise the ongoing operations of New Dragonfly.

Business of Dragonfly

Dragonfly is a manufacturer of non-toxic deep cycle lithium-ion batteries that caters to customers in the RV, marine vessel and off-grid residence industries, with potentially disruptive solid-state cell technology currently under development. Dragonfly believes that green energy is more than just a trend. Dragonfly’s goal is to develop technology to deliver environmentally impactful solutions for energy storage to everyone globally. Dragonfly believes that the innovative design of its lithium-ion batteries is ideally suited for the demands of modern customers who rely on consumer electronics, connected devices and smart appliances that require continuous, reliable electricity, regardless of location. Dragonfly is leveraging the expertise of its Chief Executive Officer and Chairman of the Board, who holds a M.B.A. from University of Nevada — Reno, a Ph.D. in Engineering from the California Institute of Technology and a B.S. in Physics from Villanova University.

Dragonfly’s deep cycle LFP batteries provide numerous advantages compared to incumbent products, such as lead-acid batteries. LFP batteries are non-toxic and environmentally friendly, do not rely on scarce or controversial metals and are a highly cost-effective storage solution. As Dragonfly develops its proprietary solid-state cell technology, it believes its use of LFP will continue to provide significant advantages over the lithium-ion technology in development by other companies, which still incorporate less stable components in their chemistries (such as sulfide glasses, which are chemically unstable and form hydrogen sulfide when exposed to air).

Table of Contents

Dragonfly currently focuses on three main end markets: RVs, marine vessels and off-grid storage and, in the medium- to longer-term, it plan on expanding into several new markets. Within its current markets, Dragonfly’s aim is to replace incumbent lead-acid batteries. Dragonfly’s batteries are primarily designed to provide consumers with a long-lasting, highly efficient power source for powering appliances, consumer electronics and other smart devices located inside RVs, marine vessels or off-grid residences and, other than for certain smaller marine vessels, are not intended for propulsion. Dragonfly’s batteries are powertrain agnostic, with the ability to operate on internal combustion engine vehicles or electric vehicles.

In addition to our conventional LFP batteries, Dragonfly’s experienced research and development team, headed by its co-founder and CEO, is currently developing the next generation of LFP solid-state cells.

Ownership of the Post-Business Combination Company After Closing

It is anticipated that upon completion of the Business Combination and assuming no redemptions by Chardan public stockholders, Chardan’s public stockholders will retain an ownership interest of approximately 22.4% of New Dragonfly, the Term Loan Lenders will own approximately 3.7% of New Dragonfly assuming the exercise of all Penny Warrants, the Sponsor, officers, directors and other holders of Founder Shares will retain an ownership interest of approximately 6.5% of New Dragonfly (including the PIPE Investment), and the Dragonfly stockholders will own approximately 67.4% (excluding the 40,000,000 Earnout Shares) of New Dragonfly. These levels of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,876,847 shares being issuable, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable. See the section entitled “Proposal No. 3 — The Incentive Plan Proposal” for additional information on the Dragonfly Incentive Plan and the 2022 Plan. If the actual facts are different from these assumptions (which they are likely to be), the percentage ownership retained by the Chardan stockholders will be different.

	No			10%			50%			75%			Maximum
	Redemptions⁽¹⁾	%		Redemption⁽²⁾	%		Redemption⁽³⁾	%		Redemption⁽⁴⁾	%		Redemption⁽⁵⁾	%
Dragonfly existing shareholders⁽⁶⁾⁽⁷⁾	38,189,691	67.4	%	38,189,691	69.1	%	38,189,691	76.4	%	38,189,691	81.7	%	38,189,691	87.9	%
Chardan existing public stockholders⁽⁸⁾	12,650,000	22.4	%	11,385,000	20.6	%	6,325,000	12.6	%	3,162,500	6.8	%	—	—	%
Initial Stockholders^(9)(10)	3,662,500	6.5	%	3,662,500	6.6	%	3,662,500	7.3	%	3,662,500	7.8	%	3,662,500	8.4	%
Term Loan Lender^(11)(12)	2,065,432	3.7	%	2,018,238	3.7	%	1,829,465	3.7	%	1,711,481	3.7	%	1,593,498	3.7	%
Pro forma Common Stock⁽¹³⁾	56,567,623	100.0	%	55,255,429	100.0	%	50,006,656	100.0	%	46,726,172	100.0	%	43,445,689	100.0	%
Potential sources of dilution:
Earnout Shares	40,000,000			40,000,000			40,000,000			40,000,000			40,000,000
Public Warrants	9,487,500			9,487,500			9,487,500			9,487,500			9,487,500
Private Warrants	4,627,858			4,627,858			4,627,858			4,627,858			4,627,858
Dragonfly Options	7,192,448			7,137,748			6,919,098			6,782,348			6,645,698
$10 Warrants	1,600,000			1,600,000			1,600,000			1,600,000			1,600,000

(1)	Assumes that no Chardan public stockholders are redeemed.

(2)	Assumes that 1,265,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $12,843,728, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

Table of Contents

(3)	Assumes that 6,325,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $64,218,641, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(4)	Assumes that 9,487,500 Chardan public shares are redeemed for aggregate redemption payments of approximately $96,327,961, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(5)	Assumes that 12,650,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $128,437,281, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(6)

(7)	Includes shares of Dragonfly common stock issued pursuant to the THOR Investment.

(8)	Excludes 9,487,500 shares of Common Stock underlying the Public Warrants.

(9)

Excludes 4,627,858 shares of Common Stock underlying the Private Warrants. Additionally, the Sponsor has agreed that the Private Warrants may not be exercised to the extent an affiliate of the Sponsor is deemed to beneficially own, or it would cause such affiliate to be deemed to beneficially own, more than 4.99% of the New Dragonfly Common Stock.

(10)

(11)

(12)	Excludes 1,600,000 shares of Common Stock underlying the $10 Warrants.

(13)	Excludes shares of Common Stock issuable pursuant to the Equity Facility after Closing.

Table of Contents

In connection with the Chardan IPO and the Business Combination, Chardan paid or will pay certain fees to Chardan Capital Markets LLC and to Stifel, Nicolaus & Company, Incorporated for advisory services. The following table illustrates the effective fee percentages paid to such advisors based on the varying levels of redemptions by Chardan public stockholders:


	No			10%			50%			75%			Maximum
	Redemptions			Redemption			Redemption			Redemption			Redemption
Unredeemed public shares		12,650,000			11,385,000			6,325,000			3,162,500			—
Trust proceeds to Dragonfly	$	128,437,281		$	115,593,553		$	64,218,641		$	32,109,320		$	—
PIPE Investment	$	5,000,000		$	5,000,000		$	5,000,000		$	5,000,000		$	5,000,000
THOR Investment	$	15,000,000		$	15,000,000		$	15,000,000		$	15,000,000		$	15,000,000
Term Loan	$	75,000,000		$	75,000,000		$	75,000,000		$	75,000,000		$	75,000,000
Business Combination Marketing Agreement – Chardan Capital Markets	$	4,427,500		$	4,427,500		$	4,427,500		$	4,427,500		$	4,427,500
Financial advisory services – Chardan Capital Markets	$	1,170,000		$	1,170,000		$	1,170,000		$	1,170,000		$	1,170,000
Capital market advisory services – Stifel	$	2,730,000		$	2,730,000		$	2,730,000		$	2,730,000		$	2,730,000
Financial advisory services – Stifel	$	8,000,000		$	8,000,000		$	8,000,000		$	8,000,000		$	8,000,000
Effective fee (%)		7.31	%		7.75	%		10.25	%		12.85	%		17.19	%

Risk Factor Summary

In evaluating the proposals to be presented at the special meeting, you should carefully read this proxy statement and especially consider the factors discussed in the section entitled “Risk Factors.” The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of Chardan and Dragonfly to complete the Business Combination, and (ii) the business, cash flows, financial condition and results of operations of the company following consummation of the Business Combination. These risks include:

Risks Related to Dragonfly’s Existing Lithium-Ion Battery Operations

●

Our business and future growth depends on the needs and success of our customers.

●

We may not succeed in our medium- and long-term strategy of entering into new end markets for LFP batteries and our success depends, in part, on our ability to successfully develop and manufacture new products for, and acquire customers in, these new markets and successfully grow our operations and production capabilities (including, in time, our ability to manufacture solid-state cells in-house).

●

We currently rely on two suppliers to provide our LFP cells and a single supplier for the manufacture of our battery management system. Any disruption in the operations of these key suppliers could adversely affect our business and results of operations.

●

We are currently, and likely will continue to be, dependent on a single manufacturing facility. If our facility becomes inoperable for any reason, or our automation and expansion plans do not yield the desired effects, our ability to produce our products could be negatively impacted.

Risks Related to Dragonfly’s Solid-State Technology Development

●

We face significant engineering challenges in our attempts to develop and manufacture solid-state battery cells and these efforts may be delayed or fail which could negatively impact our business.

Table of Contents

●

We expect to make significant investments in our continued research and development of solid-state battery technology development, and we may be unable to adequately control the costs associated with manufacturing our solid-state battery cells.

●

If our solid-state batteries fail to perform as expected, our ability to further develop, market and sell our solid-state batteries could be harmed.

Risks Related to Intellectual Property

●

We rely heavily upon our intellectual property portfolio. If we are unable to protect our intellectual property rights, our business and competitive position would be harmed.

●

We may need to defend ourselves against intellectual property infringement claims, which may be time- consuming and could cause us to incur substantial costs.

General Risk Factors

●

The uncertainty in global economic conditions, including as a result of the COVID-19 pandemic and the Russia-Ukraine conflict, could reduce consumer spending and disrupt our supply chain which could negatively affect our results of operations.

●

The loss of one or more members of our senior management team, other key personnel or our failure to attract additional qualified personnel may adversely affect our business and our ability to achieve our anticipated level of growth.

●

Our operating and financial results forecast relies in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

●

If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.

Risks Related to Dragonfly’s Financial Position and Capital Requirements

●

Our business is capital intensive, and we may not be able to raise additional capital on attractive terms, if at all. Any further indebtedness we incur may limit our operational flexibility in the future.

●

Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in acquisitions or other business activities necessary to achieve growth.

●

We will enter into the definitive documentation with respect to the Term Loan for the purposes of consummating the Business Combination which may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us.

Risks Related to Ownership of Chardan Securities and the Business Combination

●

The Sponsor, certain members of the Chardan Board and certain Chardan officers have interests in the Business Combination that are different from or are in addition to the Chardan stockholders in recommending that stockholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement.

●

If Chardan is unable to complete the Business Combination or another initial business combination by August 13, 2022 (unless this deadline is extended pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents), Chardan will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and the Chardan Board, dissolving and liquidating. In such event, third parties may bring claims against Chardan and, as a result, the proceeds

Table of Contents

held in the trust account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

●

The unaudited pro forma financial information included elsewhere in this proxy statement may not be indicative of what New Dragonfly’s actual financial position or results of operations would have been.

Risks Related to Ownership of New Dragonfly’s Common Stock

●

Warrants will become exercisable for New Dragonfly’s common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to New Dragonfly’s stockholders.

●

Insiders will continue to have substantial influence over New Dragonfly after the Business Combination, which could limit your ability to affect the outcome of key transactions, including a change of control.

●

Chardan’s public stockholders will experience immediate dilution as a consequence of, among other transactions, the issuance of Chardan common stock as consideration in the Business Combination, the PIPE Investment, the Term Loan and the Equity Facility in addition to immediate dilution from the issuance of the Equity Facility Commitment Shares. Having a minority share position may reduce the influence that Chardan’s current stockholders have on the management of New Dragonfly.

●

We may issue additional shares of Chardan common stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.

Table of Contents

SUMMARY HISTORICAL FINANCIAL INFORMATION OF DRAGONFLY

The information presented below is derived from Dragonfly’s unaudited financial statements included elsewhere in this proxy statement/prospectus for the three months ended March 31, 2022 and 2021 and the balance sheet data as of March 31, 2022 and Dragonfly’s audited financial statements included elsewhere in this proxy statement/prospectus as of and for the years ended December 31, 2021 and 2020.

Dragonfly’s historical results are not necessarily indicative of the results that may be expected for any other period in the future. You should read the selected historical financial data set forth below together with Dragonfly’s financial statements and the accompanying notes included elsewhere in this proxy statement, the information in the section entitled “Dragonfly’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information contained elsewhere in this proxy statement.

Dragonfly is providing the following selected historical consolidated financial information to assist you in your analysis of the financial aspects of the Business Combination.


	For the three months ended March 31,
	2022		2021

	(in thousands)
Net Sales	$	18,303	$	15,646
Cost of Goods Sold		12,808		9,805
Gross profit		5,495		5,841
Operating expenses
Research and development		339		519
Sales and marketing		3,626		2,096
General and administrative		3,092		1,884
Total Operating expenses		7,057		4,499
(Loss) Income From Operations		(1,562)		1,342
Other (Expense) Income
Interest (Expense) Income		(1,263)		—
Total Other (Expense) Income		(1,263)		—
(Loss) Income Before Taxes		(2,825)		1,342
(Benefit) Provision for Income Tax		(527)		276
Net (Loss) Income	$	(2,298)	$	1,066


	For the year ended December 31,
	2021		2020

	(in thousands)
Net Sales	$	78,000	$	47,187
Cost of Goods Sold		48,375		26,580
Gross profit		29,625		20,607
Operating expenses
Research and development		2,689		1,239
Sales and marketing		10,621		4,662
General and administrative		9,848		5,960
Total Operating expenses		23,158		11,861
Income From Operations		6,467		8,746
Other Income
Other Income		1		15
Interest Income		(519)		3
Total Other Income		(518)		18
Income Before Taxes		5,949		8,764
Income Tax Expense		1,611		1,886
Net Income	$	4,338	$	6,878

Table of Contents


	As of March 31,		As of December 31,
	2022		2021		2020

	(in thousands)
Balance Sheet Data:
Cash	$	10,063	$	25,586	$	6,206
Total Assets	$	70,680	$	76,251	$	18,807
Total Liabilities	$	56,516	$	60,190	$	8,252
Total Equity	$	12,164	$	14,061	$	8,555
Total Liabilities, Redeemable Preferred Stock and Shareholders’ Equity	$	70,680	$	76,251	$	18,807

Table of Contents

SUMMARY HISTORICAL FINANCIAL INFORMATION OF CHARDAN

Chardan is providing the following summary historical financial information to assist you in your analysis of the financial aspects of the Business Combination.

Chardan’s statements of operations and cash flows data for the three months ended March 31, 2022 and the audited financial statements of Chardan as of December 31, 2021 and consolidated balance sheet data as of March 31, 2022 are derived from Chardan’s financial statements included elsewhere in this proxy statement/prospectus.

This information is only a summary and should be read in conjunction with Chardan’s financial statements and related notes and the sections entitled “Chardan’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this proxy statement/prospectus. The historical results included below and elsewhere in this proxy statement are not indicative of the future performance of Chardan.


	March 31, 2022
Balance Sheet Data:
Cash	$	648
Investments held in Trust Account	$	128,437
Total assets	$	129,381
Total liabilities	$	816
Common stock subject to possible redemption	$	128,398
Total retained earnings	$	167


	For the Three Months Ended March 31, 2022		For the Year Ended December 31, 2021
Statement of Operations Data:
Loss from operations	$	(259)	$	(358)
Warrant issuance costs	$	—	$	(19)
Loss on sale of private warrants	$	—	$	(1,254)
Change in fair value of warrant liability	$	1,435	$	3,517
Net gain on investments held in Trust Account	$	16	$	24
Net income (loss)	$	1,192	$	1,910
Basic weighted average shares outstanding		15,812,500		7,732,021
Basic net income (loss) per share of common stock	$	0.08	$	0.25
Diluted weighted average shares outstanding		15,812,500		7,991,952
Diluted net income (loss) per share of common stock	$	0.08	$	0.24

Statement of Cash Flows Data:
Net cash used in operating activities	$	(153)	$	(547)
Net cash used in investing activities	$	—	$	(128,398)
Net cash provided by financing activities	$	—	$	129,719

Table of Contents

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial data (the “Summary Pro Forma Information”) gives effect to the Business Combination and related transactions. The Business Combination will be accounted for as a reverse recapitalization, in accordance with GAAP. Under this method of accounting, Chardan will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be reflected as the equivalent of Dragonfly issuing shares for the net assets of Chardan, followed by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations prior to the Business Combination will be those of Dragonfly. There will be no accounting effect or change in the carrying amount of the assets and liabilities as a result of the Business Combination. The summary unaudited pro forma condensed combined balance sheet as of March 31, 2022 gives effect to the Business Combination as if it had occurred on March 31, 2022. The summary unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2022 and the year ended December 31, 2021 gives effect to the Business Combination as if they had occurred on January 1, 2021.

The Summary Pro Forma Information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information included in the section titled “Unaudited Pro Forma Condensed Combined Financial Information” in this proxy statement/prospectus and the accompanying notes thereto. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical financial statements and related notes of Chardan and Dragonfly for the applicable periods included elsewhere in this proxy statement/prospectus. The Summary Pro Forma Information has been presented for informational purposes only and is not necessarily indicative of what Dragonfly’s financial position or results of operations actually would have been had the Business Combination been completed as of the dates indicated. In addition, the Summary Pro Forma Information does not purport to project the future financial position or operating results of Dragonfly following the reverse recapitalization.

The unaudited pro forma condensed combined financial information has been prepared using the assumptions below with respect to the potential redemption into cash of Chardan ordinary shares:

●

Assuming No Redemptions: This scenario assumes that no public stockholders of Chardan exercise redemption rights with respect to their public shares for a pro rata share of the funds in the Trust Account.

●

Assuming Maximum Redemptions: This scenario assumes that 12,650,000 shares of Chardan common stock subject to redemption are redeemed for an aggregate payment of approximately $128.4 million (based on an estimated per share redemption price of approximately $10.15 that was calculated using the $128.4 million of cash in the Trust Account divided by 12,650,000 Chardan shares of Common Stock subject to redemption assuming the pro forma maximum redemption scenario pursuant to the Business Combination Agreement).


	Pro Forma Combined
			Assuming
	Assuming No		Maximum
	Redemptions		Redemptions
Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data For the Three Months Ended March 31, 2022
Net loss	$	(3,301)	$	(3,301)
Basic and diluted net loss per share	$	(0.06)	$	(0.08)
Weighted average shares outstanding		56,567,623		43,445,689

Summary Unaudited Pro Forma Condensed Combined Statement of Operations Data For the Year Ended December 31, 2021
Net loss	$	(34,986)	$	(30,987)
Basic and diluted net loss per share	$	(0.62)	$	(0.71)
Weighted average shares outstanding		56,567,623		43,445,689

Summary Unaudited Pro Forma Condensed Combined Balance Sheet Data As of March 31, 2022
Total assets	$	213,733	$	89,296
Total liabilities	$	69,087	$	69,087
Total stockholders’ equity (deficit)	$	144,646	$	20,209

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, including certain financial forecasts and projections. All statements other than statements of historical fact contained in this proxy statement, including statements as to the transactions contemplated by the business combination and related agreements, future results of operations and financial position, revenue and other metrics, planned products and services, business strategy and plans, objectives of management for future operations of Dragonfly, market size and growth opportunities, competitive position and technological and market trends, are forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking words, including “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “plan,” “targets,” “projects,” “could,” “would,” “continue,” “forecast” or the negatives of these terms or variations of them or similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors (some of which are beyond the control of Dragonfly or Chardan) which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements are based upon estimates, forecasts and assumptions that, while considered reasonable by Chardan and its management, and Dragonfly and its management, as the case may be, are inherently uncertain and many factors may cause the actual results to differ materially from current expectations.

Factors that may impact such forward-looking statements include:

●

the occurrence of any event, change or other circumstances that could give rise to the termination of the Business Combination Agreement;

●

the outcome of any legal proceedings that may be instituted against Chardan, Dragonfly or others following announcement of the Business Combination and the transactions contemplated in the Business Combination Agreement;

●

the inability to complete the transactions contemplated by the Business Combination Agreement due to the failure to obtain approval of the stockholders of Chardan or other conditions to closing in the Business Combination Agreement;

●

the ability to obtain or maintain the listing of New Dragonfly common stock on the Nasdaq following the Business Combination;

●

changes to the proposed structure of the Business Combination that may be required or appropriate as a result of applicable laws or regulations or as a condition to obtaining regulatory approval of the Business Combination;

●

the ability to meet Nasdaq’s listing standards following the consummation of the business Combination;

●

the risk that the proposed transaction disrupts current plans and operations of Dragonfly as a result of the announcement and consummation of the Business Combination;

●

the inability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the ability of New Dragonfly to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees;

●

the ability of Dragonfly to successfully increase market penetration into its target markets

●

the addressable markets that Dragonfly intends to target do not grow as expected;

●

the loss of any members of Dragonfly’s senior management team or other key personnel;

●

the loss of any relationships with key suppliers including suppliers in China;

●

the loss of any relationships with key customers;

Table of Contents

●

the inability to protect Dragonfly’s patents and other intellectual property;

●

the failure to successfully optimize solid state cells or to produce commercially viable solid state cells in a timely manner or at all, or to scale to mass production;

●

costs related to the proposed Business Combination;

●

changes in applicable laws or regulations;

●

the possibility that Dragonfly or the combined company may be adversely affected by other economic, business and/or competitive factors(including an economic slowdown or inflationary pressures);

●

Dragonfly’s estimates of its growth and projected financial results for 2022 and 2023 and meeting or satisfying the underlying assumptions with respect thereto;

●

the risk that the Business Combination may not be completed in a timely manner or at all, which may adversely affect the price of Chardan’s securities;

●

the risk that the transaction may not be completed by Chardan’s Business Combination deadline (as may be extended pursuant to Chardan’s governing documents);

●

the impact of the novel coronavirus disease pandemic, including any mutations or variants thereof, and its effect on business and financial conditions;

●

inability to complete the PIPE investment, the Term Loan and equity line (“ChEF”) in connection with the Business Combination;

●

the potential for events or circumstances that result in Dragonfly’s failure to timely achieve the anticipated benefits of Dragonfly’s customer arrangements with THOR;

●

New Dragonfly’s ability to raise additional capital to fund its operations;

●

New Dragonfly’s ability to generate revenue from future product sales and its ability to achieve and maintain profitability;

●

the accuracy of New Dragonfly’s projections and estimates regarding its expenses, capital requirements, cash utilization, and need for additional financing;

●

the expected uses of the net proceeds from the Business Combination;

●

the potential scope and value of New Dragonfly’s intellectual property and proprietary rights;

●

developments relating to New Dragonfly’s competitors and its industry;

●

New Dragonfly’s ability to engage target customers and successfully convert these customers into meaningful orders in the future;

●

New Dragonfly’s reliance on two suppliers for its LFP cells and a single supplier for the manufacture of its battery management system;

●

New Dragonfly’s likely dependence on a single manufacturing facility;

Table of Contents

●

New Dragonfly’s increasing reliance on software and hardware that is highly complex and technical; and

●

other risks and uncertainties indicated in this proxy statement/prospectus, including those under the heading “Risk Factors” in this proxy statement/prospectus, and other filings that have been made or will be made with the SEC by Chardan and New Dragonfly, as applicable.

The forward-looking statements contained in this proxy statement are based on Chardan’s and Dragonfly’s current expectations and beliefs concerning future developments and their potential effects on the Business Combination and Dragonfly. There can be no assurance that future developments affecting Chardan and/or Dragonfly will be those that Chardan or Dragonfly has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond Chardan’s and/or Dragonfly’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Chardan and Dragonfly will not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Before a stockholder grants its proxy or instructs how its vote should be cast or votes on the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal, the Director Election Proposal or the Adjournment Proposal, it should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement/prospectus may adversely affect Chardan and Dragonfly.

Table of Contents

RISK FACTORS

The following risk factors will apply to the business and operations of New Dragonfly following the Closing. These risk factors are not exhaustive and stockholders should carefully consider the following risk factors in addition to the other information included in this proxy statement/prospectus, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements,” before deciding how to vote their shares of Chardan common stock. Please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have a material adverse effect on the business, financial condition and operating results of Dragonfly and New Dragonfly following the Business Combination. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by Chardan and Dragonfly that later may prove to be incorrect or incomplete. Chardan, Dragonfly and New Dragonfly may face additional risks and uncertainties that are not presently known to Chardan or Dragonfly or that Chardan and Dragonfly currently deem immaterial, which may also impair New Dragonfly’s business, financial condition or operating results. The following discussion should be read in conjunction with the financial statements of Dragonfly and the financial statements of Chardan and the notes thereto included elsewhere in this proxy statement/prospectus.

Unless the context otherwise requires, all references in this section to “we,” “us,” or “our” refer to Dragonfly and its subsidiaries prior to the Closing and the business and operations of New Dragonfly as directly or indirectly affected by Dragonfly by virtue of New Dragonfly’s ownership of the business of Dragonfly.

Risks Related to Dragonfly’s Existing Lithium-Ion Battery Operations

Our business and future growth depends on the needs and success of our customers.

The demand for our products, including sales to original equipment manufacturers (“OEMs”), ultimately depends on consumers in our current end markets (primarily owners of recreational vehicles (“RVs”), marine vessels and off-grid residences). The performance and growth of these markets is impacted by numerous factors, including macro-economic conditions, consumer spending, travel restrictions, fuel costs and energy demands (including an increasing trend towards the use of green energy). Increases or decreases in these variables may significantly impact the demand for our products. If we fail to accurately predict demand, we may be unable to meet our customers’ needs, resulting in the loss of potential sales, or we may produce excess products, resulting in increased inventory and overcapacity in our production facilities, increasing our unit production cost and decreasing our operating margins.

An increasing proportion of our revenue has been and is expected to continue to be derived from sales to RV OEMs. Our RV OEM sales have been on a purchase order basis, without firm revenue commitments, and we expect that this will likely continue to be the case. For example, under our supply arrangement with Keystone RV Company (“Keystone”), the largest manufacturer of towable RVs in North America, Keystone has agreed to fulfill certain of its LFP battery requirements exclusively through us for at least one year, with potential annual renewals. However, although in time we expect Keystone to be significant contributor to our projected growth in RV OEM battery sales, this arrangement may not deliver the anticipated benefits, as there are no firm purchase commitments, sales will continue to be made on a purchase order basis, Keystone is permitted to purchase other LFP batteries from third parties and this arrangement may not be renewed. In addition, we have recently agreed to a strategic investment by THOR Industries (“THOR”), which, among other things, contemplates a future, mutually agreed exclusive distribution agreement with THOR in North America. Although we expect that THOR will be a be significant contributor to our projected growth in RV OEM battery sales, this arrangement may not deliver the anticipated benefits and this distribution agreement will, in the future, preclude us from dealing with other large RV OEMs and their associated brands in North America or otherwise could negatively impact our relationships with those RV OEMs to whom we may be permitted to supply our batteries.

Increased overall RV OEM sales may not materialize as expected or at all and we may fail to achieve our targeted sales levels. Future RV OEM sales are subject to a number of risks and uncertainties, including the number of RVs that these OEMs manufacture and sell (which can be impacted by a variety of events including those disrupting our OEM customers’ operations due to supply chain disruptions or labor constraints); the degree to which our OEM customers incorporate/design-in our batteries into their RV product lines; the extent to which RV owners, if applicable, opt to purchase our batteries upon initial purchase of their RV or in the aftermarket; and our continued ability to successfully develop and introduce reliable and cost-effective batteries meeting evolving industry standards and customer specifications and preferences. Our failure to adequately address any of these risks may result in lost sales which could have a material adverse effect on our business, financial condition and results of operations.

Table of Contents

In addition, our near-term growth depends, in part, on the continued growth of the end markets in which we currently operate. Although the total addressable market for RVs, marine vessels and off-grid residences is estimated to reach $12 billion by 2025, these markets may not grow as expected or at all, and we may be unable to maintain existing customers and/or attract new customers in these markets. Our failure to maintain or expand our share of these growing markets could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to engage target customers successfully and convert these customers into meaningful orders in the future.

Our success, and our ability to increase sales and operate profitably, depends on our ability to identify target customers and convert these customers into meaningful orders, as well as our continued development of existing customer relationships. Although we have developed a multi-pronged sales and marketing strategy to penetrate our end markets and reach a range of customers, this strategy may not continue to be effective in reaching or converting target customers into orders, or as we expand into additional markets. Recently, we have also dedicated more resources to developing relationships with certain key RV OEMs, such as Keystone, which we aim to convert into collaborations on custom designs and/or long-term contractual arrangements. We may be unable to convert these relationships into meaningful orders or renew these arrangements going forward, which may require us to expend additional cost and management resources to engage other target customers.

Our sales to any future or current customers may decrease for reasons outside our control, including loss of market share by customers to whom we supply products, reduced or delayed customer requirements, supply and/or manufacturing issues affecting production, reputational harm or continued price reductions. Furthermore, in order to attract and convert customers we must continue to develop batteries that address our current and future customers’ needs. Our failure to achieve any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We operate in a competitive industry. We expect that the level of competition will increase and the nature of our competitors will change as we develop new LFP battery products for, and enter into, new markets, and as the competitive landscape evolves. These competitive and other factors could result in lost potential sales and lower average selling prices and profitability for our products.

We compete with traditional lead-acid battery manufacturers and lithium-ion battery manufacturers, who primarily either import their products or components or manufacture products under a private label. As we continue to expand into new markets, develop new products and move towards production of our solid- state cells, we will experience competition with a wider range of companies. These include companies focused on solid-state cell production, vertically integrated energy companies and other technology-focused energy storage companies. We believe our main competitive advantage in displacing incumbent lead-acid batteries is that we produce a lighter, safer, higher performing, cost-effective battery with a longer lifespan. We believe our go-to-market strategy, established brand, proven reliability and relationships with OEMs and end consumers both (i) enable us to compete effectively against other battery manufacturers and (ii) position us favorably to expand into new addressable markets. However, OEM sales typically result in lower average selling prices and related margins, which could result in overall margin erosion, affect our growth or require us to raise our prices. As a result, we may be unable to maintain this competitive advantage given the rapidly developing nature of the industry in which we operate.

Our current competitors have, and future competitors may have, greater resources than we do. Our competitors may be able to devote greater resources to the development of their current and future technologies. These competitors may also be able to devote greater resources to sales and marketing efforts, affording them great access to customers, and may be able to establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their competitive positioning. In addition, foreign producers may be able to employ labor at significantly lower costs than producers in the United States, expand their export capacity and increase their marketing presence in our major end markets. We expect actual and potential competitors to continue their efforts to develop alternative battery technologies and introduce new products with more desirable, attractive features. These new technologies and products may be introduced sooner than our offerings and could gain greater market acceptance. Although we believe we are a leader in developing solid-state battery technology (particularly for the RV, marine vessel and off-grid residence markets which require cost-effective batteries with a long-life span), new competitors may emerge, alternative approaches to solid-state battery technology may be developed and competitors may seek to market solid- state battery technologies better suited for other applications (such as electric vehicles (“EVs”)) to our target markets.

Additional competitive and other factors may result in lost sales opportunities and declines in average sales prices and overall product profitability. These include rapidly evolving technologies, industry standards, economic conditions and end-customer preferences. Our failure to adapt to or address these factors as they arise could have a material adverse effect on our business, financial condition and results of operations.

Table of Contents

Our future success depends, in part, upon our ability to expand into additional end markets identified by us as opportunities for our LFP batteries. These markets include industrial, specialty and work vehicles, material handling, solar integration, and emergency and standby power in the medium term, and data centers, rail, telecom and distributed on-grid storage in the longer term. Our ability to expand into these markets depends on a number of factors, including the continued growth of these markets, having sufficient capital to expand our product offerings (including in the longer term batteries incorporating, once developed, our solid-state cells) and manufacturing capacity, developing products adapted to customer needs and preferences in these markets, our successful expansion of our manufacturing capabilities in order to meet customer demand, our ability to identify and convert potential customers within these markets and our ability to attract and retain qualified personnel to assist in these efforts. Although we intend to devote resources and management time to understanding these new markets, we may face difficulties in understanding and accurately predicting the demographics, preferences and purchasing habits of customers and consumers in these markets. If we fail to execute on our growth strategies in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end markets, and this could have a material adverse effect on our business, financial condition and results of operations.

Further, if we are unable to manage the growth of our operations effectively to match the growth in sales, we may incur unexpected expenses and be unable to meet our customers’ requirements, which could materially adversely affect our business, financial condition and results of operations. A key component of our growth strategy is the expansion and automation of our manufacturing sales capacity to address expected growing product demand and to accommodate our production of solid-state cells at scale. This would require the successful automation of additional aspects of our production process, maximizing the capacity of our manufacturing facility from the two lines currently in operation to six lines and implementing production lines specifically adapted to solid-state technology. We have experienced supply delays in obtaining the necessary components to implement our automated adhesive application systems, as well as our pilot production line for our solid-state cells, and we may continue to experience component shortages in the future, which may negatively impact our ability to achieve these aspects of our growth strategy on time or at all. The costs of our expansion and automation efforts may be greater than expected, and we may fail to achieve anticipated cost efficiencies, which could have a material adverse effect on our business, financial condition and results of operations. We must also attract, train and retain a significant number of skilled employees, including engineers, sales and marketing personnel, customer support personnel and management, and the availability of such personnel may be constrained. Failure to effectively manage our growth could also lead us to over-invest or under-invest in development and operations; result in weaknesses in our infrastructure, systems or controls; give rise to operational mistakes, financial losses, loss of productivity or business opportunities; and result in loss of employees and reduced productivity of remaining employees, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our dependence on a limited number of key third-party suppliers exposes us to challenges and risks in ensuring that we maintain adequate supplies required to produce our LFP batteries. Although we carefully manage our inventory and lead-times, we may experience a delay or disruption in our supply chain and/or our current suppliers may not continue to provide us with LFP cells or our battery management systems in our required quantities or to our required specifications and quality levels or at attractive prices. Our close working relationships with our China-based LFP cell suppliers to-date, reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts) and to order and receive delivery of cells in advance of required demand, has helped us moderate or offset increased supply-related costs associated with inflation, currency fluctuations and tariffs imposed on our battery cell imports by the U.S. government and avoid potential shipment delays. If we are unable to enter into or maintain commercial agreements with these suppliers on favorable terms, or if any of these suppliers experience unanticipated delays, disruptions or shutdowns or other difficulties ramping up their supply of products or materials to meet our requirements, our manufacturing operations and customer deliveries would be seriously impacted, potentially resulting in liquidated damages and harm to our customer relationships. Although we believe we could locate alternative suppliers to fulfill our needs, we may be unable to find a sufficient alternative supply in a reasonable time or on commercially reasonable terms.

Table of Contents

Further, our dependence on these third-party suppliers entails additional risks, including:

●

inability, failure or unwillingness of third-party suppliers to comply with regulatory requirements;

●

breach of supply agreements by the third-party suppliers;

●

misappropriation or disclosure of our proprietary information, including our trade secrets and know- how;

●

relationships that third-party suppliers may have with others, which may include our competitors, and failure of third-party suppliers to adequately fulfill contractual duties, resulting in the need to enter into alternative arrangements, which may not be available, desirable or cost-effective; and

●

termination or nonrenewal of agreements by third-party suppliers at times that are costly or inconvenient for us.

We may not be able to accurately estimate future demand for our LFP batteries, and our failure to accurately predict our production requirements could result in additional costs or delays.

We seek to maintain an approximately one-year supply of LFP cells and six-month supply of all other components by pre-ordering components in advance of expected demand. However, our business and customer product demand is impacted by trends and factors that may be outside our control. Therefore, our ability to predict our manufacturing requirements is subject to inherent uncertainty. Lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of our batteries to our customers could be delayed, which would harm our business, financial condition and results of operations.

To meet our delivery deadlines, we generally make significant decisions on our production level and timing, procurement, facility requirements, personnel needs and other resources requirements based on our estimate of demand, our past dealings with such customers, economic conditions and other relevant factors. Although we monitor our slow-moving inventory, if customer demand declines significantly, we may have excess inventory which could result in unprofitable sales or write-offs as our products are susceptible to obsolescence and price declines. Expediting additional material to make up for any shortages within a short time frame could result in increased costs and a delay in meeting orders, which would result in lower profits and negatively impact our reputation. In either case, our results of operations would fluctuate from period to period.

In addition, certain of our competitors may have long-standing relationships with suppliers, which may provide them with a competitive pricing advantage for components and reduce their exposure to volatile raw material costs, including due to inflation. As a result, we may face market-driven downward pricing pressures in the future, which may run counter to the cost of the components required to produce our products. Our customers may expect us to cut our costs further and/or to lower the price of our products. We may be unable to increase our sales volumes to offset lower prices (if we choose to implement lower prices), develop new or enhanced products with higher selling prices or margins, or reduce our costs to levels enabling us to remain competitive. Our failure to accomplish any of the foregoing could have a negative impact on our profitability and our business, financial condition and results of operations may ultimately be materially adversely affected.

We are currently, and will likely continue to be, dependent on a single manufacturing facility. If our facility becomes inoperable for any reason, or our automation and expansion plans do not yield the desired effects, our ability to produce our products could be negatively impacted.

All of our battery assembly currently takes place at our 99,000 square foot headquarters and manufacturing facility located in Reno, Nevada. We currently operate two LFP battery production lines, which has been sufficient to meet customer demand. If one or both production lines were to be inoperable for any period of time, we would face delays in meeting orders, which could prevent us from meeting demand or require us to incur unplanned costs, including capital expenditures.

Our facility may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, utility and transportation infrastructure disruptions, acts of war or terrorism, or by public health crises, such as the ongoing COVID-19 pandemic, which may render it difficult or impossible for us to manufacture our products for an extended period of

Table of Contents

time. The inability to produce our products or the backlog that could develop if our manufacturing facility is inoperable for even a short period of time may result in increased costs, harm to our reputation, a loss of customers or a material adverse effect on our business, financial condition or results of operations. Although we maintain property damage and business interruption insurance, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.

Over the next two to three years we plan to automate additional aspects of our two existing LFP battery production lines, add four additional LFP battery production lines and construct and operate a pilot production line for our solid-state cells, all designed to maximize the capacity of our manufacturing facility. Our plans for automation and expansion may experience delays, incur additional costs or cause disruption to our existing production lines. For example, we have experienced supply delays in obtaining the necessary components to implement our automated adhesive application systems, as well as our pilot production line for our solid-state cells, and we may continue to experience component shortages in the future. The costs to successfully achieve our expansion and automation goals may be greater than we expect, and we may fail to achieve our anticipated cost efficiencies, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, while we are generally responsible for delivering products to the customer, we do not maintain our own fleet of delivery vehicles and outsource this function to third parties. Any shortages in trucking capacity, any increase in the cost thereof or any other disruption to the highway systems could limit our ability to deliver our products in a timely manner or at all.

Lithium-ion battery cells have been observed to catch fire or release smoke and flame, which may have a negative impact on our reputation and business.

Our LFP batteries use lithium iron phosphate (LiFePO4) as the cathode material for lithium-ion cells. LFP is intrinsically safer than other battery technologies due to its thermal and chemical stability and LFP batteries are less flammable than lead-acid batteries or lithium-ion batteries using different chemistries. On rare occasions, however, lithium-ion cells can rapidly release the energy they contain by releasing smoke and flames in a manner that can ignite nearby materials and other lithium-ion cells. This faulty result could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive. Further, negative public perceptions regarding the suitability or safety of lithium-ion cells or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve our products, could seriously harm our business and reputation.

To facilitate an uninterrupted supply of battery cells, we store a significant number of lithium-ion cells at our facility. While we have implemented enhanced safety procedures related to the handling of the cells, any mishandling, other safety issue or fire related to the cells could disrupt our operations. In addition, any accident, whether occurring at our manufacturing facility or from the use of our batteries, may result in significant production interruption, delays or claims for substantial damages caused by personal injuries or property damage. Such damage or injury could lead to adverse publicity and potentially a product recall, which could have a material adverse effect on our brand, business, financial condition and results of operations.

We may be subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

Product liability claims, even those without merit or that do not involve our products, could result in adverse publicity or damage to our brand, decreased partner and end-customer demand, and could have a material adverse effect on our business, financial condition and results of operations. The occurrence of any defects in our products could make us liable for damages and legal claims. In addition, we could incur significant costs to correct such issues, potentially including product recalls. We face an inherent risk of exposure to claims in the event that our products do not perform or are claimed not to have performed as expected. We also face risk of exposure to claims because our products may be installed on vehicles (including RVs and marine vessels) that may be involved in crashes or may not perform as expected resulting in death, personal injury or property damage. Liability claims may result in litigation, the occurrence of which could be costly, lengthy and distracting and could have a material adverse effect on our business, financial condition and results of operations.

In the future, we may voluntarily or involuntarily initiate a recall if any products prove to be defective or non-compliant with then-applicable safety standards. Such recalls may involve significant expense and diversion of management attention and other resources, which could damage our brand image in our target end markets, as well as have a material adverse effect on our business, financial condition and results of operations.

A successful product liability claim against us could require us to pay a substantial monetary award. While we maintain product liability insurance, the insurance that we carry may not be sufficient or it may not apply to all situations. Moreover, a product liability

Table of Contents

claim against us or our competitors could generate substantial negative publicity about our products and business and could have a material adverse effect on our brand, business, financial condition and results of operations.

We currently rely on software and hardware that is complex and technical, and we expect that our reliance will increase in the future with the introduction of future products. If we are unable to manage the risks inherent in these complex technologies, or if we are unable to address or mitigate technical limitations in our systems, our business could be adversely affected.

Each of our batteries include our proprietary battery management system, which relies on software and hardware manufactured by third parties that is complex and technical. In addition, our battery communications system, expected to launch in the first half of 2023, will utilize third-party software and hardware to store, retrieve, process and manage data. The software and hardware utilized in these systems may contain errors, bugs, vulnerabilities or defects, which may be difficult to detect and/or manage. Although we attempt to remedy any issues that we observe in our products as effectively and rapidly as possible, such efforts may not be timely, may hamper production, or may not be to the satisfaction of our customers. If we are unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in the software and hardware that we use, we may suffer damage to our brand, loss of customers, loss of revenue or liability for damages, any of which could adversely affect our business, financial condition and results of operations.

Risks Related to Dragonfly’s Solid-State Technology Development

We face significant engineering challenges in our attempts to develop and manufacture solid-state battery cells and these efforts may be delayed or fail which could reduce consumer spending which could negatively impact our business.

Our solid-state battery development efforts are still ongoing, and we may fail to meet our goal of commercially selling LFP batteries incorporating our manufactured solid-state cells by mid- to late-2023, or at all. We may encounter delays in the design, manufacture and launch of our solid-state battery cells, and in increasing production to scale.

Development and engineering challenges could delay or prevent our production of solid-state battery cells. These difficulties may arise in connection with current and future efforts to optimize the chemistry or physical structure of our solid-state batteries with the goal of enhancing conductivity and power; maximizing cycling capabilities and power results; reducing costs; and developing related mass production manufacturing processes. If we are unable to overcome developmental and engineering challenges, our solid-state battery efforts could fail.

We currently purchase the battery cells incorporated into our LFP batteries and have no experience in manufacturing battery cells. To cost-effectively and rapidly manufacture our solid-state cells at scale for incorporation into our LFP batteries, we plan to utilize currently available spray powder deposition equipment and other commercially available equipment modified to utilize our proprietary dry spray deposition and other technologies and processes. We may experience delays or additional costs in adapting our facility, existing production equipment and LFP battery manufacturing processes (for example, designing a dry room to accommodate our dry spraying processes) to manufacture solid-state cells. Even if we achieve the development and volume production of our solid-state battery that we anticipate, if the cost, cycling and power results or other technology or performance characteristics of the solid-state battery fall short of our targets, our business and results of operations would likely be materially adversely affected.

We will require significant capital to fund our solid-state cell research and development activities, pilot line construction and expansion of our manufacturing capabilities to accommodate large-scale production of solid-state cells. We have not yet produced any solid-state battery cells at volume and our forecasted cost advantage for the production of these cells at scale, compared to conventional lithium-ion cells, will require us to achieve rates of throughput, use of electricity and consumables, yield, and rate of automation demonstrated for mature battery, battery material, and ceramic manufacturing processes, that we have not yet achieved. We may not be able to achieve our desired cost benefits and, in turn, we may not be able to provide our solid-state cells at a cost that is attractive to customers. If we are unable to cost-efficiently design, manufacture, market, sell and distribute our solid-state batteries and services, our margins, profitability and prospects would be materially and adversely affected.

Table of Contents

If our solid-state batteries fail to perform as expected, our ability to further develop, market and sell our solid- state batteries could be harmed.

Our solid-state battery cells may contain defects in design and manufacture that may cause them to not perform as expected or that may require repairs, recalls and design changes. Our solid-state batteries will incorporate components that have not been used individually or in combination in the same manner as the design of our solid-state cells, and that may result in defects and errors, particularly when produced at scale. We may be unable to detect and fix any defects in our solid-state battery cells prior to their incorporation into our solid-state LFP batteries and sale to potential consumers. If our solid-state batteries fail to perform as expected, we could lose customers, or be forced to delay deliveries, terminate orders or initiate product recalls, each of which could adversely affect our sales and brand and would have a material adverse effect on our business, financial condition and results of operations.

We expect to rely on machinery used in other large-scale commercial applications, modified to incorporate our proprietary technologies and processes, in order to mass produce solid-state battery cells, which exposes us to a significant degree of risk and uncertainty in terms of scaling production, operational performance and costs.

We expect to rely on machinery used in other large-scale commercial applications to mass produce our solid-state battery cells. Doing so will require us to work closely with the equipment provider to modify this machinery to effectively integrate our proprietary solid-state technology and processes in order to create the equipment we need for the production of solid-state cells. This integration work will involve a significant degree of uncertainty and risk and may result in delays in scaling up production of our solid-state cells or result in additional cost to us.

Such machinery is likely to suffer unexpected malfunctions from time to time and will require repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions may significantly affect the intended operational efficiency of, and therefore expected cost-efficiency associated with, our production equipment. In addition, because this machinery has not been used to manufacture and assemble solid-state battery cells, the operational performance and costs associated with repairing and maintaining this equipment can be difficult to predict and may be influenced by factors outside of our control, including failures by suppliers to deliver necessary components of our products in a timely manner and at prices acceptable to us, the risk of environmental hazards and the cost of any required remediation and damages or defects already present in the machinery.

Operational problems with our manufacturing equipment could result in personal injury to or death of workers, the loss of production equipment or damage to our manufacturing facility, which could result in monetary losses, delays and unanticipated fluctuations in production. In addition, we may be subject to administrative fines, increased insurance costs or potential legal liabilities. Any of these operational problems could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Intellectual Property

We rely heavily upon our intellectual property portfolio. If we are unable to protect our intellectual property rights, our business and competitive position would be harmed.

We may not be able to prevent unauthorized use of our intellectual property, which could harm our business and competitive position. We rely upon a combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the United States and other jurisdictions to establish, maintain and enforce rights in our proprietary technologies. In addition, we seek to protect our intellectual property rights through non-disclosure and invention assignment agreements with our employees and consultants, and through non-disclosure agreements with business partners and other third parties. Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our intellectual property. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or will take to prevent unauthorized use may not be sufficient. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert management’s attention, which could harm our business, results of operations and financial condition.

In addition, available intellectual property laws and contractual remedies in some jurisdictions may afford less protection than needed to safeguard our intellectual property portfolio. Intellectual property laws vary significantly throughout the world. The laws of a number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong, or as easily enforced, outside of the United States, and efforts to protect against the unauthorized use of our intellectual property rights, technology and other proprietary rights may be more expensive and difficult to undertake outside of the United States. In addition, while we have filed for and obtained certain intellectual property rights in

Table of Contents

commercially relevant jurisdictions, we have not sought protection for our intellectual property rights in every possible jurisdiction. Failure to adequately protect our intellectual property rights could result in competitors using our intellectual property to make, have made, use, import, develop, have developed, sell or have sold their own products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results.

We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incur substantial costs.

Companies, organizations or individuals, including our current and future competitors, may hold or obtain intellectual property rights that would prevent, limit or interfere with our ability to make, have made, use, import, develop, have developed, sell or have sold our products, which could make it more difficult for us to operate our business. From time to time, we may receive inquiries from holders of intellectual property rights inquiring whether we are infringing their rights and/or seek court declarations that they do not infringe upon our intellectual property rights. Entities holding intellectual property rights relating to our technology, including, but not limited to, batteries, battery materials, encapsulated powders, spray deposition of battery materials, and alternator regulators, may bring suits alleging infringement of such rights or otherwise asserting their rights and seeking licenses. For example, patents and patent applications owned by third parties may present freedom to operate (“FTO”) questions with regards to the precoated feedstock materials for the spray deposition process depending on the final material selections that are used, although we believe that Dragonfly owns a patent application that pre-dates their patents and patent applications of interest such that Dragonfly’s patent application may act as a basis for an invalidity position. However, it is possible that a court may not agree that Dragonfly’s patent application invalidates the patents and patent applications of interest. Additionally, a prior allegation of infringement was raised by a separate third party with regards to the alternator regulators that Dragonfly plans to sell, although Dragonfly believes the referenced patent is invalid in view of an earlier sale of a product that the third party was made aware of and no further communications have been received from the third party since they were made aware of this position on December 18, 2020. Any such litigation or claims, whether or not valid or successful, could result in substantial costs and diversion of resources and management’s attention. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:

●

cease using, making, having made, selling, having sold, developing, having developed or importing products that incorporate the infringed intellectual property rights;

●

pay substantial damages;

●

obtain a license from the holder of the infringed intellectual property rights, which license may not be available on reasonable terms or at all; or

●

redesign our processes or products, which may result in inferior products or processes.

In the event of a successful claim of infringement against us and our failure or inability to obtain a license to or design around the infringed intellectual property rights, our business, prospects, operating results and financial condition could be materially adversely affected.

Our current and future patent applications may not result in issued patents or our patent rights may be contested, circumvented, invalidated or limited in scope, any of which could have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.

Our current and future patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products or technology similar to ours. The outcome of patent applications involves complex legal and factual questions and the breadth of claims that will be allowed is uncertain. As a result, we cannot be certain that the patent applications that we file will result in patents being issued, or that our current issued patents, and any patents that may be issued to us in the future, will afford protection that covers our commercial processes, systems and products or that will afford protection against competitors with similar products or technology. Numerous prior art patents and pending patent applications owned by others, as well as prior art non-patent literature, exist in the fields in which we have developed and are developing our technology, which may preclude our ability to obtain a desired scope of protection in the desired fields. In addition to potential prior art concerns, any of our existing patents, pending patent applications, or future issued patents or patent applications may also be challenged on the basis that

Table of Contents

they are invalid or unenforceable. Furthermore, patent applications filed in foreign countries are subject to laws, rules, and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued.

Even if our current or future patent applications succeed and patents are issued, it is still uncertain whether our current or future patents will be contested, circumvented, invalidated or limited in scope in the future. The rights granted under any issued patents may not provide us with meaningful protection or competitive advantages, and some foreign countries provide significantly less effective patent enforcement than the United States. In addition, the claims under our current or future patents may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar us from licensing and exploiting our current or future patents. In addition, our current or future patents may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition and operating results.

General Risk Factors

The uncertainty in global economic conditions, including as a result of the COVID-19 pandemic and the Russia- Ukraine conflict, could reduce consumer spending and disrupt our supply chain which could negatively affect our results of operations.

Our results of operations are directly affected by the general global economic conditions that impact our main end markets. The uncertainty in global economic conditions can result in substantial volatility, which can affect our business by reducing customer spending and the prices that our customers may be able or willing to pay for our products, which in turn could negatively impact our sales and result in a material adverse effect on our business financial condition and results of operations.

The COVID-19 pandemic has caused, and could in the future continue to cause, and other factors could contribute to causing, delays or disruptions in our supply chain and labor shortages and shutdowns, which would be disruptive to the production of our batteries and would adversely impact our business. For example, we experienced shortages and workforce slowdowns at our manufacturing facility due to stay-at-home mandates, delays in shipping finished products to customers and some delays in our receiving non-critical battery components. In addition, the spreading of the virus may make it more difficult for us to find alternative suppliers due to the high concentration of such suppliers located in China. Any performance failure on the part of any of our significant suppliers could interrupt production of our products, which would have a material adverse effect on our business, financial condition and results of operations. Furthermore, the severity, magnitude and duration of the current COVID-19 pandemic is uncertain, rapidly changing and hard to predict. A prolonged or worsened COVID-19 pandemic could cause continued supply disruptions which could lead to a reduction in manufacturing, lead to extended disruption of economic activity and make it difficult for us to predict demand for our products. In addition, while the COVID-19 pandemic may, for a period, positively impact our battery sales as more consumers adopt the RV lifestyle, there is no guarantee that any such increase would be sustained, which could cause our results of operations to fluctuate.

As a result of sanctions imposed in relation to the Russia-Ukraine conflict, gas prices in the United States have risen to historic levels. This rise in price may cause a decrease in RV travel, which could ultimately negatively impact sales of our batteries for RVs. Further escalation of the Russia-Ukraine conflict and the subsequent response, including further sanctions or other restrictive actions, by the United States and/or other countries could also adversely impact our supply chain, partners or customers. The extent and duration of the situation in Ukraine, resulting sanctions and resulting future market disruptions are impossible to predict but could be significant. Any such disruptions caused by Russian military action or other actions (including cyberattacks and espionage) or resulting actual and threatened responses to such activity, boycotts or changes in consumer or purchaser preferences, sanctions, tariffs or cyberattacks, may impact the global economy and adversely affect commodity prices.

Furthermore, the cost of our components is a key element in the cost of our products. Increases in the prices of our components, including if our suppliers choose to pass through their increased costs to us, would result in increased production costs, which may result in a decrease in our margins and may have a material adverse effect on our business financial condition and results of operations. We have historically offset cost increases through careful management of our inventory of supplies, ordering six months to a year in advance, and increasing our purchase order volumes to qualify for volume-based discounts, rather than increase prices to customers. However, we may increase prices from time to time, which may not be sufficient to offset material price inflation and which may result in loss of customers if they believe our products are no longer competitively priced. In addition, if we are required to spend a prolonged period of time negotiating price increases with our suppliers, we may be further delayed in receiving the components necessary to manufacture our products and/or implement aspects of our growth strategy.

Table of Contents

Currency fluctuations, trade barriers, tariffs or shortages and other general economic or political conditions may limit our ability to obtain key components for our battery packs or significantly increase freight charges, raw material costs and other expenses associated with our business, which could further materially and adversely affect our financial condition and results of operations.

Because our key suppliers are located in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies, laws, rules and regulations of the United States or Chinese governments, as well as political unrest or unstable economic conditions in China. For example, trade tensions between the United States and China have been escalating in recent years. Most notably, several rounds of U.S. tariffs have been placed on Chinese goods being exported to the United States. Each of these U.S. tariff impositions against Chinese exports was followed by a round of retaliatory Chinese tariffs on U.S. exports to China. Our LFP battery cells, battery management systems and other components we purchase from China have been, and may in the future be, subject to these tariffs, which could increase our manufacturing costs and could make our products, if successfully developed and approved, less competitive than those of our competitors whose inputs are not subject to these tariffs. We may otherwise experience supply disruptions or delays, and although we carefully manage our inventory and lead-times, our suppliers may not continue to provide us with LFP cells or our battery management systems in our required quantities, to our required specifications and quality levels or at attractive prices.

Further, we may be unable to control price fluctuations for these components or negotiate supply agreements on favorable terms to us. We may also be exposed to fluctuations in the value of the U.S. dollar relative to the Renminbi with any appreciation in the value of the Renminbi increasing our costs for components sourced from China. Substantial increases in the prices for our components would increase our operating costs and negatively impact our results of operations.

We are highly dependent on the talent and services of Denis Phares, our Chief Executive Officer, Sean Nichols, our Chief Operating Officer, and other senior technical and management personnel, including our executive officers, who would be difficult to replace. The loss of Mr. Phares, Mr. Nichols or other key personnel would disrupt our business and harm our results of operations, and we may not be able to successfully attract and retain senior leadership necessary to grow our business.

Our future success also depends on our ability to attract and retain other key employees and qualified personnel, and our operations may be severely disrupted if we lost their services. As we become more well known, there is increased risk that competitors or other companies will seek to hire our personnel. None of our employees are bound by a non-competition agreement. The failure to attract, integrate, train, motivate, and retain these personnel could impact our ability to successfully grow our operations and execute our strategy.

The projected financial and operating information appearing elsewhere in this proxy statement/prospectus reflects current estimates of future performance. Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecasts depends on a number of factors, many of which are outside our control, including:

●

increased sales to RV OEM customers with whom the Company has existing relationships;

●

increased sales with our existing end markets;

●

sales to additional adjacent end markets;

●

the successful introduction of new products;

●

our ability to implement planned automation and expansion efforts;

●

continued supply from our carefully selected cell manufacturers;

Table of Contents

●

our ability to offset supplier price increases and any emerging inflationary price pressures through inventory management, volume-based supplier discounts and potential price increases to customers;

●

the successful development of our solid state battery technology; and

●

other factors, including our ability to obtain sufficient capital to sustain and grow our business, our ability to manage our growth and our ability to retain existing key management, integrate recent hires and attract, retain, and motivate qualified personnel.

Unfavorable changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our business, financial condition and results of operations.

Our website, systems, and the data we maintain may be subject to intentional disruption, security incidents, or alleged violations of laws, regulations, or other obligations relating to data handling that could result in liability and adversely impact our reputation and future sales.

We expect to face significant challenges with respect to information security and maintaining the security and integrity of our systems, as well as with respect to the data stored on or processed by these systems. Advances in technology, and an increase in the level of sophistication, expertise and resources of hackers, could result in a compromise or breach of our systems or of security measures used in our business to protect confidential information, personal information, and other data.

The availability and effectiveness of our batteries, and our ability to conduct our business and operations, depend on the continued operation of information technology and communications systems, some of which we have yet to develop or otherwise obtain the ability to use. Systems used in our business (including third-party data centers and other information technology systems provided by third parties) are and will be vulnerable to damage or interruption. Such systems could also be subject to break-ins, sabotage and intentional acts of vandalism, as well as disruptions and security incidents as a result of non-technical issues, including intentional or inadvertent acts or omissions by employees, service providers, or others. Some of the systems used in our business will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any data security incidents or other disruptions to any data centers or other systems used in our business could result in lengthy interruptions in our service.

If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.

We have experienced significant growth in our business, and our future success depends, in part, on our ability to manage our business as it continues to expand. We have dedicated resources to expanding our manufacturing capabilities, exploring adjacent addressable markets and our solid-state cell research and development. If not managed effectively, this growth could result in the over-extension of our operating infrastructure, management systems and information technology systems. Internal controls and procedures may not be adequate to support this growth. Failure to adequately manage our growth in our businesses may cause damage to our brand or otherwise have a material adverse effect on our business, financial condition and results of operations.

We may expand our business through acquisitions in the future, and any future acquisition may not be accretive and may negatively affect our business.

As part of our growth strategy, we may make future investments in businesses, new technologies, services and other assets that complement our business. We could fail to realize the anticipated benefits from these activities or experience delays or inefficiencies in realizing such benefits. Moreover, an acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures, including disruption to our ongoing operations, management distraction, exposure to additional liabilities and increased expenses, any of which could adversely impact our business, financial condition and results of operations. Our ability to make these acquisitions and investments could be restricted by the terms of our current and future indebtedness and to pay for these investments we may use cash on hand, incur additional debt or issue equity securities, each of which may affect our financial condition or the value of our stock and could result in dilution to our stockholders. Additional debt would result in increased fixed obligations and could also subject us to covenants or other restrictions that would impede our ability to manage our operations.

Table of Contents

Our operations are subject to a variety of environmental, health and safety rules that can bring scrutiny from regulatory agencies and increase our costs.

Our operations are subject to environmental, health and safety rules, laws and regulations and we may be subject to additional regulations as our operations develop and expand. There are significant capital, operating and other costs associated with compliance with these environmental laws and regulations. While we believe that the policies and programs we have in place are reasonably designed and implemented to assure compliance with these requirements and to avoid hazardous substance release liability with respect to our manufacturing facility, we may be faced with new or more stringent compliance obligations that could impose substantial costs.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”). The FCPA prohibits us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records, and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation. Our policies and procedures designed to ensure compliance with these regulations may not be sufficient and our directors, officers, employees, representatives, consultants, agents and business partners could engage in improper conduct for which we may be held responsible.

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our reputation, business, financial condition and results of operation.

From time to time, we may be involved in legal proceedings and commercial or contractual disputes, which could have an adverse impact on our profitability and consolidated financial position.

We may be involved in legal proceedings and commercial or contractual disputes that, from time to time, are significant and which may harm our reputation. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with customers and suppliers; intellectual property matters; personal injury claims; environmental issues; tax matters; and employment matters. It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and any such exposure may be material. Regardless of outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Environmental, social and governance matters may cause us to incur additional costs.

Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the future further mandate, certain environmental, social and governance (“ESG”) disclosure or performance. For example, the Securities and Exchange Commission has proposed rules that would mandate certain climate-related disclosures. In addition, we may face reputational damage in the event our corporate responsibility initiatives or objectives do not meet the standards or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other stakeholders. Failure to comply with ESG-related laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and related cost of capital, and limit our ability to fund future growth, or result in increased investigations and litigation.

Table of Contents

Risks Related to Dragonfly’s Financial Position and Capital Requirements

Over time, we expect that we will need to raise additional funds, including through the issuance of equity, equity-related or debt securities or by obtaining credit from financial institutions to fund, together with our principal sources of liquidity, ongoing costs, such as research and development relating to our solid-state batteries, expansion of our facilities, and new strategic investments. We cannot be certain that additional capital will be available on attractive terms, if at all, when needed, which could be dilutive to stockholders. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing stockholders could experience significant dilution. Any equity securities issued may provide for rights, preferences, or privileges senior to those of common stockholders. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of common stockholders.

As of March 31, 2022, we had approximately $39.5 million in outstanding indebtedness. We may be unable to repay our indebtedness when due, or we may be unable to refinance our indebtedness on acceptable terms or at all. The incurrence of additional debt could adversely impact our business, including limiting our operational flexibility by:

●

making it difficult for us to pay other obligations;

●

increasing our cost of borrowing from other sources;

●

making it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, investments, acquisitions, debt service requirements, or other purposes;

●

restricting us from making acquisitions or causing us to make divestitures or similar transactions;

●

requiring us to dedicate a substantial portion of our cash flow from operations to service and repay our indebtedness, reducing the amount of cash flow available for other purposes;

●

placing us at a competitive disadvantage compared to our less leveraged competitors; and

●

limiting our flexibility in planning for and reacting to changes in our business.

The agreements governing our indebtedness restrict us from engaging in specified types of transactions. These restrictive covenants restrict our ability to, among other things:

●

incur additional indebtedness;

●

create or incur encumbrances or liens;

●

engage in consolidations, amalgamations, mergers, acquisitions, liquidations, dissolutions or dispositions;

●

sell, transfer or otherwise dispose of assets; and

●

pay dividends and distributions on, or purchase, redeem, defease, or otherwise acquire or retire for value, our stock.

Table of Contents

Under the agreements governing our indebtedness, we are also subject to certain financial covenants, including maintaining minimum levels of Adjusted EBITDA, maximum capital expenditure levels and a minimum fixed charge coverage ratio. We cannot guarantee that we will be able to maintain compliance with these covenants or, if we fail to do so, that we will be able to obtain waivers from the applicable lender(s) and/or amend the covenants. Even if we comply with all of the applicable covenants, the restrictions on the conduct of our business could adversely affect our business by, among other things, limiting our ability to take advantage of financing opportunities, mergers, acquisitions, investments, and other corporate opportunities that may be beneficial to our business.

A breach of any of the covenants in the agreements governing our existing or future indebtedness could result in an event of default, which, if not cured or waived, could trigger acceleration of our indebtedness, and may result in the acceleration of or default under any other debt we may incur in the future to which a cross- acceleration or cross-default provision applies, which could have a material adverse effect on our business, financial condition and results of operations. In the event of any default under our existing or future credit facilities, the applicable lenders could elect to terminate borrowing commitments and declare all borrowings and loans outstanding, together with accrued and unpaid interest and any fees and other obligations, to be immediately due and payable. In addition, our obligations under our indebtedness are secured by, among other things, a security interest in our intellectual property. During the existence of an event of default under our credit agreements, the applicable lender could exercise its rights and remedies thereunder, including by way of initiating foreclosure proceedings against any assets constituting collateral for our obligations under such credit facility.

Each Initial Term Loan Lender has acknowledged and agreed that it has no right of set-off or any right, title, interest or any claim of any kind, to, or to any monies or other assets in, the Trust Account in connection with the Term Loan prior to the Closing Date. The definitive agreements governing the Term Loan that will be entered into at Closing, will impose, and future financing agreements are likely to impose, operating and financial restrictions on our activities which may adversely affect the ability of New Dragonfly and its subsidiaries to finance capital expenditures, acquisitions, debt service requirements or to engage in new business activities or otherwise adversely affect their ability execute their business strategy compared to competitors who have less debt. In some cases, these restrictions will require New Dragonfly and its subsidiaries to comply with or maintain certain financial tests and ratios, including a requirement with respect to the Term Loan to maintain a leverage ratio below an agreed-upon level, a minimum fixed charge coverage ratio and a minimum monthly liquidity level. Subject to certain exceptions, such agreements would likely restrict the ability of New Dragonfly and its subsidiaries to, among other things:

●

declare dividends or redeem or repurchase capital stock;

●

prepay, redeem or purchase other debt;

●

incur liens or additional indebtedness;

●

make loans, guarantees, acquisitions and other investments;

●

engage in sale and leaseback transactions;

●

amend or otherwise alter debt and other material agreements;

●

engage in mergers or asset sales;

●

engage in new business activities;

●

engage in transactions with affiliates; and

●

enter into arrangements that would prohibit granting liens or restrict the ability of subsidiaries to pay dividends, make loans or investments or transfer assets.

Table of Contents

Further, various risks, uncertainties and events beyond our or New Dragonfly’s control could affect the ability of New Dragonfly or its subsidiaries to comply with these covenants. Failure to comply with any of the covenants in existing or future financing agreements, including with respect to the Term Loan, could result in a default under those agreements and under other agreements containing cross-default provisions. Such a default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing such debt. Under these circumstances, New Dragonfly might not have sufficient funds or other resources to satisfy all of its obligations. New Dragonfly’s obligations under the Term Loan will be secured by, among other things, a security interest in its intellectual property and all the shares of New Dragonfly’s Nevada operating subsidiary. During the existence of an event of default under the Term Loan, the Term Loan Lenders could exercise their rights and remedies thereunder, including initiating foreclosure proceedings against any assets constituting collateral for New Dragonfly’s Term Loan obligations, which would materially and adversely affect New Dragonfly’s financial condition and results of operations. In addition, the limitations imposed by existing and future financing agreements on New Dragonfly’s ability to incur additional debt and to take other actions might significantly impair its ability to obtain other financing. We cannot assure you that New Dragonfly will be granted waivers or amendments to these agreements if for any reason New Dragonfly is unable to comply with these agreements or that New Dragonfly will be able to refinance outstanding debt on terms acceptable to it, or at all.

Dragonfly’s management has identified material weaknesses in its internal control over financial reporting. These material weaknesses could continue to adversely affect its, and following the Business Combination, New Dragonfly’s ability to report its results of operations and financial condition accurately and in a timely manner.

Dragonfly’s management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. As a public company, New Dragonfly’s management will be required, on a quarterly basis, to evaluate the effectiveness of its internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As described elsewhere in this proxy statement/prospectus, Dragonfly’s management identified material weaknesses in its internal control over financial reporting relating to (i) inadequate segregation of duties; (ii) lack of appropriate technology controls; and (iii) deficiency in the design of controls around account reconciliations and operational activity. As a result of these material weaknesses, Dragonfly’s management concluded that its internal control over financial reporting was not effective as of December 31, 2021, and December 31, 2020.

Dragonfly is in the process of developing a plan to remediate these material weaknesses. It has recently implemented an ERP system and hired a new Chief Financial Officer, and will continue to identify additional appropriate remediation measures. However, the material weaknesses will not be considered remediated until the remediation plan has been fully implemented, the applicable controls are fully operational for a sufficient period of time, and New Dragonfly has concluded, through testing, that the newly implemented and enhanced controls are operating effectively. At this time, Dragonfly cannot predict the success of such efforts or the outcome of future assessments of the remediation efforts. Dragonfly’s and, following the Business Combination, New Dragonfly’s, efforts may not remediate these material weaknesses in internal controls over financial reporting, and may not prevent additional material weaknesses from being identified in the future. Failure to implement and maintain effective internal control over financial reporting could result in errors in New Dragonfly’s consolidated financial statements that could result in a restatement of its consolidated financial statements, and could cause it to fail to meet its reporting obligations, any of which could diminish investor confidence in New Dragonfly and cause a decline in its equity value. Additionally, ineffective internal controls could expose New Dragonfly to an increased risk of financial reporting fraud and the misappropriation of assets, and may further subject it to potential delisting from the stock exchange on which it lists, or to other regulatory investigations and civil or criminal sanctions.

Table of Contents

As a public company, subject to limited exceptions following the Business Combination, New Dragonfly will be required pursuant to Section 404(a) of the Sarbanes-Oxley Act to furnish a report by management on, among other things, the effectiveness of its internal control over financial reporting for each annual report on Form 10-K to be filed with the SEC. This assessment will need to include disclosure of any material weaknesses identified by New Dragonfly’s management in internal control over financial reporting. If in the future New Dragonfly is no longer classified under the definition of an “emerging growth company,” its independent registered public accounting firm will also be required, pursuant to Section 404(b) of the Sarbanes-Oxley Act, to attest to the effectiveness of its internal control over financial reporting in each annual report on Form 10-K to be filed with the SEC. New Dragonfly will be required to disclose material changes made in its internal control over financial reporting on a quarterly basis. Failure to comply with the Sarbanes-Oxley Act could potentially subject New Dragonfly to sanctions or investigations by the SEC, the stock exchange on which its securities are listed, or other regulatory authorities, which would require additional financial and management resources.

Risks Related to Ownership of Chardan Securities and the Business Combination

Except where noted or the context otherwise requires, as used in this subsection, the terms “we,” “us,” “our,” “our company,” “our business” and similar terms refer to Chardan.

The Sponsor and the Insiders have agreed to vote in favor of the Business Combination, regardless of how Chardan’s public stockholders vote.

The Sponsor and the Insiders have agreed to vote any shares of common stock owned by them in favor of the business combination proposal. As of the date of this proxy statement, the Sponsor and the Insiders own shares equal to approximately 20% of Chardan’s issued and outstanding shares of common stock. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination than would be the case if the Sponsor and the Insiders agreed to vote any shares of common stock owned by them in accordance with the majority of the shares represented at the special meeting by the public stockholders.

When considering the Chardan Board’s recommendation that our stockholders vote in favor of the approval of the business combination proposal and the other proposals described in this proxy statement, our stockholders should be aware that the Sponsor and certain directors and officers of Chardan have interests in the Business Combination that may be different from, or in addition to, the interests of our stockholders generally. These interests include:

●

Table of Contents

the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,876,847 shares being issuable, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

●

Simultaneously with the closing of the Chardan IPO, Holdings (an affiliate of Sponsor and Chardan Capital Markets) purchased an aggregate of 4,361,456 private warrants at a price of $0.93 per private placement warrant ($4,052,000 in the aggregate). Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Holdings purchased an additional 266,402 private warrants warrants at a purchase price of $0.93 per private placement warrant. Each private placement warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share. The proceeds from the private warrants warrants were added to the proceeds from the Chardan IPO to be held in the Trust Account. The private warrants had an aggregate market value of $1,156,964.50 based upon the closing price of approximately $0.25 per share on the Nasdaq on July 19, 2022. The private warrants will become worthless if Chardan does not consummate a business combination by August 13, 2022 (unless this deadline is extended pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents).

●

Table of Contents

●

Chardan’s officers and directors, and their affiliates, are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on Chardan’s behalf, such as identifying and investigating possible business targets and business combinations. However, if Chardan fails to consummate an initial business combination within the completion window, they will not have any claim against the trust account for reimbursement. Accordingly, Chardan may not be able to reimburse these expenses if the Business Combination or another initial business combination is not completed within the completion window.

●

The current directors and officers will continue to be indemnified and the liability insurance of the directors and officers will continue.

●

In addition, pursuant to the Equity Facility Letter Agreement, Chardan and Dragonfly agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date reflecting the terms in the Equity Facility Letter Agreement. Pursuant to and on the terms of the Equity Facility Definitive Documentation, the Equity Facility Investor will commit to purchase up to an aggregate of $150,000,000 in shares of New Dragonfly’s common stock from time to time at the request of the New Dragonfly, subject to certain limitations and the satisfaction of certain conditions. Further, New Dragonfly will agree to issue Equity Facility Commitment Shares having a value of $1 million determined based on the applicable trading price at the time of issuance to the Equity Facility Investor as consideration for its irrevocable commitment to purchase the shares of New Dragonfly common stock upon the terms and subject to the satisfaction of the conditions set forth in the Equity Facility Definitive Documentation. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Equity Facility Letter Agreement” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

The Sponsor and the initial stockholders, among others, will enter into the Registration Rights Agreement which will provide them with registration rights.

The personal and financial interests of our officers and directors may have influenced their motivation in identifying and selecting Dragonfly, and completing an initial business combination with Dragonfly and may influence their operation of the post-combination company following the Business Combination. This risk may become more acute as the deadline of August 13, 2022 (unless this deadline is extended pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents) for completing an initial business combination nears.

Table of Contents

The Chardan Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and in recommending to the Chardan stockholders that they vote “FOR” the proposals presented at the special meeting.

The Sponsor may have interests in the Business Combination different from the interests of Chardan’s public stockholders.

The Sponsor has financial interests in the Business Combination that are different from, or in addition to, those of other Chardan stockholders generally. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information. In addition, the Sponsor may be incentivized to complete the Business Combination, or an alternative initial business combination with a less favorable company or on terms less favorable to shareholders, rather than to liquidate, in which case the Sponsor would lose its entire investment. As a result, the Sponsor may have a conflict of interest in determining whether Dragonfly is an appropriate business with which to effectuate a business combination and/or in evaluating the terms of the Business Combination. See the sections entitled “Summary of the Proxy Statement — Interests of Certain Persons in the Business Combination” and “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination” for additional information. The Chardan Board was aware of and considered these interests, among other matters, in evaluating and unanimously approving the Business Combination and in recommending to Chardan stockholders that they approve the Business Combination.

The Sponsor, Chardan’s directors and affiliates of Chardan’s management team may receive a positive return on the 3,162,500 Founder Shares and 4,627,858 private placement warrants even if Chardan’s public stockholders experience a negative return on their investment after consummation of the Business Combination.

If Chardan is able to complete a business combination within the required time period, the Sponsor may receive a positive return on the 3,162,500 Founder Shares, which were acquired by the Sponsor for an aggregate purchase price of $25,000 prior to Chardan’s IPO, and the 4,627,858 private placement warrants (including 266,402 private warrants in connection with the underwriters’ over-allotment option), which were acquired for an aggregate purchase price of $4,299,500 (or $0.93 per warrant) concurrently with completion of Chardan’s IPO and also in connection with exercise of the underwriters’ over-allotment option, even if Chardan’s public stockholders experience a negative return on their investment in Chardan common stock and Chardan warrants after consummation of the Business Combination.

Our private warrants are currently accounted for as liabilities and the changes in value of our private warrants could have a material effect on our financial results.

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing Chardan’s private warrants. As a result of the SEC Statement, Chardan reevaluated the accounting treatment of the private warrants and determined to classify the private warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. As a result, included on Chardan’s balance sheet as of September 30, 2021 are derivative liabilities related to embedded features contained within the private warrants. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our private warrants each reporting period and that the amount of such gains or losses could be material.

We identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management also evaluates the effectiveness of our internal controls and we will disclose any

Table of Contents

changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or surrounding interim financial statements will not be prevented or detected on a timely basis.

We have implemented a remediation plan, described under Item 4, Controls and Procedures of our March 31, 2021 Form 10-Q filed with the SEC on May 25, 2021, to remediate the material weakness related to our historical presentation of our private warrants but can give no assurance that the measures we have taken will prevent any future material weaknesses or deficiencies in internal control over financial reporting. Even though we have strengthened our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

Chardan and, following the Business Combination, New Dragonfly, may face litigation and other risks as a result of the material weakness in Chardan’s internal control over financial reporting.

Following the issuance of the SEC Statement, Chardan’s management and audit committee concluded that it was appropriate to revise its previously issued financial statements as of and for the year ended December 31, 2020, as well as certain interim periods within 2020, on Form 10-Q filed with the SEC on November 15, 2021. See above under the heading “— Our private warrants are currently accounted for as liabilities and the changes in value of our private warrants could have a material effect on our financial results.” As part of the restatement, Chardan identified a material weakness in its internal controls over financial reporting.

As a result of such material weakness, the restatement, the change in accounting for the warrants and other matters raised or that may in the future be raised by the SEC, Chardan and, following the Business Combination, New Dragonfly, face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weaknesses in Chardan’s internal control over financial reporting and the preparation of its financial statements. Any such litigation or dispute, whether successful or not, could have a material adverse effect on Chardan’s business, results of operations and financial condition or its ability to complete the Business Combination and related transactions.

The Nasdaq may not continue to list our securities, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

Our common stock and public warrants are currently listed on the Nasdaq and will be listed on the Nasdaq upon consummation of the Business Combination. Our continued eligibility for listing may depend on, among other things, the number of public shares that are redeemed. There can be no assurance that New Dragonfly will be able to comply with the continued listing standards of the Nasdaq following the Business Combination. If, after the Business Combination, the Nasdaq delists New Dragonfly common stock from trading on its exchange for failure to meet the listing standards, Chardan’s stockholders could face significant material adverse consequences including:

●

a limited availability of market quotations for New Dragonfly’s securities;

●

reduced liquidity for New Dragonfly’s securities;

●

a determination that New Dragonfly common stock is a “penny stock,” which would require brokers trading in such securities to adhere to more stringent rules, could adversely impact the value of New Dragonfly’s securities and/or possibly result in a reduced level of trading activity in the secondary trading market for New Dragonfly’s securities;

●

a limited amount of news and analyst coverage; and

●

a decreased ability to issue additional securities or obtain additional financing in the future.

Table of Contents

Future resales of our outstanding securities, including the registration of securities for resale under the Registration Rights Agreement, may cause the market price of our securities to drop significantly, even if our business is doing well.

New Dragonfly will have 56,567,623 shares of common stock outstanding immediately following the consummation of the Business Combination (assuming that no shares of Chardan common stock are redeemed by Chardan stockholders) and excluding the Earnout Consideration, but including the common stock issued in connection to the PIPE Investment, and there may be a large number of shares of New Dragonfly common stock sold in the market following the consummation of the Business Combination, or shortly thereafter. In addition, Chardan will issue to the Facilities Lenders the warrants, which includes the Penny Warrants exercisable to purchase 3.6% of New Dragonfly’s common stock on a fully diluted basis, calculated as of the Closing Date, and the $10 Warrants exercisable to purchase 1.6 million shares of New Dragonfly’s common stock.

At the closing of the Business Combination, New Dragonfly will enter into the Registration Rights Agreement with certain stockholders party thereto, pursuant to which, among other things, such stockholders will be entitled to customary registration rights following their respective lock-up periods. The sale or possibility of sale of these securities could have the effect of increasing the volatility in our share price or putting significant downward pressure on the price of our common stock.

The Sponsor is liable to ensure that proceeds of the trust are not reduced by vendor claims in the event an initial business combination is not consummated. It has also agreed to pay for any liquidation expenses if an initial business combination is not consummated. Such liability may have influenced the Sponsor’s decision to approve the Business Combination.

If the Business Combination or another initial business combination is not consummated by Chardan within the completion window, the Sponsor will be liable under certain circumstances to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Chardan for services rendered or contracted for or products sold to Chardan. If Chardan consummates an initial business combination, including the Business Combination, on the other hand, Chardan will instead be liable for all such claims. Please see the section entitled “Other Information Related to Chardan — Liquidation if No Business Combination” for further information. If Chardan is required to be liquidated and there are no funds remaining to pay the costs associated with the implementation and completion of such liquidation, the Sponsor has also agreed to pay the funds necessary to complete such liquidation and not to seek repayment for such expense. We currently do not anticipate that such funds will be insufficient.

These obligations of the Sponsor may have influenced the Sponsor’s decision to approve the Business Combination and to continue to pursue the Business Combination. In considering the recommendations of the Chardan Board to vote for the business combination proposal and the other proposals described in this proxy statement, Chardan’s stockholders should consider these interests.

The exercise of Chardan’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in Chardan’s stockholders’ best interest.

In the period leading up to the Closing, events may occur that, pursuant to the Business Combination Agreement, would require Chardan to agree to amend the Business Combination Agreement, to consent to certain actions to be taken by Dragonfly or to waive rights that Chardan is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of Dragonfly’s business, a request by Dragonfly to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on Dragonfly’s business and would entitle Chardan to terminate the Business Combination Agreement. In any such circumstances, it would be at Chardan’s discretion, acting through the Chardan Board, to grant its consent or waive those rights. The existence of the financial and personal interests of the directors described in the preceding risk factors may result in a conflict of interest on the part of one or more of the directors between what such directors believe is best for Chardan and what he or they may believe is best for themselves in determining whether or not to take the requested action. As of the date of this proxy statement, Chardan does not believe there will be any material changes or waivers that Chardan’s directors and officers would be likely to make after the mailing of this proxy statement. To the extent required by law, Chardan will circulate a new or amended proxy statement or supplement thereto in the event there are any changes to the terms of the Business Combination Agreement or the Business Combination that would have a material impact on its stockholders or are required prior to the vote on the business combination proposal.

Table of Contents

If Chardan is unable to complete the Business Combination or another initial business combination by August 13, 2022 (or by the new deadline set pursuant to Chardan’s covenant to extend the August 13, 2022 deadline under the Business Combination Agreement pursuant to the Chardan Organizational Documents), Chardan will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and the Chardan Board, dissolving and liquidating. In such event, third parties may bring claims against Chardan and, as a result, the proceeds held in the trust account could be reduced and the per-share liquidation price received by stockholders could be less than $10.00 per share.

Under the terms of Chardan’s current certificate of incorporation, Chardan must complete an initial business combination before the end of the completion window, or Chardan must cease all operations except for the purpose of winding up, redeeming 100% of the outstanding public shares and, subject to the approval of its remaining stockholders and the Chardan Board, dissolving and liquidating. In such event, third parties may bring claims against Chardan. Although Chardan has obtained waiver agreements from certain vendors and service providers it has engaged and owes money to, and the prospective target businesses it has negotiated with, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the trust account notwithstanding such agreements. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the trust account could be subject to claims which could take priority over those of Chardan’s public stockholders. If Chardan is unable to complete an initial business combination within the completion window, the Insiders have agreed to waive their rights to liquidating distributions from the trust account with respect to any Founder Shares held by them. The Insiders have also agreed they will be personally liable under certain circumstances to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Chardan for services rendered or contracted for or products sold to Chardan. However, they may not be able to meet such obligation. Therefore, the per-share distribution amount from the trust account in such a situation may be less than $10.00 due to such claims.

Additionally, if Chardan is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, or if Chardan otherwise enters compulsory or court supervised liquidation, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of its stockholders. To the extent any bankruptcy claims deplete the trust account, Chardan may not be able to return to its public stockholders at least $10.00 per share.

Chardan’s stockholders may be held liable for claims by third parties against Chardan to the extent of distributions received by them.

If Chardan is unable to complete the Business Combination or another initial business combination within the completion window, Chardan will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably practicable following such redemption, subject to the approval of its remaining stockholders and the Chardan Board, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject (in the case of (ii) and (iii) above) to its obligations to provide for claims of creditors and the requirements of applicable law. Chardan cannot assure you that it will properly assess all claims that may be potentially brought against Chardan. As such, Chardan’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, Chardan cannot assure you that third parties will not seek to recover from its stockholders amounts owed to them by Chardan.

If Chardan is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by Chardan’s stockholders. Furthermore, because Chardan intends to distribute the proceeds held in the trust account to its public stockholders promptly after the expiration of the time period to complete an initial business combination, this may be viewed or interpreted as giving preference to its public stockholders over any potential creditors with respect to access to or distributions from its assets. Furthermore, the Chardan Board may be viewed as having breached its fiduciary duties to Chardan’s creditors and/or may have acted in bad faith, thereby exposing itself and Chardan to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. Chardan cannot assure you that claims will not be brought against it for these reasons.

Table of Contents

We may not have sufficient funds to satisfy indemnification claims of our directors and officers.

We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed, and any persons who may become officers or directors prior to an initial business combination will agree, to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (a) we have sufficient funds outside of the trust account or (b) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.

Chardan’s public stockholders will experience immediate dilution as a consequence of, among other transactions, the issuance of Chardan common stock as consideration in the Business Combination, the PIPE Investment, the Term Loan, and the Equity Facility in addition to immediate dilution from the issuance of the Equity Facility Commitment Shares. Having a minority share position may reduce the influence that Chardan’s current stockholders have on the management of New Dragonfly.

Chardan’s public stockholders will experience immediate dilution as a consequence of the issuance of common stock as consideration in the Business Combination and the PIPE Investment. Having a minority share position may reduce the influence that Chardan’s current stockholders have on the management of New Dragonfly.

It is anticipated that upon completion of the Business Combination and assuming no redemptions by Chardan public stockholders, Chardan’s public stockholders will retain an ownership interest of approximately 22.4% of New Dragonfly, the Term Loan Lenders will own approximately 3.7% of New Dragonfly assuming the exercise of all Penny Warrants, the Sponsor, officers, directors and other holders of Founder Shares will retain an ownership interest of approximately 6.5% of New Dragonfly (including the PIPE Investment), and the Dragonfly stockholders will own approximately 67.4% (excluding the 40,000,000 Earnout Shares) of New Dragonfly. These levels of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

If the actual facts are different from these assumptions (which they are likely to be), the percentage ownership retained by the Chardan stockholders will be different. See “Unaudited Pro Forma Condensed Combined Financial Information.”

The following table shows all possible sources and the extent of dilution, pursuant to the issuance or exercise and conversion (as applicable) of all Earnout Shares, public and private warrants, Dragonfly Options, Penny Warrants, and $10 Warrants, that our

Table of Contents

shareholders who elect not to redeem their shares may experience in connection with the Business Combination, assuming no redemption and maximum redemption scenarios:


	No			10%			50%			75%			Maximum
	Redemptions⁽¹⁾	%		Redemption⁽²⁾	%		Redemption⁽³⁾	%		Redemption⁽⁴⁾	%		Redemption⁽⁵⁾	%
Dragonfly existing shareholders⁽⁶⁾	85,382,139	71.5	%	85,327,439	72.2	%	85,108,789	75.6	%	84,972,039	77.8	%	84,835,389	80.2	%
Chardan existing public stockholders⁽⁷⁾	22,137,500	18.5	%	20,872,500	17.7	%	15,812,500	14.0	%	12,650,000	11.6	%	9,487,500	9.0	%
Initial Stockholders⁽⁸⁾⁽⁹⁾	8,290,358	6.9	%	8,290,358	7.0	%	8,290,358	7.4	%	8,290,358	7.6	%	8,290,358	7.8	%
Term Loan Lender⁽¹⁰⁾	3,665,432	3.1	%	3,618,238	3.1	%	3,429,465	3.0	%	3,311,481	3.0	%	3,193,498	3.0	%
Pro forma fully diluted Common Stock⁽¹¹⁾	119,475,429	100.0	%	118,108,535	100.0	%	112,641,112	100.0	%	109,223,878	100.0	%	105,806,745	100.0	%

(1)	Assumes that no Chardan public stockholders are redeemed.

(2)	Assumes that 1,265,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $12,843,728, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(3)	Assumes that 6,325,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $64,218,641, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(4)	Assumes that 9,487,500 Chardan public shares are redeemed for aggregate redemption payments of approximately $96,327,961, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(5)	Assumes that 12,650,000 Chardan public shares are redeemed for aggregate redemption payments of approximately $128,437,281, assuming a $10.15 per share redemption price and based on funds in the Trust Account as of March 31, 2022.

(6)

(7)	Includes 9,487,500 shares of Common Stock underlying the public warrants.

(8)

(9)	Total of 3,162,500 outstanding Founder Shares includes 3,052,500 Founder Shares held by the Sponsor, and 110,000 Founder Shares held by officers and directors of Chardan. Please see the section titled “Beneficial Ownership of Securities.”

(10)

(11)	Excludes shares of common stock issuable pursuant to the Equity Facility after Closing. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption

Table of Contents

price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

Sales to the Equity Facility Investor by New Dragonfly could result in substantial dilution to the interests of other holders of its shares of New Dragonfly Common Stock. Additionally, the sale of a substantial number of shares pursuant to the Equity Facility, or the anticipation of such sales, could make it more difficult for New Dragonfly to sell equity or equity-related securities in the future at a time and at a price that it might otherwise wish to effect sales. See “—Risks Related to the Equity Facility — The issuance and sale of shares of New Dragonfly common stock to the Equity Facility Investor will cause dilution to other holders of shares of New Dragonfly common stock, and the sale of the shares of New Dragonfly common stock acquired by the Equity Facility Investor, or the perception that such sales may occur, could cause the price of the shares of New Dragonfly common stock to fall.” In addition, Dragonfly employees and consultants hold and, after the Transactions are expected to be granted, equity awards under the Dragonfly Incentive Plan and the 2022 Plan. Chardan stockholders will experience additional dilution when those equity awards and purchase rights become vested and settled or exercisable, as applicable, for shares of New Dragonfly common stock.

The issuance of additional common stock will significantly dilute the equity interests of existing holders of Chardan securities and may adversely affect prevailing market prices for our units, public shares or public warrants.

Having a minority ownership interest in New Dragonfly may reduce the influence that Chardan’s public stockholders have on the management of Chardan.

The Sponsor and its affiliates will beneficially own a significant equity interest in Chardan and may take actions that conflict with your interests.

The interests of Sponsor and its affiliates may not align with the interests of Chardan and its other stockholders. The Sponsor and its affiliates are in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with Chardan. The Sponsor and its affiliates may also pursue acquisition opportunities that may be complementary to Dragonfly’s business and, as a result, those acquisition opportunities may not be available to New Dragonfly.

The proposed business combination with Dragonfly may be delayed or ultimately prohibited since such initial business combination may be subject to regulatory review and approval requirements, including pursuant to foreign investment regulations and review by governmental entities such as the Committee on Foreign Investment in the United States (“CFIUS”).

The Business Combination may be subject to regulatory review and approval requirements by governmental entities, or ultimately prohibited. For example, CFIUS has authority to review direct or indirect foreign investments in U.S. companies. Among other things, CFIUS is empowered to require certain foreign investors to make mandatory filings, to charge filing fees related to such filings, and to self-initiate national security reviews of foreign direct and indirect investments in U.S. companies if the parties to that investment choose not to file voluntarily. If CFIUS determines that an investment threatens national security, CFIUS has the power to impose restrictions on the investment or recommend that the President prohibit and/or unwind it. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, the nationality of the parties, the level of beneficial ownership interest and the nature of any information or governance rights involved.

In our view, it is unlikely that the Business Combination would be subject to or impacted by a CFIUS review. We note that the Sponsor is not controlled by non-U.S. persons. Moreover, the parties have determined that Dragonfly is not a TID U.S. business, as that term is defined in 31 C.F.R. § 800.248, and as a result, it is not mandatory to submit a CFIUS filing with respect to the Business Combination. We do not anticipate any CFIUS-related delay.

Nevertheless, we may submit to CFIUS review on a voluntary basis or proceed with the transaction without submitting to CFIUS and risk CFIUS intervention, before or after closing the transaction. CFIUS may decide to block or delay the Business Combination, or impose conditions with respect to it, which may delay or prevent us from consummating the transaction.

Table of Contents

The process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our initial business combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we are unable to consummate the Business Combination within the applicable time period required, including as a result of extended regulatory review, we will, as promptly as reasonably possible but not more than five business days thereafter, redeem the public shares for a pro rata portion of the funds held in the trust account and as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such event, our shareholders will miss the opportunity to benefit from the Business Combination and the appreciation in value of such investment. Additionally, the warrants will be worthless.

Our Sponsor, directors or officers or their affiliates may elect to purchase shares from public stockholders, which could reduce the number of shares that may be redeemed in connection with the Business Combination and reduce the public “float” of Chardan common stock.

Subject to applicable securities laws, our Sponsor, Insiders or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, Insiders or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to reduce the number of shares of Chardan common stock that may be redeemed in connection with the Business Combination and may include a business decision to increase such purchaser’s ownership at an attractive price.

In addition, the Sponsor will waive any redemption rights with respect to any shares of Chardan common stock purchased in Open Market Purchases and will not vote any shares of Chardan common stock purchased in Open Market Purchases in favor of the Business Combination Proposal.

In addition, subject to applicable securities laws, Chardan Capital Markets may make Open Market Purchases by purchasing shares of Chardan common stock on the open market prior to the Closing and separate from the redemption process conducted in connection with the Business Combination. The purposes of any Open Market Purchases would be to reduce the number of shares of Chardan common stock that may be redeemed in connection with the Business Combination and may include a business decision to increase such purchaser’s ownership at an attractive price. Chardan Capital Markets will only make Open Market Purchases to the extent the price per common stock of Chardan so acquired is no higher than the redemption price that would be available in connection with the redemption procedures described in this proxy statement. In addition, Chardan Capital Markets will waive any redemption rights with respect to any shares of Chardan common stock purchased in Open Market Purchases and will not vote any shares of Chardan common stock purchased in Open Market Purchases in favor of the Business Combination Proposal.

If such purchases are made, the public “float” of Chardan common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on the Nasdaq or another national securities exchange or reducing the liquidity of the trading market for Chardan common stock.

We may issue additional shares of Chardan common stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.

We may issue additional shares of Chardan common stock or other equity securities of equal or senior rank in the future in connection with, among other things, the Equity Facility, future acquisitions, repayment of outstanding indebtedness or under our 2022 Plan, without stockholder approval, in a number of circumstances.

Our issuance of such additional shares of Chardan common stock or other equity securities of equal or senior rank could have the following effects:

●

your proportionate ownership interest in Chardan will decrease;

●

the relative voting strength of each previously outstanding share of common stock may be diminished; or

Table of Contents

●

the market price of our shares of Chardan common stock may decline.

Chardan and Dragonfly currently operate as separate companies and have had no prior history as a combined entity, and Chardan’s and Dragonfly’s operations have not previously been managed on a combined basis. The pro forma financial information included in this proxy statement is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have actually occurred had the Business Combination been completed at or as of the dates indicated, nor is it indicative of the future operating results or financial position of New Dragonfly. The pro forma statement of operations does not reflect future nonrecurring charges resulting from the Business Combination. The unaudited pro forma financial information does not reflect future events that may occur after the Business Combination and does not consider potential impacts of future market conditions on revenues or expenses. The pro forma financial information included in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” has been derived from Chardan’s and Dragonfly’s historical financial statements and certain adjustments and assumptions have been made regarding Dragonfly after giving effect to the Business Combination. There may be differences between preliminary estimates in the pro forma financial information and the final acquisition accounting, which could result in material differences from the pro forma information presented in this proxy statement in respect of the estimated financial position and results of operations of Dragonfly.

In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate and other factors may affect Dragonfly’s financial condition or results of operations following the Closing. Any potential decline in Dragonfly’s financial condition or results of operations may cause significant variations in the stock price of New Dragonfly.

Chardan and Dragonfly have incurred and expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by Chardan if the Business Combination is not completed.

Chardan and Dragonfly expect to incur significant costs associated with the Business Combination. These expenses will reduce the amount of cash available to be used for other corporate purposes by Chardan if the Business Combination is not completed.

We may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their public warrants worthless.

We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, upon a minimum of 30 days’ prior written notice of redemption; provided that the last reported sales price of Chardan common stock equals or exceeds $16.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any ten Trading Days within a 30 Trading Day period ending three business days prior to the date we send the notice of redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption rights provided that there is an effective registration statement covering the issuance of the shares of New Dragonfly common stock issuable upon exercise of the New Dragonfly warrants. Redemption of the outstanding warrants could force the warrant holders to (i) exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so, (ii) sell their warrants at the then-current market price when they might otherwise wish to hold their warrants or (iii) accept the nominal redemption price which, at the time the outstanding public warrants are called for redemption, is likely to be substantially less than the market value of their warrants. If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” None of the private warrants will be redeemable by us so long as they are held by our Founders or their permitted transferees.

There is no guarantee that the public warrants will ever be “in the money,” and they may expire worthless and the terms of Chardan’s warrants may be amended.

The exercise price for Chardan public warrants is $11.50 per share of Chardan common stock. Each warrant entitles the registered holder to purchase three-quarters of a share of Chardan common stock at a price of $11.50 per whole share. If Chardan is unable to complete an initial business combination, Chardan’s warrants may expire worthless. Even if Chardan consummates the Business Combination, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants

Table of Contents

may expire worthless. Further, the exercise price for Chardan public warrants is higher than in many similar blank check company offerings in the past, and, accordingly, the Chardan public warrants are more likely to expire worthless.

We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least a majority of the then-outstanding warrants. As a result, the exercise price of our warrants could be increased, the exercise period could be shortened and the number of shares of Chardan common stock purchasable upon exercise of a warrant could be decreased without a warrant holder’s approval.

Our warrants were issued in registered form under the Warrant Agreement, between Continental Stock Transfer & Trust Company, as warrant agent, and us. The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or to cure, correct or supplement any defective provision or add or change any other provisions with respect to matters or questions arising under the Warrant Agreement as may be deemed necessary or desirable and shall not adversely affect the interests of the holders, but requires the approval by the holders of a majority of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of a majority of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of a majority of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of Chardan common stock purchasable upon exercise of a warrant.

A provision in Chardan’s Warrant Agreement may make it more difficult for Chardan to consummate the Business Combination.

If (i) Chardan issues additional Chardan common stock or equity-linked securities for capital raising purposes in connection with the Closing of the Business Combination at a price or deemed price of less than $9.20 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) (with such issue price or effective issue price to be determined in good faith by the Chardan Board and in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (ii) the aggregate gross proceeds from such issuance represent more than 60% of the total equity proceeds, and interest thereon, available for funding of the Business Combination on the Closing Date (net of redemptions) and (iii) the volume weighted average trading price of Chardan common stock during the 20 trading day period starting on the trading day prior to the Closing Date (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the public warrants will be adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $16.00 per share redemption trigger prices applicable to public warrants will be adjusted (to the nearest cent) to be equal to 160% of the higher of the Market Value and the Newly Issued Price. This may make it more difficult for Chardan to consummate the Business Combination.

Chardan has a commitment to issue the Chardan common stock in connection with the PIPE Investment which may trigger the adjustment to the exercise price of the public warrants described above. Such adjustment may result in additional dilution to the Chardan shareholders and may make it more difficult to consummate the Business Combination.

Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of certain key personnel, including the key personnel of Dragonfly whom we expect to stay with the post-combination business following the Business Combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business and its financial condition could suffer as a result.

Our ability to successfully effect the Business Combination and to be successful thereafter is dependent upon the efforts of our key personnel, including the key personnel of Dragonfly. Although some key personnel may remain with the post-combination business in senior management or advisory positions following the Business Combination, it is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of our post-combination business. Dragonfly’s success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of Dragonfly’s officers, be it upon the closing of the Business Combination or at some point following the consummation of the Business Combination, could have a material adverse effect on Dragonfly’s business, financial condition or operating results.

Table of Contents

Chardan and Dragonfly will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.

Uncertainty about the effect of the Business Combination on employees and third parties may have an adverse effect on Chardan and Dragonfly. These uncertainties may impair our or Dragonfly’s ability to retain and motivate key personnel and could cause third parties that deal with Dragonfly or Chardan to defer entering into contracts or making other decisions or seek to change existing business relationships. If key employees depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our or Dragonfly’s business could be harmed.

The ability of Chardan’s public stockholders to exercise redemption rights with respect to a large number of shares of Chardan’s Class A common stock could reduce the amount of working capital available to New Dragonfly upon the closing of the Transaction and could adversely affect the completion of the Transaction.

As of the date hereof, Chardan does not know how many of its public shareholders will exercise their redemption rights in advance of the closing of the Transaction. If a larger number of Chardan’s public shareholders elect to redeem their common stock than Chardan had expected when it entered into the definitive documents relating to the Transaction, this could lead to a failure to consummate the Transaction and a failure to maintain the listing of its securities on the Nasdaq, which could impair Chardan’s ability to fund its operations and adversely affect its business, financial condition and results of operations.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We will be subject to income taxes in the United States, and our tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

●

changes in the valuation of our deferred tax assets and liabilities;

●

expected timing and amount of the release of any tax valuation allowances;

●

tax effects of stock-based compensation;

●

costs related to intercompany restructurings;

●

changes in tax laws, regulations or interpretations thereof; or

●

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

Going public through a merger rather than an underwritten offering presents risks to unaffiliated investors. Subsequent to completion of the Business Combination, New Dragonfly may be required to take write-downs or write-offs, restructure its operations, or take impairment or other charges, any of which could have a significant negative effect on New Dragonfly’s financial condition, results of operations and New Dragonfly’s stock price, which could cause you to lose some or all of your investment.

Going public through a merger rather than an underwritten offering, as Dragonfly is seeking to do through the Business Combination, presents risks to unaffiliated investors. Such risks include the absence of a due diligence investigation conducted by an underwriter that would be subject to liability for any material misstatements or omissions in a registration statement. Although Chardan has conducted due diligence on the Dragonfly business, Chardan cannot assure you that this due diligence has identified all material issues that may be present in Dragonfly’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Dragonfly’s business and outside of Chardan’s and Dragonfly’s control will not later arise. As a result of these factors, Chardan may be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in reporting losses. Even if Chardan’s due diligence successfully identifies certain risks, unexpected

Table of Contents

risks may arise and previously known risks may materialize in a manner not consistent with Chardan’s preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on Chardan’s liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about New Dragonfly or its securities. Accordingly, any of Chardan’s stockholders who choose to remain stockholders of Chardan following the Business Combination could suffer a reduction in the value of their shares and these stockholders are unlikely to have a remedy for the reduction in value.

The availability of dissenter’s rights under Nevada law for Dragonfly stockholders in connection with the Business Combination could have an adverse impact on the economic benefits of the Business Combination.

Under the Nevada Dissenter’s Rights Statutes (NRS 92A.300 through NRS 92A.500, inclusive), any Dragonfly stockholder who does not vote or sign a written consent (and who does not cause or permit the stockholder’s shares to be voted) in favor of the Merger will have the right to dissent from the Merger and, in lieu of receiving the Per Share Merger Consideration with respect to the stockholder’s Dragonfly shares, obtain payment of the fair value (as defined in NRS 92A.320) of the stockholder’s Dragonfly shares, but only if the stockholder complies with all other applicable requirements under the Nevada Dissenter’s Rights Statutes. NRS 92A.320 defines the “fair value” of a dissenter’s shares as the value of the shares determined:

●

immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable;

●

using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the transaction requiring appraisal; and

●

without discounting for lack of marketability or minority status.

If any Dragonfly stockholders properly preserve, assert and exercise such dissenter’s rights and to the extent any such demands for payment of fair value cannot be settled between those stockholders and Dragonfly within the parameters prescribed by the Nevada Dissenter’s Rights Statutes, under NRS 92.490 Dragonfly then would be required to commence an action in Nevada state district court for a judicial determination of fair value plus accrued interest determined in accordance with NRS 92A.340. Dragonfly reserves the right to assert in any such appraisal proceeding that, for purposes thereof, the fair value of a Dragonfly dissenting share is less than the value of the Per Share Merger Consideration to be issued and paid in connection with the Business Combination. However, the fair value (as defined in NRS 92A.320) of Dragonfly shares, as determined by the Nevada state district court under the Nevada Dissenter’s Rights Statutes, could be more than, the same as or less than the value of consideration to be paid in connection with the Business Combination. It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and any such exposure may be material. Regardless of outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Any such impact could have an adverse impact on the economic benefits of the Business Combination. Further, the Dragonfly stockholders must approve the Merger, and the Dragonfly Stockholder Approval must be obtained and delivered to Chardan (which such approval was obtained and delivered by execution of a written consent by the requisite equityholders of Dragonfly).

Risks Related to the Financings

Securities issued in the private placement will be restricted securities and will not be registered upon issuance and therefore will be subject to securities law restrictions on transferability until such time as the resale of such securities is registered or an exemption from registration is available.

We are not registering the PIPE shares under the Securities Act or any state securities laws at this time. However, under the terms of the Restated Registration Rights Agreement, we have agreed that as soon as practicable, but in no event later than 30 business days after the Closing, we will file with the SEC a registration statement for the registration under the Securities Act of the PIPE shares and thereafter will use commercially reasonable efforts to cause the same to become effective within 90 business days following the Closing and to maintain such registration statement in accordance with the provisions of the Registration Rights Agreement. However, we cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order.

Table of Contents

If the PIPE shares are not registered, qualified or exempt from registration or qualification, the holder of such PIPE shares will not be entitled to sell its shares.

There can be no assurance that Chardan will be able to raise sufficient capital to consummate the Transaction or for use by New Dragonfly following the Transaction.

As of March 31, 2022, there was approximately $128,437,281 in Chardan’s trust account, commitments from the PIPE Investor to purchase up to 500,000 shares of common stock for an aggregate purchase price of up to $5,000,000 and, on the terms and subject to satisfaction of the conditions to be set forth in the Equity Facility Definitive Documentation, commitments from the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the term of the Equity Facility and commitments of the Initial Term Loan Lenders to provide a $75,000,000 senior secured term loan facility. Nevertheless, there can be no assurances that Chardan will be able to obtain all of the cash in Chardan’s trust account, the full amount of the PIPE Investment, the full amount available under the Equity Facility or the full amount of the Term Loan. In particular, if there are significant redemptions, the amount of cash left remaining in Chardan’s trust account upon consummation of the Business Combination will be lower than anticipated. Any such shortfall may also materially reduce the amount of available working capital for New Dragonfly, which may materially and adversely affect New Dragonfly’s business, financial condition and results of operations.

It is not possible to predict the actual number of shares New Dragonfly will sell under the Equity Facility to the Equity Facility Investor, or the actual gross proceeds resulting from those sales. Further, New Dragonfly may not have access to the full amount available under the Equity Facility with the Equity Facility Investor.

Chardan and Dragonfly have agreed to establish the Equity Facility pursuant to which, upon the terms of and subject to the satisfaction of the conditions to the Equity Facility Investor’s purchase obligation to be set forth in the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility.

New Dragonfly generally has the right to control the timing and amount of any sales of New Dragonfly common stock to the Equity Facility Investor under the Equity Facility. Sales of shares of New Dragonfly common stock, if any, to the Equity Facility Investor under the Equity Facility Definitive Documentation will be determined by New Dragonfly from time to time in its sole discretion and will depend on a variety of factors, including, among other things, market conditions and the terms, conditions and limitations set forth in the Equity Facility Definitive Documentation (subject to certain limitations on the obligation of the Equity Facility Investor to purchase shares including, among other things, daily trading volumes and beneficial ownership limitations). New Dragonfly may ultimately decide to sell to the Equity Facility Investor all, some or none of the shares of New Dragonfly common stock that may be available for New Dragonfly to sell to the Equity Facility Investor pursuant to the Equity Facility Definitive Documentation. Depending on market liquidity at the time, resales of those shares by the Equity Facility Investor may cause the public trading price of New Dragonfly common stock to decrease.

Because the purchase price per share to be paid by the Equity Facility Investor for the shares of New Dragonfly common stock that New Dragonfly may elect to sell to the Equity Facility Investor under the Equity Facility Definitive Documentation, if any, will fluctuate based on the VWAP of New Dragonfly common stock during the applicable period for each purchase made pursuant to the Equity Facility Definitive Documentation, if any, it is not possible to predict, prior to any such sales, the number of shares of New Dragonfly common stock that New Dragonfly will sell to the Equity Facility Investor under the Equity Facility Definitive Documentation, the purchase price per share that the Equity Facility Investor will pay for shares purchased from New Dragonfly under the Equity Facility Definitive Documentation, or the aggregate gross proceeds that New Dragonfly will receive from those purchases by the Equity Facility Investor under the Equity Facility Definitive Documentation, if any.

As a result of the above factors, it is possible that New Dragonfly may need to issue and sell more than the number of shares that it initially expects to issue to the Equity Facility Investor under the Equity Facility Definitive Documentation in order to receive aggregate gross proceeds equal to the Equity Facility Investor’s $150,000,000 total aggregate purchase commitment under the Equity Facility Definitive Documentation, which could cause additional substantial dilution to holders of New Dragonfly common stock. The number of shares of New Dragonfly common stock ultimately offered for sale by the Equity Facility Investor is dependent upon the number of shares of New Dragonfly common stock, if any, New Dragonfly ultimately sells to the Equity Facility Investor under the Equity Facility.

Table of Contents

New Dragonfly will not have the right to commence any sales of New Dragonfly common stock to the Equity Facility Investor under the Equity Facility Definitive Documentation until the commencement date, which is the date on which all of the conditions to the Equity Facility Investor’s purchase obligations set forth in the Equity Facility Definitive Documentation have been initially satisfied, including the filing and effectiveness of a registration statement and the receipt of a no-objection letter from FINRA. The Equity Facility Investor will not be obligated to (but may, at its option, choose to) purchase shares of New Dragonfly common stock to the extent such purchase: (a) would exceed 20% of the number of shares of New Dragonfly common stock that would count towards VWAP on the applicable Purchase Date for such purchase, (b) would cause the aggregate purchase price on the applicable Purchase Date for such purchase to exceed $3 million or would result in beneficial ownership (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the Equity Facility Investor, together with its affiliates, of more than 9.9%. New Dragonfly’s inability to access a portion or the full amount available under the Equity Facility, in the absence of any other financing sources, could have a material adverse effect on its business.

The Investor is an affiliate of the Sponsor. As a result, in addition to the $1 million of commitment shares required to be issued to the Investor, the Investor could be deemed to potentially own the approximately 6.5% (assuming no redemptions) or 8.7% (assuming maximum redemptions) of New Dragonfly’s outstanding stock after the Business Combination held by the Sponsor, officers, directors and other holders of Founder Shares (including the PIPE Investment). To ensure that there is availability under the Equity Facility, the Sponsor has agreed that the Private Warrants may not be exercised to the extent an affiliate of the Sponsor is deemed to beneficially own, or it would cause such affiliate to be deemed to beneficially own, more than 4.99% of the New Dragonfly Common Stock.

The issuance and sale of shares of New Dragonfly common stock to the Equity Facility Investor will cause dilution to other holders of shares of New Dragonfly common stock, and the sale of the shares of New Dragonfly common stock acquired by the Equity Facility Investor, or the perception that such sales may occur, could cause the price of the shares of New Dragonfly common stock to fall.

The purchase price for the shares that New Dragonfly may sell to the Equity Facility Investor under the Equity Facility Definitive Documentation will fluctuate based on the price of New Dragonfly common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of shares of New Dragonfly common stock to fall.

If and when New Dragonfly does sell shares to the Equity Facility Investor, after the Equity Facility Investor has acquired the shares, the Equity Facility Investor may resell all, some, or none of those shares at any time or from time to time in its discretion, subject to the terms of the Equity Facility Definitive Documentation and compliance with securities laws. Therefore, sales to the Equity Facility Investor by New Dragonfly could result in substantial dilution to the interests of other holders of its shares of New Dragonfly common stock. Additionally, the sale of a substantial number of shares of New Dragonfly common stock to the Equity Facility Investor, or the anticipation of such sales, could make it more difficult for New Dragonfly to sell equity or equity-related securities in the future at a time and at a price that it might otherwise wish to effect sales.

New Dragonfly’s management team will have broad discretion over the use of the net proceeds from New Dragonfly’s sale of shares of New Dragonfly common stock to the Equity Facility Investor, if any, and the proceeds may not be invested successfully.

New Dragonfly’s management team will have broad discretion as to the use of the net proceeds from the sale of shares of New Dragonfly common stock to the Equity Facility Investor, if any. It is possible that, pending their use, New Dragonfly may invest those net proceeds in a way that does not yield a favorable, or any, return. The failure of New Dragonfly’s management team to use such funds effectively could have a material adverse effect on New Dragonfly’s business, financial condition, operating results and cash flows.

Table of Contents

Risks Related to the Redemption

You must tender your shares of Chardan common stock in order to validly seek redemption at the special meeting.

In connection with tendering your shares for redemption, you must elect either to physically tender your common stock certificates to the Transfer Agent or to deliver your shares of Chardan common stock to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, which election would likely be determined based on the manner in which you hold your shares of Chardan common stock, in each case, by two business days prior to the originally scheduled vote on the business combination proposal. The requirement for physical or electronic delivery by two business days prior to the originally scheduled vote on the business combination proposal ensures that a redeeming holder’s election to redeem is irrevocable once the Business Combination is approved. Any failure to observe these procedures will result in your loss of redemption rights in connection with the vote on the Business Combination.

Chardan does not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for Chardan to complete an initial business combination with which a substantial majority of Chardan’s stockholders do not agree.

Chardan’s existing charter does not provide a specified maximum redemption threshold, except that Chardan will not redeem public shares in an amount that would cause Chardan’s net tangible assets to be less than $5,000,001 (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act). As a result, Chardan may be able to complete the Business Combination even though a substantial portion of public stockholders do not agree with the transaction and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to Sponsor, directors or officers or their affiliates. As of the date of this proxy statement, no agreements with respect to the private purchase of public shares by Chardan or the persons described above have been entered into with any such investor or holder. Chardan will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the business combination proposal or other proposals (as described in this proxy statement) at the special meeting. The Insiders have agreed not to redeem any Chardan common stock held by them in connection with a shareholder vote to approve the Business Combination.

In the event that the aggregate cash consideration that Chardan would be required to pay for all shares of Chardan common stock that are validly submitted for redemption, plus any amount required to satisfy the foregoing cash condition pursuant to the terms of the Business Combination Agreement, exceeds the aggregate amount of cash available to Chardan, Chardan may not complete the Business Combination or redeem any shares, all shares of Chardan common stock submitted for redemption will be returned to the holders thereof and Chardan may instead search for an alternate initial business combination.

Table of Contents

Public stockholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 20% of the public shares.

A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13(d) of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 20% of the shares of Chardan common stock included in the units sold in the Chardan IPO unless such stockholder first obtains Chardan’s prior consent. In order to determine whether a stockholder is acting in concert or as a group with another stockholder, Chardan will require each public stockholder seeking to exercise redemption rights to certify to Chardan whether such stockholder is acting in concert or as a group with any other stockholder. Such certifications, together with other public information relating to stock ownership available to Chardan at that time, such as Schedule 13D, Schedule 13G and Section 16 filings under the Exchange Act, will be the sole basis on which Chardan makes the above-referenced determination. Your inability to redeem any such excess shares will reduce your influence over Chardan’s ability to consummate the Business Combination and you could suffer a material loss on your investment in Chardan if you sell such excess shares in open market transactions. Additionally, you will not receive redemption distributions with respect to such excess shares if Chardan consummates the Business Combination. As a result, you will continue to hold that number of shares aggregating to more than 20% of the shares sold in the Chardan IPO and, in order to dispose of such excess shares, would be required to sell your stock in open market transactions, potentially at a loss. Chardan cannot assure you that the value of such excess shares will appreciate over time following the Business Combination or that the market price of shares of Chardan common stock will exceed the per-share redemption price. Notwithstanding the foregoing, stockholders may challenge Chardan’s determination as to whether a stockholder is acting in concert or as a group with another stockholder in a court of competent jurisdiction.

However, Chardan’s stockholders’ ability to vote all of their shares (including such excess shares) for or against the Business Combination is not restricted by this limitation on redemption.

There is no guarantee that a stockholder’s decision whether to redeem its shares for a pro rata portion of the trust account will put the stockholder in a better future economic position.

We can give no assurance as to the price at which a stockholder may be able to sell its public shares in the future following the completion of the Business Combination or any alternative business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in our share price, and may result in a lower value realized now than a stockholder of Chardan might realize in the future had the stockholder not redeemed its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the public shares after the consummation of any initial business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement. A stockholder should consult the stockholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

Stockholders of Chardan who wish to redeem their shares of Chardan common stock for a pro rata portion of the trust account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline. If stockholders fail to comply with the redemption requirements specified in this proxy statement, they will not be entitled to redeem their shares of Chardan common stock for a pro rata portion of the funds held in the trust account.

Stockholders electing to redeem their shares of Chardan common stock will receive their pro rata portion of the trust account less franchise and income taxes payable, calculated as of two business days prior to the anticipated consummation of the Business Combination. Please see the section entitled “Special Meeting of Chardan Stockholders — Redemption Rights” of this proxy statement for additional information on how to exercise your redemption rights.

If, despite Chardan’s compliance with the proxy rules, a stockholder fails to receive Chardan proxy materials, such stockholder may not become aware of the opportunity to redeem its shares of Chardan common stock. In addition, the proxy materials that Chardan is furnishing to holders of public shares of Chardan common stock in connection with the Business Combination describe the various procedures that must be complied with in order to validly redeem public shares of Chardan common stock. In the event that a stockholder fails to comply with these procedures, its shares of Chardan common stock may not be redeemed.

Table of Contents

The nominal purchase price paid by our Sponsor for the Founder Shares may significantly dilute the implied value of your public shares in the event we consummate an initial business combination, and our Sponsor is likely to make a substantial profit on its investment in us in the event we consummate an initial business combination, even if the business combination causes the trading price of our public shares to materially decline.

On June 23, 2020, Chardan issued an aggregate of 1,000,000 shares of common stock to the Sponsor for an aggregate purchase price of $25,000. On March 4, 2021, the Company effected a 2.875-for-1 stock split of its issued and outstanding shares of common stock, resulting in an aggregate of 2,875,000 shares of common stock issued and outstanding. On August 10, 2021, Chardan effectuated a 1.1-for-1 stock split, resulting in an aggregate of 3,162,500 shares of common stock outstanding. The Founder Shares include an aggregate of up to 412,500 shares of common stock subject to forfeiture by the initial stockholders to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the initial stockholders would collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering. On August 18, 2021, the underwriters exercised the over-allotment option in full, therefore the Founder Shares are no longer subject to forfeiture.

While we offered our units at an offering price of $10.00 per unit and the amount in our trust account was initially $10.00 per public share, implying an initial value of $10.00 per public share, our sponsor paid only a nominal purchase price of approximately $.0079 per share. As a result, the value of your public shares may be significantly diluted in the event we consummate an initial business combination. For example, the following table shows the public stockholders’ and Sponsor’s investment per share and how that compares to the implied value of one of our shares upon the consummation of our initial business combination if at that time we were valued at $128,397,500, which is the amount we would have for our initial business combination in the trust account assuming no interest is earned on the funds held in the trust account and no public shares are redeemed in connection with our initial business combination. At such valuation, each of our public shares would have an implied value of $8.12 per share, which is a 18.8% decrease as compared to the initial implied value per public share of $10.00.


Chardan public shares		12,650,000
Chardan Founder Shares		3,162,500
Total Chardan shares		15,812,500
Total funds in trust available for initial business combination⁽¹⁾	$	128,397,500
Implied value per share	$	8.12
Public stockholders’ investment per share⁽²⁾	$	10.00
Sponsor’s investment per share	$	0.0079

(1)

Does not take into account other potential impacts on our valuation at the time of the business combination, such as the value of our public and private warrants, the trading price of our public shares, the business combination transaction costs (including payment of deferred underwriting commissions), any equity issued or cash paid to the target’s sellers or other third parties, or the target’s business itself, including its assets, liabilities, management and prospects.

(2)	While the public stockholders’ investment is in both the public shares and the public warrants, for purposes of this table the full investment amount is ascribed to the public shares only.

While the implied value of our public shares may be diluted, the implied value of $9.07 per share would represent a significant implied profit for our sponsor relative to the initial purchase price of the Founder Shares. Our sponsor and its affiliates invested an aggregate of $4,077,000 in us in connection with our initial public offering, comprised of the $25,000 purchase price for the Founder Shares and the $4,052,000 purchase price for the private warrants. At $9.07 per share, the 3,162,500 Founder Shares would have an aggregate implied value of $28,683,875. As a result, even if the trading price of our public shares significantly declines, our sponsor will stand to make significant profit on its investment in us. In addition, our sponsor could potentially recoup its entire investment in us even if the trading price of our public shares were as low as $1.42 per share and even if the private warrants are worthless. As a result, our sponsor is likely to make a substantial profit on its investment in us even if we select and consummate an initial business combination that causes the trading price of our public shares to decline, while our public shareholders who purchased their units in this offering could lose significant value in their public shares. Our sponsor may therefore be economically incentivized to consummate an initial business combination with a riskier, weaker- performing or less-established target business than would be the case if our sponsor had paid the same per share price for the Founder Shares as our public shareholders paid for their public shares.

Table of Contents

Risks If the Adjournment Proposal Is Not Approved

If the Adjournment Proposal is not approved, and an insufficient number of votes have been obtained to authorize the consummation of the Business Combination, the Chardan Board will not have the ability to adjourn the special meeting to a later date in order to solicit further votes, and, therefore, the Business Combination will not be approved.

The Chardan Board is seeking approval to adjourn the special meeting to a later date or dates if, at the special meeting, Chardan is unable to consummate the Business Combination. If the Adjournment Proposal is not approved, the Chardan Board will not have the ability to adjourn the special meeting to a later date and, therefore, the Business Combination would not be completed.

Risks Related to Ownership of New Dragonfly’s Common Stock

If securities or industry analysts do not publish research or reports about New Dragonfly, or publish negative reports, New Dragonfly’s stock price and trading volume could decline.

The trading market for New Dragonfly’s common stock will depend, in part, on the research and reports that securities or industry analysts publish about New Dragonfly. New Dragonfly will not have any control over these analysts. If New Dragonfly’s financial performance fails to meet analyst estimates or one or more of the analysts who cover New Dragonfly downgrade its common stock or change their opinion, New Dragonfly’s stock price would likely decline. If one or more of these analysts cease coverage of New Dragonfly or fail to regularly publish reports on New Dragonfly, it could lose visibility in the financial markets, which could cause New Dragonfly’s stock price or trading volume to decline.

If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of New Dragonfly’s securities may decline. Additionally, trading prices for New Dragonfly’s securities could be highly volatile, and purchasers of New Dragonfly securities could incur substantial losses.

If the benefits of the Business Combination do not meet the expectations of investors, stockholders or securities analysts, the market price of New Dragonfly’s securities following the consummation of the Business Combination may decline. The market values of New Dragonfly’s securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination Agreement was executed, the date of this proxy statement, or the date on which Chardan’s stockholders vote on the Business Combination.

In addition, following the Business Combination, fluctuations in the price of New Dragonfly’s securities could contribute to the loss of all or part of your investment. Immediately prior to the Business Combination, there has not been a public market for stock relating to the Dragonfly business and trading in shares of Chardan common stock has not been active. Accordingly, the valuation ascribed to the Dragonfly business and Chardan common stock in the Business Combination may not be indicative of the price that will prevail in the trading market following the Business Combination.

The trading price of the New Dragonfly common stock following the Business Combination may fluctuate substantially and may be lower than its current price. This may be especially true for companies like ours with a small public float. If an active market for New Dragonfly’s securities develops and continues, the trading price of New Dragonfly’s securities following the Business Combination could be volatile and subject to wide fluctuations. The trading price of the New Dragonfly common stock following the Business Combination will depend on many factors, including those described in this “Risk Factors” section, many of which are beyond New Dragonfly’s control and may not be related to New Dragonfly’s operating performance. These fluctuations could cause you to lose all or part of your investment in the New Dragonfly common stock since you might be unable to sell your shares at or above the price attributed to them in the Business Combination. Any of the factors listed below could have a material adverse effect on your investment in New Dragonfly’s securities and New Dragonfly’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of New Dragonfly’s securities may not recover and may experience a further decline.

Factors affecting the trading price of New Dragonfly securities following the Business Combination may include:

●

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to ours;

●

changes in the market’s expectations about our operating results;

Table of Contents

●

the public’s reaction to our press releases, other public announcements and filings with the SEC;

●

speculation in the press or investment community;

●

actual or anticipated developments in New Dragonfly’s business, competitors’ businesses or the competitive landscape generally;

●

innovations or new products developed by New Dragonfly or its competitors;

●

manufacturing, supply or distribution delays or shortages;

●

any changes to New Dragonfly’s relationship with any manufacturers, suppliers, licensors, future collaborators, or other strategic partners;

●

the operating results failing to meet the expectation of securities analysts or investors in a particular period;

●

changes in financial estimates and recommendations by securities analysts concerning New Dragonfly or the market in general;

●

operating and stock price performance of other companies that investors deem comparable to ours;

●

changes in laws and regulations affecting New Dragonfly’s business;

●

commencement of, or involvement in, litigation involving New Dragonfly;

●

changes in New Dragonfly’s capital structure, such as future issuances of securities or the incurrence of additional debt;

●

the volume of New Dragonfly common stock available for public sale;

●

any major change in New Dragonfly board of directors or management;

●

sales of substantial amounts of New Dragonfly common stock by our directors, officers or significant stockholders or the perception that such sales could occur;

●

general economic and political conditions such as recessions, interest rates, “trade wars,” pandemics (such as COVID-19) and acts of war or terrorism (including the Russia-Ukraine conflict); and

●

other risk factors and other matters described or referenced under the sections “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Broad market and industry factors may materially harm the market price of New Dragonfly’s securities irrespective of New Dragonfly’s operating performance. The stock market in general and the Nasdaq have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of New Dragonfly’s securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to New Dragonfly’s could depress New Dragonfly’s stock price regardless of New Dragonfly’s business, prospects, financial conditions or results of operations. Broad market and industry factors, including, most recently, the impact of the novel coronavirus, COVID-19, and any other global pandemics, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of the New Dragonfly common stock, regardless of New Dragonfly’s actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following the Business Combination. A decline in the market price of New Dragonfly’s securities also could adversely affect New Dragonfly’s ability to issue additional securities and New Dragonfly’s ability to obtain additional financing in the future.

In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this type, if instituted against us, could

Table of Contents

result in substantial costs and a diversion of our management’s attention and resources. Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments.

An active trading market for New Dragonfly’s securities may not be available on a consistent basis to provide stockholders with adequate liquidity.

Chardan intends to apply to list the New Dragonfly common stock and warrants on Nasdaq under the symbols “DFLI” and “DFLIW” respectively, and to trade on that market. However, New Dragonfly cannot assure you that an active trading market for its common stock will be sustained. Accordingly, New Dragonfly cannot assure you of the liquidity of any trading market, your ability to sell your shares of its common stock when desired or the prices that you may obtain for your shares.

Warrants will become exercisable for the Company’s common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. Following the Business Combination, there will be 9,487,500 outstanding public warrants to purchase 9,487,500 shares of common stock at an exercise price of $11.50 per share, which warrants will become exercisable commencing the later of 30 days following the Closing and 12 months from the closing of the Chardan IPO, which closed on August 13, 2021. In addition, there will be 4,627,858 private warrants outstanding exercisable for 4,627,858 shares of common stock at an exercise price of $11.50 per share.

To the extent such warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the holders of the Company’s common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of the Company’s common stock, the impact of which is increased as the value of our stock price increases.

New Dragonfly’s operating results may fluctuate significantly following the Business Combination, which makes its future operating results difficult to predict and could cause its operating results to fall below expectations or any guidance it may provide.

New Dragonfly’s quarterly and annual operating results may fluctuate significantly, which makes it difficult for it to predict its future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of its control, including, but not limited to:

●

New Dragonfly’s ability to engage target customers and successfully convert these customers into meaningful orders in the future;

●

New Dragonfly’s reliance on two suppliers for its LFP cells and a single supplier for the manufacture of its battery management system;

●

the size and growth of the potential markets for New Dragonfly’s batteries and its ability to serve those markets;

●

challenges in New Dragonfly’s attempts to develop and produce solid state battery cells;

●

the level of demand for any products, which may vary significantly;

●

future accounting pronouncements or changes in its accounting policies; and

●

macroeconomic conditions, both nationally and locally; and

●

any other change in the competitive landscape of its industry, including consolidation among New Dragonfly’s competitors or partners.

Table of Contents

The cumulative effects of these factors could result in large fluctuations and unpredictability in New Dragonfly’s quarterly and annual operating results. As a result, comparing its operating results on a period- to-period basis may not be meaningful. Investors should not rely on its past results as an indication of its future performance.

This variability and unpredictability could also result in its failing to meet the expectations of industry or financial analysts or investors for any period. If New Dragonfly’s revenue or operating results fall below the expectations of analysts or investors or below any forecasts New Dragonfly may provide to the market, or if the forecasts it provides to the market are below the expectations of analysts or investors, the price of New Dragonfly common stock could decline substantially. Such a stock price decline could occur even when it has met any previously publicly stated revenue or earnings guidance it may provide.

Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect New Dragonfly’s business, investments and results of operations.

New Dragonfly will be subject to laws, regulations and rules enacted by national, regional and local governments and the Nasdaq. In particular, New Dragonfly will be required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on New Dragonfly’s business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on New Dragonfly’s business and results of operations.

On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940 (the “Investment Company Act”). These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our ability to negotiate and complete our initial business combination and may increase the costs and time related thereto.

New Dragonfly does not intend to pay dividends on its common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of New Dragonfly’s common stock.

New Dragonfly currently intends to retain any future earnings to finance the operation and expansion of its business and New Dragonfly does not expect to declare or pay any dividends in the foreseeable future. As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.

The rights of holders of Chardan and Dragonfly capital stock will change as a result of the Business Combination.

Upon completion of the Business Combination, shareholders of Chardan and stockholders of Dragonfly will be shareholders of New Dragonfly. Their rights as shareholders of New Dragonfly will be governed by New Dragonfly’s certificate of incorporation, bylaws and Delaware corporation law.

The terms of New Dragonfly’s certificate of incorporation and bylaws are in some respects different from the terms of Chardan’s current certificate of incorporation and Dragonfly’s Nevada articles of incorporation and bylaws. For more information, see the section of this proxy statement/prospectus titled “Comparison of Stockholders’ Rights.”

The second amended and restated certificate of incorporation, as will be in effect following the completion of the Business Combination, will designate specific courts as the exclusive forum for substantially all stockholder litigation matters, which could limit the ability of New Dragonfly’s stockholders to obtain a favorable forum for disputes with New Dragonfly or its directors, officers or employees.

The second amended and restated certificate of incorporation, as will be in effect following the completion of the Business Combination, will require, to the fullest extent permitted by law, that derivative actions brought in New Dragonfly’s name, actions against current or former directors, officers or other employees for breach of fiduciary duty, any action asserting a claim arising pursuant to any provision of the DGCL, the second amended and restated certificate of incorporation or the New Dragonfly amended and restated

Table of Contents

bylaws, any action asserting a claim governed by internal affairs doctrine of the State of Delaware or any other action asserting an “internal corporate claim” (as defined in Section 115 of the DGCL), confers jurisdiction to the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction thereof, any state court located in the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware), unless New Dragonfly consents in writing to the selection of an alternative forum. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. The second amended and restated certificate of incorporation also provides that, unless New Dragonfly consents in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with New Dragonfly and New Dragonfly’s directors, officers or other employees and may have the effect of discouraging lawsuits against New Dragonfly’s directors, officers and other employees. Furthermore, stockholders may be subject to increased costs to bring these claims, and the exclusive forum provision could have the effect of discouraging claims or limiting investors’ ability to bring claims in a judicial forum that they find favorable.

In addition, the enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could rule that this provision in the second amended and restated certificate of incorporation is inapplicable or unenforceable. In March 2020, the Delaware Supreme Court issued a decision in Salzburg et al. v. Sciabacucchi, which found that an exclusive forum provision providing for claims under the Securities Act to be brought in federal court is facially valid under Delaware law. We intend to enforce this provision, but we do not know whether courts in other jurisdictions will agree with this decision or enforce it. If a court were to find the exclusive forum provision contained in the second amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, New Dragonfly may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, prospects, financial condition and operating results.

The second amended and restated certificate of incorporation, as will be in effect following the completion of the Business Combination, could discourage another company from acquiring New Dragonfly and may prevent attempts by its stockholders to replace or remove its management.

Provisions in our second amended and restated certificate of incorporation and our amended and restated bylaws to be in effect immediately prior to the consummation of the Business Combination may discourage, delay or prevent, a merger, acquisition or other change in control of New Dragonfly that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of New Dragonfly common stock, thereby depressing the market price of its common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. As our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by New Dragonfly stockholders to replace current members of our management team. These provisions provide, among other things, that:

●

the New Dragonfly board of directors will be divided into three classes, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

●

the New Dragonfly board of directors has the exclusive right to expand the size of its board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

●

New Dragonfly stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders;

●

a special meeting of stockholders may be called only by a majority of the New Dragonfly board of directors, which may delay the ability of New Dragonfly stockholders to force consideration of a proposal or to take action, including the removal of directors;

●

the second amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

Table of Contents

●

the New Dragonfly board of directors may alter certain provisions of the New Dragonfly amended and restated bylaws without obtaining stockholder approval;

●

the approval of the holders of at least sixty-six and two-thirds percent (662∕3%) of the New Dragonfly common shares entitled to vote at an election of the New Dragonfly board of directors is required to adopt, amend, alter or repeal our amended and restated bylaws or amend, alter, change or repeal or adopt any provision of the second amended and restated certificate of incorporation inconsistent with the provisions of the New Dragonfly second amended and restated certificate of incorporation regarding the election and removal of directors;

●

stockholders must provide advance notice and additional disclosures to nominate individuals for election to the New Dragonfly board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain voting control of the New Dragonfly common stock; and

●

the New Dragonfly board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.

Moreover, because New Dragonfly is incorporated in Delaware, it will be governed by the provisions of Section 203 of the DGCL, which prohibits a person who owns in excess of 15% of the New Dragonfly outstanding voting stock from merging or combining with New Dragonfly for a period of three years after the date of the transaction in which the person acquired in excess of 15% of the New Dragonfly outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

New Dragonfly will be an emerging growth company and any decision to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make New Dragonfly’s common stock less attractive to investors.

Chardan currently is, and following the Business Combination, New Dragonfly will be, an “emerging growth company,” as defined in the JOBS Act. For as long as it continues to be an emerging growth company, New Dragonfly may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including:

●

not being required to have an independent registered public accounting firm audit New Dragonfly’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;

●

reduced disclosure obligations regarding executive compensation in New Dragonfly’s periodic reports and annual report on Form 10-K; and

●

exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.

As a result, the stockholders may not have access to certain information that they may deem important. New Dragonfly’s status as an emerging growth company will end as soon as any of the following takes place:

●

the last day of the fiscal year in which New Dragonfly has at least $1.07 billion in annual revenue;

●

the date New Dragonfly qualifies as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates;

●

the date on which New Dragonfly has issued, in any three-year period, more than $1.0 billion in non- convertible debt securities; or

●

the last day of the fiscal year ending after the fifth anniversary of the Chardan IPO.

Table of Contents

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. New Dragonfly may elect to take advantage of this extended transition period and as a result, its financial statements may not be comparable with similarly situated public companies.

New Dragonfly cannot predict if investors will find New Dragonfly’s common stock less attractive if it chooses to rely on any of the exemptions afforded emerging growth companies. If some investors find New Dragonfly’s common stock less attractive because New Dragonfly relies on any of these exemptions, there may be a less active trading market for New Dragonfly’s common stock and the market price of New Dragonfly’s common stock may be more volatile and may decline.

If New Dragonfly fails to maintain an effective system of disclosure controls and internal control over financial reporting, New Dragonfly’s ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired, which may adversely affect investor confidence in New Dragonfly and, as a result, the market price of New Dragonfly common stock.

As a public company, New Dragonfly will be required to comply with the requirements of the Sarbanes- Oxley Act, including, among other things, that New Dragonfly maintain effective disclosure controls and procedures and internal control over financial reporting. Dragonfly is continuing to develop and refine its disclosure controls and other procedures that are designed to ensure that information required to be disclosed by New Dragonfly in the reports that New Dragonfly will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to New Dragonfly’s management, including New Dragonfly’s principal executive and financial officers.

Dragonfly must continue to improve its internal control over financial reporting. New Dragonfly will be required to make a formal assessment of the effectiveness of its internal control over financial reporting and once New Dragonfly ceases to be an emerging growth company, New Dragonfly will be required to include an attestation report on internal control over financial reporting issued by New Dragonfly’s independent registered public accounting firm. To achieve compliance with these requirements within the prescribed time period, New Dragonfly will be engaging in a process to document and evaluate New Dragonfly’s internal control over financial reporting, which is both costly and challenging. In this regard, New Dragonfly will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of New Dragonfly’s internal control over financial reporting, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. There is a risk that New Dragonfly will not be able to conclude, within the prescribed time period or at all, that New Dragonfly’s internal control over financial reporting is effective as required by Section 404 of the Sarbanes-Oxley Act. Moreover, New Dragonfly’s testing, or the subsequent testing by New Dragonfly’s independent registered public accounting firm, may reveal additional deficiencies in New Dragonfly’s internal control over financial reporting that are deemed to be material weaknesses.

Any failure to implement and maintain effective disclosure controls and procedures and internal control over financial reporting, including the identification of one or more material weaknesses, could cause investors to lose confidence in the accuracy and completeness of New Dragonfly’s financial statements and reports, which would likely adversely affect the market price of New Dragonfly’s common stock. In addition, New Dragonfly could be subject to sanctions or investigations by the stock exchange on which New Dragonfly’s common stock is listed, the SEC and other regulatory authorities.

Upon the consummation of the Business Combination, Sponsor will beneficially own approximately 6.5% of New Dragonfly’s common stock outstanding, representing 6.5% of the vote, and New Dragonfly’s executive officers, directors and their affiliates as a group will beneficially own approximately 56.9% of New Dragonfly’s common stock representing 56.9% of the vote. These levels of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number

Table of Contents

is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

As a result, these stockholders, if they act together, will be able to influence New Dragonfly’s management and affairs and all matters requiring stockholder approval, including the election of directors, amendments of New Dragonfly’s organizational documents and approval of significant corporate transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of New Dragonfly and might affect the market price of New Dragonfly’s common stock.

The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that: (1) none of the public stockholders exercise their redemption rights with respect to their public shares; (2) Chardan does not issue any additional equity securities prior to the Business Combination and no other event occurs that would change the Merger Consideration from what it would have been as of the date of the initial signing of the Business Combination Agreement; and (3) there is no exercise of Chardan’s 14,115,358 outstanding warrants at an exercise price of $11.50 per share (which warrants are not exercisable until 30 days after the completion of the Business Combination). If the actual facts differ from these assumptions, the numbers of shares and percentage interests set forth above will be different.

Following the Closing, New Dragonfly will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and operating results.

Following the consummation of the Business Combination, New Dragonfly will face increased legal, accounting, administrative and other costs and expenses as a public company that Dragonfly does not incur as a private company and these expenses may increase even more after New Dragonfly is no longer an “emerging growth company.” The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges and the listing standards of the Nasdaq, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require New Dragonfly to carry out activities Dragonfly has not done previously. For example, New Dragonfly will create new board committees, enter into new insurance policies and adopt new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if management or New Dragonfly’s independent registered public accounting firm identifies additional material weaknesses in the internal control over financial reporting), New Dragonfly could incur additional costs rectifying those issues, the existence of those issues could adversely affect New Dragonfly’s reputation or investor perceptions of it and it may be more expensive to obtain director and officer liability insurance. Risks associated with New Dragonfly’s status as a public company may make it more difficult to attract and retain qualified persons to serve on the New Dragonfly board of directors or as executive officers. In addition, as a public company, New Dragonfly may be subject to stockholder activism, which can lead to substantial costs, distract management and impact the manner in which New Dragonfly operates New Dragonfly’s business in ways New Dragonfly cannot currently anticipate. As a result of disclosure of information in this proxy statement and in filings required of a public company, New Dragonfly’s business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, New Dragonfly’s business and results of operations could be materially adversely affected and even if the claims do not result in litigation or are resolved in New Dragonfly’s favor, these claims and the time and resources necessary to resolve them could divert the resources of New Dragonfly’s management and adversely affect New Dragonfly’s business and results of operations. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require New Dragonfly to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

Because there are no current plans to pay cash dividends on the New Dragonfly common stock for the foreseeable future, you may not receive any return on investment unless you sell your New Dragonfly common stock at a price greater than what you paid for it.

New Dragonfly intends to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of New Dragonfly common stock will be at the sole discretion of the New Dragonfly board of directors. The New Dragonfly board of

Table of Contents

directors may take into account general and economic conditions, New Dragonfly’s financial condition and results of operations, New Dragonfly’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications of the payment of dividends by New Dragonfly to its stockholders or by its subsidiaries to it and such other factors as the New Dragonfly board of directors may deem relevant. As a result, you may not receive any return on an investment in New Dragonfly common stock unless you sell your New Dragonfly common stock for a price greater than that which you paid for it.

Table of Contents

FAIRNESS OPINION OF DUFF & PHELPS

Opinion of Duff & Phelps, Chardan’s Financial Advisor

On January 24, 2022, Chardan retained Duff & Phelps to serve as an independent financial advisor to the Chardan Board, specifically to provide to the Chardan Board a fairness opinion in connection with the Business Combination. On May 13, 2022, Duff & Phelps delivered its opinion, dated May 13, 2022 (the “Opinion”), to the Chardan Board that, as of the date of the Opinion and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in the Opinion, the consideration to be paid by Chardan (in the form of Chardan common stock, the “Consideration”) to the Dragonfly securityholders in the Business Combination pursuant to the Business Combination Agreement is fair to Chardan, from a financial point of view.

In selecting Duff & Phelps, the Chardan Board considered, among other things, the fact that Duff & Phelps is a global leader in providing fairness opinions to boards of directors. Duff & Phelps is regularly engaged in the valuation of businesses and their securities and the provision of fairness opinions in connection with various transactions.

The Opinion was approved by Duff & Phelps’ fairness opinions committee. The Opinion was provided for the information of, and directed to, the Chardan Board for its information and assistance in connection with the Business Combination.

The full text of the Opinion is attached to this proxy statement/prospectus as Annex I and is incorporated into this document by reference. The summary of the Opinion set forth herein is qualified in its entirety by reference to the full text of the Opinion. Chardan’s stockholders are urged to read the Opinion carefully and in its entirety for a discussion of the procedures followed, assumptions made, matters considered, limitations of the review undertaken by Duff & Phelps in connection with the Opinion, as well as other qualifications contained in the Opinion.

In connection with the Opinion, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances to enable Duff & Phelps to render the Opinion. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation in general, and with respect to similar transactions in particular. Duff & Phelps’ procedures, investigations and financial analyses with respect to the preparation of the Opinion included, but were not limited to, the items summarized below:

●

reviewed unaudited financial information for Dragonfly for the year ended December 31, 2018 and audited financial information for Dragonfly for the years ended December 31, 2019 through December 31, 2021;

●

reviewed financial projections for New Dragonfly for the calendar years 2022 through 2023, provided to us by management of Dragonfly, approved for our use by management of Chardan (the “Financial Projections”), which are described in the section of this proxy statement/prospectus entitled “Certain Projected Financial Information of Dragonfly”;

●

reviewed the Dragonfly Investor Presentation dated April 2022;

●

reviewed the Business Combination Agreement;

●

reviewed the term sheet for the senior credit facilities dated March 30, 2022 by and between Dragonfly and Energy Impact Credit Fund;

●

reviewed Chardan’s S-1 dated March 8, 2021;

●

reviewed Chardan’s audited financial statements for the year ended December 31, 2021 filed on form 10-K;

●

discussed the information referred to above and the background and other elements of the Business Combination with the management of Chardan and certain members of the Chardan Board (in their capacity as members of the Chardan Board);

Table of Contents

●

discussed with Chardan management and Dragonfly management the plans and intentions with respect to the management and operation of New Dragonfly following the completion of the Business Combination;

●

discussed with Chardan management and certain members of the Chardan Board (in their capacity as members of the Chardan Board) their assessment of the strategic rationale for, and the potential benefits of, the Business Combination;

●

performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques, including a discounted cash flow analysis and an analysis of selected public companies that Duff & Phelps deemed relevant for comparison to New Dragonfly, as further described below in this section entitled “— Opinion of Chardan’s Financial Advisor”; and

●

conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

In performing its analyses and rendering the Opinion with respect to the Business Combination, Duff & Phelps, with Chardan’s consent:

●

relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Chardan and Dragonfly and their respective management, including all financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by us, and did not independently verify such information;

●

relied upon the fact that the Chardan Board and Chardan have been advised by counsel as to all legal matters with respect to the Business Combination, including whether all procedures required by law to be taken in connection with the Business Combination have been duly, validly and timely taken;

●

assumed that any estimates, evaluations, forecasts and projections and other pro forma information, including the Financial Projections, furnished to Duff & Phelps were reasonably prepared and based upon the best currently available information and good faith judgment of the person(s) furnishing the same, and Duff & Phelps expressed no opinion with respect to such estimates, evaluations, forecasts and projections and other pro forma information or any underlying assumptions;

●

assumed that information supplied by and representations made by Chardan and Dragonfly and their respective management are substantially accurate regarding Chardan, Dragonfly, New Dragonfly, and the Business Combination;

●

assumed that the representations and warranties made in the Business Combination Agreement are substantially accurate;

●

assumed that the final versions of all documents reviewed by Duff & Phelps in draft form conform in all material respects to the drafts reviewed;

●

assumed that the PIPE Investment and the Term Loan will be completed as contemplated by the draft documents reviewed by Duff & Phelps and as described by management of Dragonfly and Chardan;

●

assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of Chardan or Dragonfly since the date of the most recent financial statements and other information made available to Duff & Phelps, and that there is no information or facts that would make the information reviewed by Duff & Phelps incomplete or misleading;

●

assumed that all of the conditions required to implement the Business Combination will be satisfied and that the Business Combination will be completed in a timely manner in accordance with the Business Combination Agreement without any material amendments thereto or any waivers of any terms or conditions thereof; and

●

assumed that the consummation of the Business Combination will comply in all respects with all applicable foreign, federal, state and local statutes, rules and regulations and that all governmental, regulatory or other consents and approvals necessary

Table of Contents

for the consummation of the Business Combination will be obtained without any adverse effect, that would be material to Duff & Phelps’ analysis, on Chardan, Dragonfly, New Dragonfly or the contemplated benefits expected to be derived in the Business Combination.

Given Chardan’s nature as a special purpose acquisition company, for purposes of the Opinion and its analysis and with Chardan’s consent, Duff & Phelps assumed a value of $10.15 per share for Chardan’s Common Stock, with such $10.15 value being based on Chardan’s initial public offering of $10.00 per share and Chardan’s approximate cash per outstanding share of Chardan common stock (excluding, for the avoidance of doubt, the dilutive impact of founder shares or any Public Warrants, Private Warrants or other rights). Further, for purposes of the Opinion and its analysis and with Chardan’s consent, Duff & Phelps assumed the accuracy and completeness of the capitalization information for New Dragonfly prepared by Chardan, pro forma for the Business Combination, the PIPE Investment and the Term Loan.

To the extent that any of the foregoing assumptions, representations or any of the facts on which the Opinion is based prove to be untrue in any material respect, Duff & Phelps informed the Chardan Board that the Opinion cannot and should not be relied upon. Furthermore, in Duff & Phelps’ analysis and in connection with the preparation of the Opinion, Duff & Phelps made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Business Combination.

Duff & Phelps prepared the Opinion effective as of May 13, 2022. The Opinion was necessarily based upon market, economic, financial and other conditions as they existed as of such date and could be evaluated as of such date, and Duff & Phelps disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Opinion which may come or be brought to the attention of Duff & Phelps after such date.

Duff & Phelps did not evaluate the solvency of Chardan, Dragonfly, or New Dragonfly or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent, derivative, off- balance sheet or otherwise). Duff & Phelps was not requested to, and did not, (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Business Combination, the assets, businesses or operations of Chardan or Dragonfly, or any alternatives to the Business Combination, (ii) negotiate the terms of the Business Combination, and therefore, Duff & Phelps assumed that such terms are the most beneficial terms, from Chardan’s perspective, that could, under the circumstances, be negotiated among the parties to the Business Combination Agreement and the Business Combination, or (iii) advise the Chardan Board or any other party with respect to alternatives to the Business Combination.

Duff & Phelps assumed that the Merger will qualify, for US federal income tax purposes, as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. Duff & Phelps was not expressing any view or rendering any opinion regarding the tax consequences of the Merger to Chardan, Dragonfly, New Dragonfly, or their respective shareholders.

In rendering the Opinion, Duff & Phelps was not expressing any opinion as to the market price or value of Chardan’s Common Stock or the equity of New Dragonfly (or anything else) either before or after the consummation of the Business Combination or how any such shares may trade at any time. The Opinion should not be construed as a valuation opinion, credit rating, solvency opinion, an analysis of Chardan’s, Dragonfly’s, or New Dragonfly’s credit worthiness, as tax advice or as accounting advice. Duff & Phelps did not make, and assumed no responsibility to make, any representation, or render any opinion, as to any legal matter.

In rendering the Opinion, Duff & Phelps was not expressing any opinion with respect to the amount or nature of any compensation to any of Chardan’s or Dragonfly’s officers, directors or employees, or any class of such persons, relative to the Total Consideration, or with respect to the fairness of any such compensation.

Duff & Phelps’ Opinion was furnished for the use and benefit of the Chardan Board in connection with the Business Combination. Duff & Phelps has consented to the inclusion of the Opinion in its entirety and the description hereof in this proxy statement/prospectus and any other filing Chardan is required to make with the SEC in connection with the Business Combination if such inclusion is required by the applicable law. The Opinion (i) did not address the merits of the underlying business decision to enter into the Business Combination versus any alternative strategy or transaction; (ii) did not address or express any view on any transaction related to the Business Combination, including the PIPE investment and the Term Loan; (iii) was not a recommendation as to how the Chardan Board or any stockholder of Chardan or Dragonfly should vote or act with respect to any matters relating to the Business Combination, or whether to proceed with the Business Combination or any related transaction; and (iv) did not indicate that the Total Consideration is the best possibly attainable by Chardan under any circumstances; instead, it merely stated whether the Total Consideration is within or

Table of Contents

below a range suggested by certain financial analyses. The decision as to whether to proceed with the Business Combination or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the Opinion was based. The Opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.

Except for the Opinion, Duff & Phelps did not express any view or opinion as to (i) any other term, aspect or implication of (a) the Business Combination (including, without limitation, the form or structure of the Business Combination) or the Business Combination Agreement or (b) any other agreement, transaction document or instrument contemplated by the Business Combination Agreement or to be entered into or amended in connection with the Business Combination, including the PIPE Investment and the Term Loan, or (ii) the fairness, financial or otherwise, of the Business Combination to, or of any consideration to be paid to or received by, the holders of any class of securities of Chardan or Dragonfly (including, without limitation, the fairness or the potential dilutive or other effects of the Business Combination or the PIPE Investment). The Opinion did not in any way address proportionate allocation or relative fairness (including, without limitation, the allocation of any consideration among or within any classes or groups of security holders or other constituents of Chardan or any other party). Duff & Phelps also did not address, or express a view with respect to, any acquisition of control or effective control of New Dragonfly by any stockholder or group of stockholders of Dragonfly (including, without limitation, any voting, control, consent rights or similar rights, preferences or privileges as among or in comparison to any classes or groups of security holders or other constituents of Chardan, Dragonfly, New Dragonfly or any other party). The Opinion did not in any way address the appropriate capital structure of New Dragonfly, whether New Dragonfly should be issuing debt or equity securities or a combination of both in the Business Combination, or the form, structure or any aspect or terms of any debt or equity financing for the Business Combination (including, without limitation, the PIPE Investment and the Term Loan) or the likelihood of obtaining such financing, or whether or not Dragonfly, Chardan, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Business Combination.

Set forth below is a summary of the material analyses performed by Duff & Phelps in connection with the delivery of the Opinion to the Chardan Board. This summary is qualified in its entirety by reference to the full text of the Opinion, attached to this proxy statement/prospectus as Annex I. While this summary describes the analyses and factors that Duff & Phelps deemed material in its presentation to the Chardan Board, it is not a comprehensive description of all analyses and factors considered by Duff & Phelps. The preparation of a fairness opinion is a complex process that involves various determinations as to appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at the Opinion, Duff & Phelps did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Duff & Phelps believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it in rendering the Opinion without considering all analyses and factors could create a misleading or incomplete view of the evaluation process underlying the Opinion. The conclusion reached by Duff & Phelps was based on all analyses and factors taken as a whole, and also on the application of Duff & Phelps’ own experience and judgment.

The financial analyses summarized below include information presented in tabular format. In order for Duff & Phelps’ financial analyses to be fully understood, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Duff & Phelps’ financial analyses.

Discounted Cash Flow Analysis

The Discounted Cash Flow (“DCF”) Analysis is a valuation technique that provides an estimation of the value of a business based on the cash flows that a business can be expected to generate (the “DCF Analysis”). The DCF Analysis begins with an estimation of the annual cash flows the subject business is expected to generate over a discrete projection period. The estimated cash flows for each of the years in the discrete projection period are then converted to their present value equivalents using a rate of return appropriate for the risk of achieving the projected cash flows. The present value of the estimated cash flows are then added to the present value equivalent of the residual/terminal value of the business at the end of the discrete projection period to arrive at an estimate of value.

Duff & Phelps performed a DCF Analysis of the estimated future unlevered free cash flows attributable to New Dragonfly for the years ending December 31, 2022 through December 31, 2023, with “unlevered free cash flow” defined as cash that is available either to reinvest or to distribute to security holders. In applying the DCF Analysis, Duff & Phelps relied on the Financial Projections. Duff & Phelps estimated the net present value of all unlevered free cash flows for New Dragonfly after fiscal year 2023 (the “Terminal Value”) by applying a revenue multiple range to New Dragonfly’s projected 2023 revenue in the Financial Projections. Duff & Phelps discounted

Table of Contents

the unlevered free cash flows in the discrete period and the Terminal Values in 2023 back to the present to obtain a range of the estimated current enterprise value of New Dragonfly.

Market Approach

The “Market Approach” is a valuation technique that provides an estimation of value by applying a valuation multiple to a specific financial metric for the subject company. These valuation multiples are either observed or derived from (i) market prices of actively traded, public companies, publicly available historical financial information and consensus equity research analyst estimates of future financial performance or (ii) prices paid in actual mergers, acquisitions or other transactions. The valuation process includes, but is not limited to, a comparison of various quantitative and qualitative factors between the subject business and other similar businesses.

Duff & Phelps utilized the Market Approach to (i) select a range of last twelve month (“LTM”) revenue multiples to calculate the Terminal Value for the DCF Analysis and (ii) select a range of 2022 and 2023 revenue multiples to estimate a range of current enterprise value-to-projected 2022 and 2023 revenue for New Dragonfly.

Duff & Phelps selected ten companies that it deemed relevant in its analysis (the “Selected Publicly Traded Companies”). Duff & Phelps arranged the Selected Publicly Traded Companies into three groups: Mature lithium-ion battery companies, solid state battery companies, and energy storage and other companies. Duff & Phelps selected the Selected Publicly Traded Companies based on their relative similarity, primarily in terms of business focus, revenue growth history and outlook, capital requirements, profit margins and other characteristics, to that of New Dragonfly. Duff & Phelps noted that none of the Selected Publicly Traded Companies are perfectly comparable to New Dragonfly. Duff & Phelps does not have access to non-public information of any of the Selected Publicly Traded Companies. Accordingly, a complete valuation analysis of New Dragonfly cannot rely solely upon a quantitative review of the Selected Publicly Traded Companies but involves complex considerations and judgments concerning differences in financial and operating characteristics of such companies, as well as other factors that could affect their value relative to that of New Dragonfly. Therefore, the Market Approach is subject to certain limitations.

The tables below summarize certain observed historical and projected financial performance and trading multiples of the Selected Publicly Traded Companies. The estimates for 2022 and 2023 in the tables below with respect to the Selected Publicly Traded Companies were derived based on information for the 12-month periods ending closest to New Dragonfly’s fiscal year ends for which information was available.

Selected Publicly Traded Companies


	LTM		2022		2023		LTM		2022		2023
	Revenue		Revenue		Revenue		EBITDA		EBITDA		EBITDA
	Growth		Growth		Growth		Growth		Growth		Growth
Mature Lithium-Ion Battery Companies
BYD Company Limited	36.0	%	53.2	%	24.5	%	-26.3	%	47.9	%	27.4	%
Samsung SDI Co., Ltd.	20.0	%	31.2	%	18.6	%	32.6	%	34.7	%	21.7	%
Solid State Battery Companies
QuantumScape Corporation	NM		NM		NM		NM		NM		NM
Solid Power, Inc.	29.0	%	47.5	%	NM		NM		NM		NM
Energy Storage/Other
Enovix Corporation	NM		NM		1376.3	%	NM		NM		NM
Eos Energy Enterprises, Inc.	1918.8	%	987.4	%	321.2	%	NM		NM		NM
ESS Tech, Inc.	NM		NM		2523.4	%	NM		NM		NM
Li-Cycle Holdings Corp.	482.4	%	417.9	%	376.9	%	NM		NM		NM
Microvast Holdings, Inc.	41.3	%	38.8	%	79.1	%	NM		NM		NM
Stem, Inc.	221.4	%	207.2	%	62.5	%	NM		NM		NM

Table of Contents


	LTM		2022		2023
	EBITDA		EBITDA		EBITDA
	Margin		Margin		Margin
Mature Lithium-Ion Battery Companies
BYD Company Limited	7.3	%	8.0	%	8.2	%
Samsung SDI Co., Ltd.	16.9	%	17.4	%	17.8	%
Solid State Battery Companies
QuantumScape Corporation	NM		NM		NM
Solid Power, Inc.	NM		NM		NM
Energy Storage/Other
Enovix Corporation	NM		NM		NM
Eos Energy Enterprises, Inc.	NM		NM		NM
ESS Tech, Inc.	NM		NM		NM
Li-Cycle Holdings Corp.	NM		NM		11.5	%
Microvast Holdings, Inc.	NM		NM		NM
Stem, Inc.	NM		NM		2.6	%

EV/ LTM

EV/ 2022

EV/ 2023

EV/ LTM

EV/ 2022

EV/ 2023

Revenue

EBITDA

Mature Lithium-Ion Battery Companies

BYD Company Limited

2.72x

1.99x

1.60x

36.9x

24.8x

19.5x

Samsung SDI Co., Ltd.

2.38x

1.81x

1.53x

13.9x

10.4x

8.6x

Solid State Battery Companies

QuantumScape Corporation

Solid Power, Inc.

Energy Storage/Other

Enovix Corporation

90.58x

6.14x

Eos Energy Enterprises, Inc.

16.25x

2.51x

0.60x

ESS Tech, Inc.

49.55x

1.89x

Li-Cycle Holdings Corp.

65.03x

17.36x

3.64x

31.7x

Microvast Holdings, Inc.

4.62x

3.33x

1.86x

Stem, Inc.

7.79x

3.05x

1.87x

71.4x

LTM = Latest Twelve Months NM = Not Meaningful

EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization

EV: Enterprise Value = Market capitalization plus debt, net of cash and equivalents

Sources: S&P Capital IQ, SEC Filings, Annual and Interim Reports, Investor Presentations

Summary Financial Analyses

Discounted Cash Flow Analysis

Based on the data shown in the tables above, Duff & Phelps selected a range of multiples to apply to New Dragonfly’s projected 2023 revenue to obtain a range of Terminal Values to incorporate in to the DCF Analysis. In particular, Duff & Phelps analyzed LTM and projected 2022 revenue growth, LTM and projected 2022 EBITDA growth, LTM and projected 2022 EBITDA margins, and multiples of enterprise value-to-LTM and enterprise value-to-projected 2022 revenue for the Selected Publicly Traded Companies compared to projected 2023 revenue growth, projected 2023 EBITDA growth, projected 2023 EBITDA margin for New Dragonfly, based on the Financial Projections. Such analysis informed the selection of terminal multiples of projected 2023 revenue for New Dragonfly. Rather than applying the average or median multiple from these analyses, Duff & Phelps selected multiples that, in its judgement, reflected New Dragonfly’s size, revenue growth outlook, capital requirements, profit margins, stage of product pipeline and other characteristics relative to the Selected Publicly Traded Companies. Based on these analyses, Duff & Phelps’ selected a terminal revenue multiple range of 3.75x to 4.25x New Dragonfly’s projected 2023 revenue which resulting terminal value range was utilized in

Table of Contents

the DCF Analysis to estimate the current enterprise value range of New Dragonfly. Duff & Phelps noted that the range of implied terminal EBITDA multiples of 24.4x to 27.7x based on the selected range of terminal revenue multiples was within the range of LTM EBITDA multiples for the mature battery company group.

Determination of an appropriate discount rate to use in the DCF Analysis requires a degree of judgment. Duff & Phelps considered a number of factors in determining the discount rate range, including the results of published studies on discount rates. Duff & Phelps also considered (i) New Dragonfly’s stage in the cycle of management’s business plan, (ii) New Dragonfly’s projected financial performance and growth and (iii) the risks facing New Dragonfly in order to achieve the projected results, including execution risk and competitive risks, among others. Based on these factors and the published discount rate studies, Duff & Phelps used discount rates ranging from 25.0% to 30.0% to discount the projected unlevered free cash flows and the Terminal Value. Duff & Phelps believes that this range of discount rates is consistent with the rate of return that security holders would require on alternative investment opportunities with similar risk profiles, including risks of achieving the projected cash flows based on the Financial Projections.

Based on these assumptions, Duff & Phelps’ DCF Analysis resulted in an estimated enterprise value range for New Dragonfly of $630 million to $760 million.

Market Approach

Based on the data shown in the tables above, Duff & Phelps also selected a range of valuation multiples to apply to New Dragonfly’s projected 2022 revenue and projected 2023 revenue to obtain a range of current enterprise values for New Dragonfly using the Market Approach. Duff & Phelps analyzed 2021 through 2023 revenue and EBITDA growth and 2021 through 2023 EBITDA margins for the Selected Publicly Traded Companies and compared these metrics to the same metrics for New Dragonfly, based on the Financial Projections. Duff & Phelps used these comparisons and the multiples of enterprise value-to-2022 projected revenue for the Selected Publicly Traded Companies to select a 2022 revenue multiple range of 5.50x to 6.50x to apply to New Dragonfly’s projected 2022 revenue and the multiples of enterprise value-to-2023 projected revenue for the Selected Publicly Traded Companies to select a 2023 revenue multiple range of 2.50x to 3.00x to apply to New Dragonfly’s projected 2023 revenue, resulting in an estimated current enterprise value range for New Dragonfly. Duff & Phelps selected multiples that, in its judgement, reflected New Dragonfly’s revenue growth outlook, capital requirements, profit margins, stage of product pipeline and other characteristics relative to the Selected Publicly Traded Companies.

Duff & Phelps’ Market Approach resulted in an estimated enterprise value range for New Dragonfly of $640 million to $760 million.

Conclusion

Duff & Phelps estimated the range of enterprise value of New Dragonfly to be $640 million to $760 million, based on the ranges indicated by the DCF Analysis and the Market Approach. Duff & Phelps further estimated the range of total equity value of New Dragonfly following the Business Combination by adding pro forma cash and cash equivalents of $133 million (which assumes no redemptions), subtracting the face value of pro forma debt of $75 million, subtracting the Duff & Phelps’ estimated theoretical value range of Management Performance Shares of approximately $150 million to $210 million and subtracting Duff & Phelps’ estimated value range of all warrants of $7 million to $8 million. Duff & Phelps estimated the value ranges for the Management Performance Shares and warrants with a stock price simulation model using volatility inputs derived from public companies. After making these adjustments, the estimated total equity value range for New Dragonfly was $541 million to $600 million.

Duff & Phelps calculated that the equity value of New Dragonfly implied by the Business Combination was $566 million, which is equivalent to 56 million shares outstanding (assuming no redemptions) multiplied by $10.15 per share. Duff & Phelps noted that the Aggregate Merger Consideration to be paid to current Dragonfly equityholders implied by the Business Combination is, therefore, $372 million, which is based on Dragonfly’s former owners’ pro forma 65.8% ownership of New Dragonfly (based on the pro forma capitalization table for New Dragonfly and assuming no redemptions).

Duff & Phelps noted that the Aggregate Merger Consideration to be paid to current Dragonfly equityholders of $372 million is within the range of $356 million to $395 million estimated for current Dragonfly equityholders’ pro forma 65.8% ownership of New Dragonfly (based on the pro forma capitalization table for New Dragonfly and assuming no redemptions).

Table of Contents

Duff & Phelps noted that Chardan’s trust account balance of $128.4 million is within the range of $123 million to $136 million estimated for Chardan stockholders’ pro forma 22.7% ownership of New Dragonfly (based on the pro forma capitalization table for New Dragonfly and assuming no redemptions).

The Opinion was only one of the many factors considered by the Chardan Board in its evaluation of the Business Combination and should not be viewed as determinative of the views of the Chardan Board.

Fees and Expenses

As compensation for Duff & Phelps’ services in connection with the rendering of the Opinion to the Chardan Board, Chardan agreed to pay Duff & Phelps a fee of $450,000. A portion of the fee was payable upon delivery of the Opinion and a portion is payable upon consummation of the Business Combination.

No portion of Duff & Phelps’ fee is refundable or contingent upon the conclusion reached in the Opinion.

Furthermore, Duff & Phelps is entitled to be paid additional fees at a percentage of Duff & Phelps’ standard hourly rates for any time incurred should Duff & Phelps be called upon to support its findings subsequent to the delivery of its opinion. Chardan has also agreed to reimburse Duff & Phelps for its reasonable out-of-pocket expenses and reasonable fees and expenses of outside counsel retained by Duff & Phelps in connection with the engagement. Chardan has also agreed to indemnify Duff & Phelps for certain liabilities arising out of its engagement.

The terms of the fee arrangements with Duff & Phelps, which Chardan believes are customary in transactions of this nature, were negotiated at arm’s length, and the Chardan Board is aware of these fee arrangements.

Disclosure of Prior Relationships

Duff & Phelps previously provided a fairness opinion to an affiliate of Chardan in connection with an unrelated transaction. For this prior engagement, Duff & Phelps received customary fees, expense reimbursement, and indemnification. Duff & Phelps may seek to provide Chardan, Dragonfly, New Dragonfly and their respective affiliates and equity holders with financial advisory and other services unrelated to the Business Combination in the future, for which services Duff & Phelps would expect to receive compensation.

100

Table of Contents

SPECIAL MEETING OF CHARDAN STOCKHOLDERS

General

Chardan is furnishing this proxy statement to Chardan’s stockholders as part of the solicitation of proxies by the Chardan Board for use at the special meeting of Chardan stockholders to be held on [●] and at any adjournment or postponement thereof. This proxy statement provides Chardan’s stockholders with information they need to know to be able to vote or instruct their vote to be cast at the special meeting.

Date, Time and Place

The special meeting of stockholders will be held at [•] a.m. Eastern Time, on [•]. In light of the COVID-19 pandemic and to protect the health of stockholders of Chardan and the community, the Special Meeting will be a completely virtual meeting of stockholders conducted via live webcast. You will be able to attend the Special Meeting by visiting https://www.cstproxy.com/cnaq/2022 and entering your control number as further explained in the accompanying proxy statement/prospectus. You may also attend the Special Meeting telephonically by dialing within the U.S. and Canada: +1 857-999-9155 (toll free) or outside of the U.S. and Canada: +1 857-999-9155 and when prompted enter the pin 5046958#.

Registering for the Special Meeting

If you do not have access to Internet, you can listen only to the meeting by dialing +1 857-999-9155 (or +1 857-999-9155 if you are located outside the United States and Canada (standard rates apply)) and when prompted enter the pin number. Please note that you will not be able to vote or ask questions at the Special Meeting if you choose to participate telephonically.

Purpose of the Chardan Special Meeting

At the special meeting, Chardan is asking holders of Chardan common stock to consider and vote upon:

●

a proposal to approve the Business Combination, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in this proxy statement. See the section entitled “Proposal No. 1 — The Business Combination Proposal” for additional information;

●

a proposal to approve and adopt changes to the certificate of incorporation of Chardan reflected in the second amended and restated certificate of incorporation of Chardan in the form attached hereto as Annex B. See the section entitled “Proposal No. 2 — The Charter Proposal” for additional information;

●

a proposal to approve, for purposes of complying with the applicable rules of the Nasdaq, the issuance of more than 20% of Chardan’s issued and outstanding shares of common stock in connection with the Business Combination, including, without limitation, the Aggregate Merger Consideration, the Earnout Shares, the PIPE Investment, the Term Loan Lender Warrants and the Equity Facility. See the section entitled “Proposal No. 3 — The Nasdaq Proposal” for additional information;

●

a proposal to approve and adopt the 2022 Plan. See the section entitled “Proposal No. 4 - The Incentive Plan Proposal” for additional information;

●

a proposal to approve and adopt the ESPP. See the section entitled “Proposal No. 5 — The ESPP Proposal” for more information;

●

a proposal to approve and elect seven (7) directors to the New Dragonfly board. See the section entitled “Proposal No. 6 — The Director Election Proposal” for more information and

101

Table of Contents

●

a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal or the Director Election Proposal. See the section entitled “Proposal No. 7 — The Adjournment Proposal.”

Recommendation of the Chardan Board

The Chardan Board unanimously recommends that stockholders vote “FOR” the Business Combination Proposal, “FOR” the Charter Proposal, “FOR” the Nasdaq Proposal, “FOR” the Incentive Plan Proposal, “FOR” the ESPP Proposal, “FOR” the Director Election Proposal and “FOR” the Adjournment Proposal, if presented.

Record Date; Persons Entitled to Vote

Chardan has fixed the close of business on July 11, 2022, as the record date for determining Chardan stockholders entitled to notice of and to attend and vote at the special meeting. As of the close of business on the record date, there were 15,812,500 shares of Chardan common stock outstanding and entitled to vote. Each share of Chardan common stock is entitled to one vote per share at the special meeting.

Quorum

The presence at the special meeting by attendance in person (via the virtual meeting platform) or by proxy, of a majority of the voting power of all the outstanding shares of Chardan common stock as of the record date entitled to vote constitutes a quorum at the special meeting. Proxies that are marked “ABSTAIN” will be treated as shares present for purposes of determining the presence of a quorum on all matters. Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting.

Vote Required for Approval

The approval of each of the Business Combination Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Adjournment Proposal requires the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to Business Combination Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Adjournment Proposal will have the same effect as a vote “AGAINST” such proposals.

Approval of the Director Election Proposal will require the vote by a plurality of the shares of the Common Stock present in person by virtual attendance or represented by proxy and entitled to vote at the Special Meeting.

Consummation of the Business Combination is conditioned on the approval of each of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Director Election Proposal. It is important for you to note that in the event that the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal or , the Director Election Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination.

102

Table of Contents

Effect of Abstentions and Broker Non-Votes

Abstentions will have the same effect as a vote “AGAINST” each of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal, the Director Election Proposal and the Adjournment Proposal. Abstentions will have no effect on the Director Election Proposal.

Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. We believe the proposals presented to the stockholders at the special meeting will be considered non-routine and, therefore, your broker, bank or nominee cannot vote your shares without your instruction on any of the proposals presented at the special meeting. If you do not provide instructions with your proxy, your broker, bank, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank or nominee is not voting your shares is referred to as a “broker non-vote.”

Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

Broker non-votes will count as a vote “AGAINST” the Charter Proposal but will not have any effect on the outcome of any other proposals.

Voting Your Shares

Each share of Chardan common stock that you own in your name entitles you to one vote. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.

There are two ways to vote your shares of Chardan common stock at the special meeting:

●

You Can Vote By Signing and Returning the Enclosed Proxy Card. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted “FOR” the Business Combination Proposal, “FOR” the Charter Proposal, “FOR” the Nasdaq Proposal, “FOR” the Incentive Plan Proposal, “FOR” the ESPP Proposal, “For” the Director Election Proposal and “FOR” the Adjournment Proposal, if presented. Votes received after a matter has been voted upon at the special meeting will not be counted.

●

You can attend the special meeting in person (via the virtual meeting platform) and vote during the meeting by following the instructions on your proxy card.

However, if your shares are held in the name of your broker, bank or another nominee, you must get a proxy from the broker, bank or other nominee. That is the only way Chardan can be sure that the broker, bank or nominee has not already voted your shares.

Revoking Your Proxy

If you are a stockholder and you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

●

you may send another proxy card with a later date;

●

you may notify Chardan’s Secretary in writing before the special meeting that you have revoked your proxy; or

●

you may attend the special meeting, revoke your proxy, and vote at the special meeting, as indicated above.

103

Table of Contents

Who Can Answer Your Questions About Voting Your Shares

If you are a stockholder and have any questions about how to vote or direct a vote in respect of your shares of Chardan common stock, you may call Chardan’s proxy solicitor, Morrow Sodali LLC, toll-free at 800-662-5200 or banks and brokers may call collect at 203-658-9400, or Chardan at (646) 465-9000.

Redemption Rights

Pursuant to our current certificate of incorporation, holders of public shares may seek to redeem their shares for cash, regardless of whether they vote “FOR” or “AGAINST” the Business Combination Proposal. Any stockholder holding public shares as of the record date who votes “FOR” or “AGAINST” the Business Combination Proposal may demand that Chardan redeem such shares for a full pro rata portion of the trust account (which, for illustrative purposes, was approximately $10.15 per share as of March 31, 2022), calculated as of two business days prior to the anticipated consummation of the Business Combination. If a holder properly seeks redemption as described in this section and the Business Combination is consummated, Chardan will redeem these shares for a pro rata portion of funds deposited in the trust account and the holder will no longer own these shares following the Business Combination. The redemption rights include the requirement that a holder must identify himself, herself or itself in writing as a beneficial holder and provide his, her or its legal name, phone number and address to the transfer agent in order to validly redeem his, her or its shares.

Notwithstanding the foregoing, a holder of public shares, together with any of its affiliates or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 20% of the public shares. Accordingly, all public shares in excess of 20% held by a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed for cash.

The Sponsor and the Insiders will not have redemption rights with respect to any shares of Chardan common stock owned by them, directly or indirectly in connection with the Business Combination.

Holders may demand redemption by delivering their stock, either physically or electronically using the Depository Trust Company’s DWAC System, to the Transfer Agent prior to the vote at the special meeting. If you hold the shares in street name, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be redeemed for cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $100 and it would be up to the broker whether or not to pass this cost on to the redeeming stockholder. In the event the Business Combination is not consummated this may result in an additional cost to stockholders for the return of their shares.

Any request to redeem such shares, once made, may be withdrawn at any time up to the vote on the Business Combination Proposal. Furthermore, if a holder of a public share delivered its certificate in connection with an election of its redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that the transfer agent return the certificate (physically or electronically).

If the Business Combination is not approved or completed for any reason, then Chardan’s public stockholders who elected to exercise their redemption rights will not be entitled to redeem their shares for a full pro rata portion of the trust account, as applicable. In such case, Chardan will promptly return any shares delivered by public holders. Additionally, if Chardan would be left with less than $5,000,001 of net tangible assets as a result of the holders of public shares properly demanding redemption of their shares for cash, Chardan will not be able to consummate the Business Combination.

The closing price of Chardan common stock on March 31, 2022 was $10.07 per share. The cash held in the trust account on such date was approximately $128,437,281 (approximately $10.15 per public share). Prior to exercising redemption rights, stockholders should verify the market price of Chardan common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. Chardan cannot assure its stockholders that they will be able to sell their shares of Chardan common stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in its securities when its stockholders wish to sell their shares.

104

Table of Contents

If a holder of public shares exercises its redemption rights, then it will be exchanging its shares of Chardan common stock for cash and will no longer own those shares. You will be entitled to receive cash for these shares only if you properly demand redemption no later than the close of the vote on the Business Combination Proposal by delivering your stock certificate (either physically or electronically) to the Transfer Agent prior to the vote at the special meeting, and the Business Combination is consummated.

Appraisal Rights / Dissenter’s Rights

Neither stockholders, unitholders nor warrant holders of Chardan have appraisal rights in connection the Business Combination under the DGCL.

Please see the section entitled “Appraisal Rights and Dissenter’s Rights” for additional information.

Proxy Solicitation Costs

Chardan is soliciting proxies on behalf of its board of directors. This solicitation is being made by mail. Chardan and its directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. Chardan will bear the cost of the solicitation.

Chardan has hired Morrow Sodali LLC to assist in the proxy solicitation process. Chardan will pay that firm a fee of $27,500 plus disbursements. Such payment will be made from non-trust account funds.

Chardan will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. Chardan will reimburse them for their reasonable expenses.

105

Table of Contents

PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL

Overview

Chardan’s stockholders are being asked to approve the Business Combination with Dragonfly described in this proxy statement, including (a) adopting the Business Combination Agreement and (b) approving the other transactions contemplated by the Business Combination Agreement and related agreements described in this proxy statement. The discussion in this proxy statement of the Business Combination and the principal terms of the Business Combination Agreement is subject to, and is qualified in its entirety by reference to, the Business Combination Agreement, which is attached as Annex A to this proxy statement.

You should carefully read this proxy statement in its entirety for more detailed information concerning the Business Combination Agreement. Please see the subsection entitled “— Business Combination Agreement” below for additional information and a summary of certain terms of the Business Combination Agreement.

We may consummate the Business Combination only if it is approved by the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon.

The Business Combination Agreement

This subsection of the proxy statement describes the material provisions of the Business Combination Agreement, but does not purport to describe all of the terms of the Business Combination Agreement. The following summary is qualified in its entirety by reference to the complete text of the Business Combination Agreement, which is attached as Annex A to this proxy statement. You are urged to read the Business Combination Agreement in its entirety because it is the primary legal document that governs the Business Combination.

The Business Combination Agreement contains representations, warranties and covenants that the respective parties made to each other as of the date of the Business Combination Agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Business Combination Agreement. The representations, warranties and covenants in the Business Combination Agreement are also modified in part by the disclosure schedules (the “disclosure schedules”), which are not filed publicly and which are subject to a contractual standard of materiality different from that generally applicable to stockholders and were used for the purpose of allocating risk among the parties rather than establishing matters as facts. We do not believe that the disclosure schedules contain information that is material to an investment decision. Additionally, the representations and warranties of the parties to the Business Combination Agreement may or may not have been accurate as of any specific date and do not purport to be accurate as of the date of this proxy statement. Accordingly, no person should rely on the representations and warranties in the Business Combination Agreement or the summaries thereof in this proxy statement as characterizations of the actual state of facts about Chardan, Merger Sub, Dragonfly or any other matter.

On May 15, 2022, Chardan, Merger Sub and Dragonfly entered into the Business Combination Agreement (as amended on July 12, 2022), which provides, among other things, that the parties to the Business Combination Agreement will cause articles of merger to be executed and filed with the Secretary of State of the State of Nevada, pursuant to which Merger Sub will merge with and into Dragonfly, with Dragonfly as the surviving corporation in the Merger and, after giving effect to such merger, Dragonfly will be a wholly owned subsidiary of Chardan. The Aggregate Merger Consideration to be received by equityholders of Dragonfly as of immediately prior to the Closing (including pursuant to the Dragonfly Incentive Plan, as described below) will be 41,500,000 shares of Chardan common stock (at a deemed value of $10.00 per share) or, as applicable, shares underlying options based on Dragonfly common stock. The portion of the Aggregate Merger Consideration reflecting the conversion of the Dragonfly options is calculated assuming that all New Dragonfly options are net-settled. With respect to the New Dragonfly options received in respect of Dragonfly options that are outstanding immediately prior to the Closing and cash exercised after the Closing, up to 3,474,256 additional shares of New Dragonfly common stock may be issued. Dragonfly stockholders will also have the contingent right to receive up to 40,000,000 shares of New Dragonfly common stock in the aggregate as Earnout Consideration.

106

Table of Contents

but only if the stockholder complies with all other applicable requirements under the Nevada Dissenter’s Rights Statutes. Please see the section entitled “Appraisal Rights and Dissenter’s Rights” for additional information.

In connection with the foregoing and concurrently with the execution of the Business Combination Agreement, Chardan entered into the Subscription Agreement with the Sponsor, pursuant to which the Sponsor has agreed to subscribe for and purchase, and Chardan has agreed to issue and sell, an aggregate of 500,000 shares of Chardan common stock at a price of $10.00 per share, for aggregate gross proceeds of $5 million (the “Aggregate Subscription Amount”), on the terms and subject to the conditions set forth in such Subscription Agreement. The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market provided such shares are not redeemed (as described below). Please see “— Related Agreements — Subscription Agreement” for additional information.

Concurrently with the execution of the Business Combination Agreement, Chardan and Dragonfly entered into a commitment letter (the “Debt Commitment Letter”) with CCM Investments 5 LLC, an affiliate of Chardan Capital Markets (“CCM 5” and, in connection with the Term Loan, the “Chardan Lender”), and EICF Agent LLC (“EIP” and, collectively with the Chardan Lender, the “Initial Term Loan Lenders”), pursuant to which the Initial Term Loan Lenders have agreed to provide Dragonfly with a senior secured term loan facility in an aggregate principal amount of $75 million (the “Term Loan”) on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The obligations of the Initial Term Loan Lenders to provide the Term Loan will terminate on October 31, 2022 (or such later date reasonably acceptable to the Initial Term Loan Lenders) if the Closing Date has not occurred by such date. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender”), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto.

Concurrently with the execution of the Business Combination Agreement, Dragonfly and CCM 5, an affiliate of Chardan Capital Markets (CCM 5 in connection with the Equity Facility, or such other affiliate investor as it may designate, the “Equity Facility Investor”), entered into an equity facility letter agreement on May 15, 2022 (the “Equity Facility Letter Agreement”), pursuant to which Chardan and Dragonfly agreed to enter into definitive documentation (the “Equity Facility Definitive Documentation”) prior to the Closing Date to establish a committed equity facility (the “Equity Facility”). The Equity Facility Definitive Documentation will contain terms that are consistent with the Equity Facility Letter Agreement and customary for documentation of this nature. Pursuant to, on the terms of and subject to the satisfaction of the conditions to be set forth in the Equity Facility Definitive Documentation, including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly common stock issued to it under the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility. The Equity Facility will be structured to allow New Dragonfly, on the terms and subject to the conditions thereof, to raise funds from the issuance of equity on a periodic basis outside the context of a traditional underwritten follow-on offering.

The PIPE Securities to be issued or issuable pursuant to the Subscription Agreement have not been registered under the Securities Act in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act. Chardan has granted the PIPE Investor certain

107

Table of Contents

registration rights in connection with the PIPE Investment. The PIPE Investment is contingent upon, among other things, the substantially concurrent closing of the Business Combination.

In connection with the Business Combination, certain related agreements have been, or will be entered into on or prior to Closing, including the Subscription Agreement, the Sponsor Support Agreement, the Registration Rights Agreement (each as hereinafter defined) and the other documents delivered pursuant to the Business Combination Agreement. See “— Related Agreements” for more information.

Consideration to Dragonfly Holders in the Business Combination

In accordance with the terms and subject to the conditions of the Business Combination Agreement, the holders of Dragonfly Conversion Shares will receive a portion of the Aggregate Merger Consideration equal to (1) the Exchange Ratio, multiplied by (2) the number of Dragonfly Conversion Shares held by such holder as of immediately prior to the Effective Time, with fractional shares rounded down to the nearest whole share as to each such separate holder of Dragonfly Conversion Share. Further, in accordance with the terms and subject to the conditions of the Business Combination Agreement, the holders of Dragonfly Conversion Shares will receive their pro rata portion of the Earnout Consideration on the applicable earnout achievement dates to the extent due and issuable, with fractional shares rounded to the nearest whole share as to each such separate holder of Dragonfly Conversion Shares.

Holders of Dragonfly stock will have the contingent right to receive up to 40,000,000 shares of New Dragonfly common stock in the aggregate (“Earnout Consideration”), as follows:

●

New Dragonfly shall issue 15,000,000 shares of New Dragonfly common stock in the aggregate, if, as disclosed in the Annual Report on Form 10-K for the fiscal year ending December 31, 2023 for New Dragonfly filed with the SEC, Acquiror’s (x) total audited revenue for the year ended December 31, 2023 is equal to or greater than $250,000,000, and (y) audited operating income for the year ended December 31, 2023 is equal to or greater than $35,000,000 (the “First Milestone”).

●

New Dragonfly shall issue an additional 12,500,000 shares of New Dragonfly common stock, in the aggregate, if at any time during the period beginning on the Closing Date and ending on December 31, 2026 (the “Second Milestone Earnout Period”), the VWAP of the New Dragonfly common stock over any 20 Trading Days (which may or may not be consecutive) within any 30 consecutive Trading Day period is greater than or equal to $22.50 per share of New Dragonfly common stock (the “Second Milestone”).

●

New Dragonfly shall issue an additional 12,500,000 shares of New Dragonfly common stock, in the aggregate, if at any time during the period beginning on the Closing Date and ending on December 31, 2028 (the “Third Milestone Earnout Period” and together with the Second Milestone Earnout Period, each, an “Earnout Period” and collectively, the “Earnout Periods”), the VWAP of the New Dragonfly common stock over any 20 Trading Days (which may or may not be consecutive) within any 30 consecutive Trading Day period is greater than or equal to $32.50 per share of New Dragonfly common stock (the “Third Milestone” and together with the First Milestone and the Second Milestone, the “Earnout Milestones”). If the Third Milestone is reached on or prior to the Third Earnout Period, New Dragonfly shall also issue the shares of New Dragonfly common stock issuable pursuant to the Second Milestone to the extent such shares had not been previously vested (i.e., New Dragonfly shall issue a total of 25,000,000 shares, and if the First Milestone was reached, New Dragonfly will have issued a total of 40,000,000 shares).

●

Upon the consummation of a change of control transaction during either the Second Milestone Earnout Period or the Third Milestone Earnout Period, any Earnout Milestone with respect to such Earnout Period that has not yet been achieved shall automatically be deemed to have been achieved if a change of control transaction is announced with an imputed share price of New Dragonfly common stock of at least $22.50 on or prior to the Second Earnout Period or $32.50 on prior to the Third Earnout Period.

Further, each Dragonfly option will be converted into a Chardan option, and such exchanged Dragonfly option will be subject to substantially the same vesting terms applicable to the Dragonfly options as of immediately prior to the Closing except that (i) such Chardan option shall provide the right to purchase that whole number of shares of Acquiror Common Stock (rounded down to the nearest whole share) equal to the number of shares of Dragonfly common stock subject to such Chardan option, multiplied by the Exchange

108

Table of Contents

Ratio, and (ii) the exercise price per share for each such Chardan option shall be equal to the exercise price per share of such Dragonfly option in effect immediately prior to the Effective Time, divided by the Exchange Ratio (the exercise price per share, as so determined, being rounded up to the nearest full cent); provided, however, that the conversion of any such Dragonfly options that are “incentive stock options” (within the meaning of Section 422 of the Code) will be made in a manner that is intended to be consistent with Treasury Regulations Section 1.424-1, and the conversion of all Dragonfly options will be made in a manner, such that such conversion will not constitute a “modification” of such Dragonfly options for purposes of Section 409A or Section 424 of the Code, as applicable.

Closing and Effective Time of the Business Combination

The Closing of the transactions contemplated by the Business Combination Agreement is required to take place electronically by exchange of the closing deliverables via e-mail or facsimile on the second business day following the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions described below under the section entitled “— Conditions to the Closing of the Business Combination,” (other than those conditions that by their nature are to be satisfied at the Closing, but subject to satisfaction or waiver of such conditions) or at such other place, date and/or time as Chardan and Dragonfly may agree in writing.

Conditions to the Closing of the Business Combination

Conditions to Each Party’s Obligations

●

this proxy statement shall have received SEC clearance;

●

the Chardan common stock to be issued in connection with the transactions shall have been approved for listing on Nasdaq;

●

the Business Combination Agreement and, to the extent required, the transactions contemplated by the Business Combination Agreement (including the Merger) shall have been approved by the affirmative vote of the holders of the requisite number of Chardan common stock being obtained in accordance with Chardan’s current certificate of incorporation and bylaws, applicable law, and the rules and regulations of Nasdaq; and

●

the Business Combination Agreement and, to the extent required, the transactions contemplated by the Business Combination Agreement (including the Merger) shall have been approved by the requisite number of stockholders of Dragonfly in accordance with the Nevada Revised Statutes, Dragonfly’s governing documents and agreements between Dragonfly and its stockholders (“Dragonfly Stockholder Approval”). The Dragonfly Stockholder Approval was obtained and delivered to Chardan immediately following the execution of the Business Combination Agreement by execution of a written consent by the requisite equityholders of Dragonfly.

109

Table of Contents

Other Conditions to the Obligations of Chardan

●

the Company Preferred Conversion shall have occurred or will occur immediately prior to the Effective Time;

●

no Material Adverse Effect shall have occurred since the date of the Business Combination Agreement.

Other Conditions to the Obligations of Dragonfly

●

certain of the representations and warranties of Chardan regarding the capitalization of Chardan, must be true and correct in all but de minimis respects as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties shall be true and correct in all but de minimis respects at and as of such date;

●

110

Table of Contents

●

Chardan shall have performed and complied in all material respects with the covenants and agreements required to be performed or complied with by it under the Business Combination Agreement.

Representations and Warranties

Under the Business Combination Agreement, Dragonfly made customary representations and warranties to Chardan and Merger Sub relating to, among other things: organization, standing and corporate power; corporate authority; non-contravention governmental approvals; capitalization; subsidiaries; financial statements; internal controls; compliance with laws; absence of certain changes or events; no undisclosed liabilities; information supplied; litigation; contracts; employment matters; taxes; intellectual property; data protection; information technology; real property; insurance; environmental matters; regulatory matters; brokers; affiliate agreements; and no other representations or warranties.

Under the Business Combination Agreement, Chardan made customary representations and warranties to Dragonfly relating to, among other things: organization, standing and corporate power; corporate authority; approval; non-contravention; litigation; compliance with laws; employee benefit plans; financial ability; trust account; taxes; brokers; Chardan SEC reports; financial statements; Sarbanes-Oxley Act; business activities; absence of changes; proxy statement; no outside reliance; capitalization; Nasdaq stock market quotation; contracts; no defaults; title to property; Investment Company Act; affiliate agreements; takeover statutes and charter provisions; Aggregate Subscription Amount; Subscription Agreement; and no other representations or warranties.

Material Adverse Effect

Under the Business Combination Agreement, certain representations and warranties of Dragonfly, Chardan and Merger Sub are qualified in whole or in part by materiality thresholds. In addition, certain representations and warranties of Dragonfly are qualified in whole or in part by a material adverse effect standard for purposes of determining whether a breach of such representations and warranties has occurred.

Pursuant to the Business Combination Agreement, a “Company Material Adverse Effect” means any event, state of facts, development, circumstance, occurrence or effect (collectively, “Events”) that (a) has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, assets, results of operations or financial condition of Dragonfly and its Subsidiaries, taken as a whole or (b) does or would reasonably be expected to, individually or in the aggregate, prevent the ability of Dragonfly to consummate the Merger; provided, however, that in no event would any of the following, alone or in combination, be deemed to constitute, or be taken into account in determining whether there has been or will be, a “Company Material Adverse Effect”: (i) any change in applicable Laws or GAAP or any authoritative interpretation thereof following the date of the Business Combination Agreement, (ii) any change in interest rates or economic, political, business or financial market conditions generally, (iii) the taking of any action required by the Business Combination Agreement, (iv) any natural disaster (including hurricanes, storms, tornados, flooding, earthquakes, volcanic eruptions, wild fires, or similar occurrences), change in climate, (v) pandemic (including COVID-19), epidemic, other outbreaks of illness or public health events, or any law issued by a governmental authority providing for any COVID-19 measures or any change in such Law after the date of the Business Combination Agreement, (vi) any acts of terrorism or war, the outbreak or escalation of hostilities, geopolitical conditions, local, national or international political conditions, (vii) any failure of Dragonfly to meet any projections or forecasts (provided that this clause (vii) shall not prevent a determination that any Event not otherwise excluded from this definition of Company Material Adverse Effect underlying such failure to meet projections or forecasts has resulted in a Company Material Adverse Effect), (viii) the announcement of the Business Combination Agreement and consummation of the transactions contemplated hereby (it being understood that this clause (viii) shall be disregarded for purposes of the representation and warranty set forth in Section 4.4 of the Business Combination Agreement and any representation or warranty which by its terms is intended to address the consequences of the announcement of the Business Combination Agreement and consummation of the transactions contemplated hereby and the condition to Closing with respect thereto), or (ix) any action taken by Dragonfly or its Subsidiaries at the written request of, Chardan or Merger Sub; provided, further, that any Event referred to in clauses (i), (ii), (iv), (v), (vi) or (viii) above may be taken into account in determining if a Company Material Adverse Effect has occurred to the extent it has a disproportionate and adverse effect on the business, assets, results of operations or financial condition of Dragonfly and its Subsidiaries, taken as a whole, relative to similarly situated companies in the industries in which Dragonfly and its Subsidiaries conduct their respective operations, but only to the extent of the incremental disproportionate effect on Dragonfly and its Subsidiaries, taken as a whole, relative to similarly situated companies in the industries in which Dragonfly and its Subsidiaries conduct their respective operations.

111

Table of Contents

Covenants of the Parties

Covenants of Dragonfly

Dragonfly made certain covenants under the Business Combination Agreement, including, among others, the following:

●

Subject to certain exceptions (including with respect to potential suspension of operations for COVID-19) or as consented to in writing by Chardan (such consent not to be unreasonably conditioned, withheld or delayed), prior to the Closing, Dragonfly will conduct and operate its business in the ordinary course, consistent with past practice, in all material respects, use commercially reasonable efforts to preserve intact Dragonfly’s current business organization and ongoing businesses, and maintain its existing relations and goodwill with its customers, suppliers, distributors and creditors, and use commercially reasonable efforts to retain the services of its present officers.

●

Subject to certain exceptions, prior to the Closing, Dragonfly will not do any of the following without Chardan’s written consent (such consent not to be unreasonably conditioned, withheld or delayed):

●

change or amend the Governing Documents of Dragonfly or any of Dragonfly’s Subsidiaries or form or cause to be formed any new Subsidiary of Dragonfly;

●

make or declare any dividend or distribution to the equityholders of Dragonfly or make any other distributions in respect of any shares of the Company Capital Stock or the Equity Securities of Dragonfly or any of its Subsidiaries;

●

split, combine, reclassify, recapitalize or otherwise amend any terms of any shares or series of Dragonfly’s or any of its Subsidiaries’ capital stock or Equity Securities, except for any such transaction by a wholly owned Subsidiary of Dragonfly that remains a wholly owned Subsidiary of Dragonfly after consummation of such transaction;

●

purchase, repurchase, redeem or otherwise acquire any issued and outstanding share capital, outstanding shares of capital stock, membership interests or other Equity Securities of Dragonfly or its Subsidiaries, except for (i) the acquisition by Dragonfly or any of its Subsidiaries of any shares of capital stock, membership interests or other Equity Securities of Dragonfly or its Subsidiaries in connection with the forfeiture or cancellation of such interests, (ii) transactions between Dragonfly and any wholly owned Subsidiary of Dragonfly or between wholly owned Subsidiaries of Dragonfly or (iii) purchases or redemptions pursuant to exercises of Company Options issued and outstanding as of the date hereof or the withholding of shares to satisfy net settlement or Tax obligations with respect to Company Awards outstanding as of the date hereof in accordance with the terms of such Company Awards;

●

enter into, modify in any material respect or terminate (other than expiration in accordance with its terms) any Contract of a type required to be listed on Section 4.12(a) of the Company Disclosure Letter, in each case, other than in the ordinary course of business or as required by Law;

●

fail to exercise any rights of renewal with respect to any Leased Real Property that by its terms would otherwise expire, or enter into or terminate any Real Property Lease other than in the ordinary course of business or as required by Law;

●

sell, assign, transfer, convey, lease or otherwise dispose of, or create or incur any Lien (except for a Permitted Lien) on, any material tangible assets or properties of Dragonfly or its Subsidiaries, except for (i) dispositions of obsolete or worthless equipment, (ii) transactions among Dragonfly and its wholly owned Subsidiaries or among its wholly owned Subsidiaries and (iii) the sale of Dragonfly’s inventory in the ordinary course of business;

●

acquire any ownership interest in any real property;

●

except as otherwise required by Law, the terms of the applicable Company Benefit Plan as in effect on the date hereof, or the Contracts listed on Section 4.12 of the Company Disclosure Letter as in effect on the date hereof, (i) agree to pay any severance, retention, change in control or termination or similar compensation or benefits to any employee, officer, director

112

Table of Contents

or other individual service provider of Dragonfly or its Subsidiaries, (ii) hire or terminate any officer, director or employee of Dragonfly or any Subsidiary receiving annual base compensation equal to or in excess of $150,000, other than terminations of employment for cause or due to death or disability, (iii) terminate, adopt, enter into or amend any Company Benefit Plan, (iv) increase the compensation or bonus opportunity of any employee, officer, director or other individual service provider, except in the ordinary course of business for employees who are not executive officers, (v) establish any trust or take any other action to secure the payment of any compensation payable by Dragonfly or any of Dragonfly’s Subsidiaries to any employee, officer, director or other individual service provider of Dragonfly or any of Dragonfly’s Subsidiaries, (vi) take any action to amend or waive any performance or vesting criteria or to accelerate the time of payment or vesting of any compensation or benefit payable by Dragonfly or any of Dragonfly’s Subsidiaries except in the ordinary course of business for employees who are not executive officers to the extent that the actions (individually or in the aggregate) do not materially increase costs to the Surviving Corporation, (vii) grant any new equity awards to any employee, officer, director or other individual service provider of Dragonfly (whether under the Company Incentive Plans or otherwise), except for grants of Dragonfly options not to exceed 1,020,127 shares of Dragonfly common stock, or (viii) amend, waive or modify any of the Key Employment Agreements (or any of the terms thereof including the Amendments), notwithstanding any provision of the Business Combination Agreement or other transaction documents to the contrary;

●

(i) acquire by merger or consolidation with, or merge or consolidate with, or purchase substantially all or a material amount of the assets of, any corporation, partnership, association, joint venture or other business organization or division thereof or (ii) launch a joint venture or similar arrangement with any corporation, partnership, association, or other business organization or division thereof;

●

(i) issue or sell any debt securities or warrants or other rights to acquire any debt securities of Dragonfly or any Subsidiary of Dragonfly or otherwise incur or assume any Indebtedness, or (ii) guarantee any Indebtedness of another Person, except in the ordinary course of business;

●

(i) make, change, or revoke any material Tax election, (ii) materially amend, modify or otherwise change any filed material Tax Return, (iii) adopt or request permission of any taxing authority to change any accounting method in respect of material Taxes, (iv) enter into any closing agreement in respect of material Taxes or enter into any Tax sharing or similar agreement (other than any Contract solely between Dragonfly and its existing Subsidiaries or any customary commercial Contract (or Contract entered into in the ordinary course of business) not primarily related to Taxes), (v) settle any claim or assessment in respect of material Taxes, (vi) surrender or allow to expire any right to claim a refund of material Taxes or (vii) consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of material Taxes;

●

take any action, or knowingly fail to take any action, where such action or failure to act could reasonably be expected to prevent the Merger from qualifying for the Intended Tax Treatment;

●

issue any additional shares of Company Capital Stock or securities exercisable for or convertible into shares of Company Capital Stock, other than the issuance of shares of Company common stock (i) upon the exercise of Company Options pursuant to their terms in the ordinary course of business under the Dragonfly Incentive Plans and the applicable award agreements, in each case, outstanding on the date of the Business Combination Agreement in accordance with their terms as in effect as of the date of the Business Combination Agreement and (ii) pursuant to the Company Preferred Conversion;

●

adopt a plan of, or otherwise enter into or effect a, complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Dragonfly or its Subsidiaries (other than the Merger);

●

commence, waive, release, settle, compromise or otherwise resolve any inquiry, investigation, claim, Action, litigation or other Legal Proceedings, except where such waivers, releases, settlements or compromises involve only the payment of monetary damages in an amount less than $250,000 in the aggregate;

●

grant to, or agree to grant to, any Person rights to any Intellectual Property that is material to Dragonfly and its Subsidiaries (other than non-exclusive licenses granted in the ordinary course of business), or dispose of, abandon or permit to lapse any rights to any Company Registered Intellectual Property, other than with respect to immaterial Company Registered Intellectual Property whose cost of prosecution or maintenance, in the reasonable exercise of Dragonfly’s or any of its Subsidiary’s business judgement, would outweigh any benefit to Dragonfly of prosecution or maintaining such item;

113

Table of Contents

●

disclose or agree to disclose to any Person (other than Chardan or any of its representatives) any trade secret of Dragonfly or any of its Subsidiaries, other than to service providers and development partners on a need-to-know basis in the ordinary course of business and pursuant to obligations to use such information, know-how or process solely for purposes of providing such services or to collaborate on such development projects with Dragonfly or any of its Subsidiaries (as applicable), and to maintain the confidentiality thereof;

●

make or commit to make capital expenditures other than in an amount not in excess of the amount set forth on Section 6.1(s) of the Company Disclosure Letter, in the aggregate;

●

manage Dragonfly’s and its Subsidiaries’ working capital (including paying amounts payable in a timely manner when due and payable and collection of accounts receivable in a timely manner when due) in a manner other than in the ordinary course of business;

●

enter into any new line of business Dragonfly and its Subsidiaries as of the date hereof do not currently engage in;

●

enter into, modify, amend, renew or extend any Collective Bargaining Agreement, other than as required by applicable Law, or recognize or certify any Labor Organization, or group of employees of Dragonfly or its Subsidiaries as the bargaining representative for any employees of Dragonfly or its Subsidiaries;

●

amend in a manner materially detrimental to Dragonfly or any of its Subsidiaries, terminate without replacement or fail to use commercially reasonable efforts to maintain, any License material to the conduct of the business of Dragonfly and its Subsidiaries, taken as a whole;

●

waive the restrictive covenant obligations of any current or former director, officer, employee or independent contractor of Dragonfly or any of Dragonfly’s Subsidiaries;

●

(i) limit the right of Dragonfly or any of Dragonfly’s Subsidiaries to engage in any line of business or in any geographic area, to develop, market or sell products or services, or to compete with any Person or (ii) grant any exclusive or similar rights to any Person, in each case, except where such limitation or grant does not, and would not be reasonably likely to, individually or in the aggregate, materially and adversely affect, or materially disrupt, the ordinary course operation of the businesses of Dragonfly and its Subsidiaries, taken as a whole;

●

terminate without replacement or amend in a manner materially detrimental to Dragonfly or any of its Subsidiaries, taken as a whole, any insurance policy insuring the business of Dragonfly or any of Dragonfly’s Subsidiaries; or

●

enter into any agreement to do any action prohibited under Section 6.1 of the Business Combination Agreement.

●

Dragonfly shall afford to Chardan and its accountants, counsel and other representatives reasonable access during the Interim Period, during normal business hours and with reasonable advance notice, in such manner as to not materially interfere with the ordinary course of business of Dragonfly, to, among other things, all of their respective properties, books, Contracts, commitments, Tax Returns, records and appropriate officers and employees of Dragonfly and its Subsidiaries, and shall furnish such representatives with all financial and operating data and other information concerning the affairs of Dragonfly and its Subsidiaries as such representatives may reasonably request.

●

Dragonfly shall use commercially reasonable efforts to deliver to Chardan, as soon as reasonably practicable following the date of the Business Combination Agreement, audited consolidated financial statements for the years ended December 31, 2020 and December 31, 2021, together with the auditor’s reports thereon, which comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act applicable to a registrant.

●

At or prior to the Closing, Dragonfly shall terminate or settle, or cause to be terminated or settled, without further liability to Chardan, Dragonfly or any of Dragonfly’s Subsidiaries, all Affiliate Agreements (other than those set forth on Section 6.4 of the Company Disclosure Letter) and provide Chardan with evidence of such termination or settlement reasonably satisfactory to Chardan.

114

Table of Contents

●

Dragonfly and its Subsidiaries shall not, and Dragonfly shall cause its affiliates and its and their representatives, employees, officers, directors and advisors not to (a) initiate any negotiations with any Person with respect to, or provide any non-public information or data concerning Dragonfly or any of Dragonfly’s Subsidiaries to any Person relating to, an Acquisition Proposal or afford to any Person access to the business, properties, assets or personnel of the Dragonfly or any of Dragonfly’s Subsidiaries in connection with an Acquisition Proposal, (b) enter into any acquisition agreement, merger agreement or similar definitive agreement, or any letter of intent, memorandum of understanding or agreement in principle, or any other agreement relating to an Acquisition Proposal, (c) grant any waiver, amendment or release under any confidentiality agreement or the anti-takeover laws of any state, or (d) otherwise knowingly facilitate any such inquiries, proposals, discussions, or negotiations or any effort or attempt by any Person to make an Acquisition Proposal.

●

If the debt financing as contemplated by the Debt Commitment Letter (x) is consummated, Dragonfly shall obtain and deliver to Chardan a fully executed customary consent to early repayment and a customary payoff letter related to all outstanding PIUS Debt (the “Payoff Letter”), which Payoff Letter shall include language (i) stating that, upon receipt of the applicable payoff amount, the PIUS Debt and all related transaction and/or disbursement documents shall be automatically terminated (subject to the survival of provisions which by their express terms survive any such termination), (ii) providing that all Liens and all guarantees in connection therewith shall be released and automatically terminated upon the payment of the applicable payoff amount and (iii) providing for the return of all possessory collateral (if any) in connection with such Indebtedness; provided, that Dragonfly shall be solely responsible for providing the funds for repayment of all amounts set forth in the Payoff Letter or (y) is not consummated, Dragonfly shall cooperate with Chardan in good faith to refinance the PIUS Debt

Prior to the Closing or termination of the Business Combination Agreement in accordance with its terms, Dragonfly shall not, and shall cause its representatives not to: (i) intentionally initiate or solicit any inquiries that would be reasonably likely to lead to an offer or proposal regarding any transaction with any person (other than Chardan or its affiliates) that would result in a Change in Control (a “Dragonfly Acquisition Proposal”); (ii) engage in, continue or otherwise participate in any negotiation or discussion concerning, or provide access to its properties, books and records or any confidential information or data to, any person relating to a Dragonfly Acquisition Proposal; (iii) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any Dragonfly Acquisition Proposal; (iv) execute or enter into any letter of intent, memorandum of understanding, agreement in principle, confidentiality agreement, merger agreement or other similar agreement for or relating to any Dragonfly Acquisition Proposal; or (v) resolve or agree to do any of the foregoing.

Covenants of Chardan

Chardan made certain covenants under the Business Combination Agreement, including, among others, the following:

●

Subject to certain exceptions, prior to the Closing, Chardan will, and will cause Merger Sub to, not do any of the following without Dragonfly’s written consent (such consent not to be unreasonably conditioned, withheld or delayed):

●

change, modify or amend the Trust Agreement (as defined in the Business Combination Agreement) or the organizational documents of Chardan or Merger Sub;

●

declare, make or pay any dividend or other distribution in respect of any of its outstanding capital stock or other equity interests or otherwise adjust its capital structure, or repurchase or redeem any equity interests in Chardan;

●

take any action, or knowingly fail to take any action, where such action or failure to act could reasonably be expected to prevent the Merger from qualifying for the Intended Tax Treatment;

●

make, revoke or change any material tax election or change any material tax accounting method or period;

●

enter into, renew or amend in any material respect any related-party contract;

115

Table of Contents

●

enter into, or amend or modify any material term of (in a manner adverse to itself), terminate, or waive or release any material right, claim or benefit under any material contract to which Chardan or Merger Sub is a party or by which it is bound;

●

enter into any settlements, other than in the ordinary course of business consistent with past practice;

●

incur, create, assume, refinance, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness;

●

offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any of its capital stock, other equity interests or securities convertible into any such capital stock or equity interests, other than in connection with the exercise of outstanding warrants or the transactions, or amend, modify or waive any of the terms or rights set forth in outstanding warrants;

●

adopt or amend any benefit plan, or enter into any employment contract or collective bargaining agreement, hire any employee or any other individual to provide services following the Closing or enter into any agreement to compensate any of its officers or directors;

●

fail to maintain its existence or acquire, merge or consolidate with, or purchase a material portion of the assets or equity of another person;

●

make any capital expenditures;

●

make any loans, advances or capital contributions to, or investments in, any other person or make any change in its existing borrowing or lending arrangements (other than the Bridge Loan);

●

enter into any new line of business;

●

make any change in financial accounting methods, principles or practices, except insofar as may be required by a change in GAAP or applicable law;

●

fail to maintain, cancel or materially change coverage under any insurance policy maintained with respect to it and its assets and properties; or

●

enter into any agreement, understanding or arrangement with respect to the voting of Chardan common stock (other than any agreement with a Chardan stockholder consistent with the terms of the Sponsor Support Agreement or the Chardan Stockholder Agreement).

●

Chardan will use reasonable best efforts, as promptly as reasonably practicable following the filing of the proxy statement, to duly convene and hold the special meeting in accordance with the DGCL and, among other things, through its board of directors, recommend the Business Combination Agreement and the transactions contemplated thereby.

●

Subject to certain exceptions, Chardan shall use its reasonable best efforts to ensure that Chardan remains listed as a public company on Nasdaq and to cause the New Dragonfly common stock to be issued in connection with the transactions to be approved for listing on Nasdaq.

●

Prior to the Closing, Chardan will purchase a “tail” policy providing liability insurance coverage for Dragonfly’s directors and officers with respect to matters occurring on or prior to the Closing.

116

Table of Contents

●

The Chardan Board will adopt the 2022 Plan with any modifications Dragonfly proposes based on the recommendation of its compensation consultant and board of directors as Chardan may consider and approve (such approval not to be unreasonably withheld or delayed).

●

Prior to the Closing or termination of the Business Combination Agreement, Chardan shall, and shall use its reasonable best efforts to cause its representatives to, cease any solicitations, discussions or negotiations with any person conducted prior to entry into the Business Combination Agreement in connection with a business combination or any inquiry or request for information that could reasonably be expected to lead to, or result in, a business combination. Chardan will also provide prompt written notice to Dragonfly of the receipt of any inquiry, proposal, offer or request for information received after the date of the Business Combination Agreement that constitutes, or could reasonably be expected to result in or lead to, any business combination and will keep Dragonfly reasonably informed of any material developments with respect to any such proposal.

●

Chardan and Merger Sub will take all actions necessary to consummate the PIPE Investment.

●

Chardan will terminate certain affiliate agreements and repay all outstanding indebtedness owed by Chardan to the Sponsor.

●

After the Closing, Chardan shall pay a transaction bonus to each of Mssrs. Denis Phars and Sean Nichols pursuant to the terms of Annex A to the Business Combination Agreement.

●

Prior to August 10, 2022, Chardan shall extend the deadline for Chardan to consummate its initial business combination by an additional three (3) months from the Acquiror Expiration Date in accordance with Chardan’s existing charter (the “Extended 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 for Chardan to consummate its initial business combination in accordance with the Chardan’s existing charter and the prospectus providing for its initial public offering by an additional three (3) months from the Extended Termination Date.

Mutual Covenants of the Parties

The parties made certain covenants under the Business Combination Agreement, including, among others, the following:

●

using commercially reasonable efforts to consummate the Business Combination;

●

cooperate with respect to the debt financing and any alternative debt financing.

●

making relevant public announcements and solicitation of Chardan Stockholder Approval;

●

keeping certain information confidential in accordance with the existing non-disclosure agreements;

●

intending that the Merger will constitute a transaction treated as a “reorganization” within the meaning of Section 368 of the IRC, and agreeing not to take any action that would reasonably be expected to cause the Merger to fail to qualify for such treatment; and

●

cooperating in connection with certain tax matters and filings.

In addition, Chardan and Dragonfly agreed that Chardan and Dragonfly will prepare and mutually agree upon and Chardan will file with the SEC, this proxy statement relating to the Business Combination.

Board of Directors

Following the Closing, the current management of Dragonfly will become the management of New Dragonfly, and the New Dragonfly board of directors will consist of seven directors, which will be divided into three classes (Class A, B and C). Pursuant to the Business Combination Agreement, the New Dragonfly board of directors will initially consist of (i) five individuals designated by

117

Table of Contents

Dragonfly and (ii) two director selected by Chardan, one in Class B (to also serve on the compensation committee and/or nominating and corporate governance committee) and the other in Class C (to also serve on the audit committee)).

Survival of Representations, Warranties and Covenants

The representations, warranties, covenants, obligations or other agreements in the Business Combination Agreement terminate at the Effective Time, except for those covenants and agreements that by their terms expressly apply in whole or in part after the Closing and then only with respect to any breaches occurring after the Closing, and those contained in Article XI of the Business Combination Agreement.

Termination

The Business Combination Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including, among others, the following:

●

by either Chardan or Dragonfly if the Closing has not occurred on or prior to nine (9) months after the date the Business Combination Agreement (the “Termination Date”);

●

by the mutual written consent of Chardan and Dragonfly;

●

by Dragonfly if there has been a Modification in Recommendation (as defined in the Business Combination Agreement), including if the Chardan board withdraws its support for Chardan’s entry into the Business Combination Agreement or the transactions contemplated thereby;

●

by Chardan, subject to certain exceptions, if any of the representations or warranties made by Dragonfly are not true and correct or if Dragonfly fails to perform any of its respective covenants or agreements under the Business Combination Agreement (including an obligation to consummate the Closing) such that certain conditions to the obligations of Chardan, as described in the section entitled “— Conditions to the Closing of the Business Combination” above could not be satisfied and the breach (or breaches) of such representations or warranties or failure (or failures) to perform such covenants or agreements is (or are) not cured or cannot be cured within the earlier of (i) 30 days after written notice thereof, and (ii) the Termination Date;

●

by Dragonfly, subject to certain exceptions, if any of the representations or warranties made by Chardan are not true and correct or if Chardan fails to perform any of its covenants or agreements under the Business Combination Agreement (including an obligation to consummate the Closing) such that the condition to the obligations of Dragonfly, as described in the section entitled “— Conditions to the Closing of the Business Combination” above could not be satisfied and the breach (or breaches) of such representations or warranties or failure (or failures) to perform such covenants or agreements is (or are) not cured or cannot be cured within the earlier of (i) 30 days after written notice thereof, and (ii) the Termination Date;

●

by either Chardan or Dragonfly if the Chardan Stockholder Approvals are not obtained at the special meeting (subject to any adjournment or recess of the meeting), or by Chardan if the Company Stockholder Approval has not been obtained by 5:00 p.m. Eastern Time on the first business day after the date of the Business Combination Agreement (which Company Stockholder Approval was obtained by Chardan on May 16, 2022); or

●

by either Chardan or Dragonfly if any Governmental Authority (as defined in the Business Combination Agreement) enacted, issued, promulgated, enforced or entered any governmental order which has become final and non-appealable and has the effect of making consummation of the Merger illegal or otherwise preventing or prohibiting consummation of the Merger or if there shall be adopted any law that permanently makes consummation of the Merger illegal or otherwise prohibited; provided that such Governmental Authority has jurisdiction over the parties with respect to the Merger.

118

Table of Contents

Sources and Uses for the Business Combination

The following tables summarize the sources and uses for funding the Business Combination (i) assuming that none of Chardan’s outstanding shares of Common Stock are redeemed in connection with the Business Combination and (ii) assuming that all of Chardan’s outstanding shares of Common Stock are redeemed in connection with the Business Combination. For an illustration of the number of shares and percentage interests outstanding under each scenario see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

No Redemption


Sources of Funds			Uses
(in millions)			(in millions)
Cash held in Trust Account⁽¹⁾	$	128.4	Common stock of combined company issued to Dragonfly stockholders⁽²⁾	$	381.9
PIPE Investment, Term Loan and THOR Investment		92.8	Transaction and other costs and existing debt settlement⁽³⁾		77.0
Common stock of combined company issued to Dragonfly stockholders⁽²⁾		381.9	Cash to combined company Balance Sheet		144.2
Total Sources	$	603.1	Total Uses	$	603.1

(1)	As of March 31, 2022.

(2)	Shares issued to Dragonfly stockholders are at a deemed value of $10.00 per share. Assumes 38,189,691 shares of Common Stock issued and inclusive of the Thor Investment. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for more details.

(3)	Represents an estimated amount, inclusive of fees related to the Business Combination and related transactions, and settlement of existing Dragonfly indebtedness under the No Redemptions scenario.

Maximum Redemption


Sources of Funds			Uses
(in millions)			(in millions)
Cash held in Trust Account⁽¹⁾	$	—	Common stock of combined company issued to Dragonfly stockholders⁽²⁾	$	381.9
PIPE Investment, Term Loan and THOR Investment		92.8	Transaction and other costs and existing debt settlement⁽³⁾		73.0
Common stock of combined company issued to Dragonfly stockholders⁽²⁾		381.9	Cash to combined company Balance Sheet		19.8
Total Sources	$	474.7	Total Uses	$	474.7

(1)

As of March 31, 2022, assumes that 12,650,000 public shares subject to redemption are redeemed for an aggregate payment of approximately $128.4 million (based on an estimated per share redemption price of approximately $10.15 that was calculated using the $128.4 of cash in the Trust Account divided by 12,650,000 public shares subject to redemption assuming the Maximum Redemptions scenario).

(2)	Shares issued to Dragonfly stockholders are at a deemed value of $10.00 per share. Assumes 38,189,691 shares of Common Stock issued and inclusive of the Thor Investment. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for more details.

(3)	Represents an estimated amount, inclusive of fees related to the Business Combination and related transactions, and settlement of existing Dragonfly indebtedness under the Maximum Redemptions scenario.

119

Table of Contents

Expenses

The fees and expenses incurred in connection with the Business Combination Agreement and the ancillary documents thereto, and the transactions contemplated thereby, including the fees and disbursements of counsel, financial advisors and accountants, will be paid by the party incurring such fees or expenses. If the Closing occurs, New Dragonfly will, upon the consummation of the Merger and release of proceeds from the Trust Account, pay or cause to be paid all accrued and unpaid Dragonfly Transaction Expenses and pay or cause to be paid all accrued and unpaid Chardan Transaction Expenses. Chardan and Dragonfly will exchange written statements setting forth all such accrued and unpaid transaction expenses not less than two business days prior to the Closing Date.

Governing Law

The Business Combination Agreement is governed by and construed in accordance with the laws of the State of Delaware, without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of the law of another jurisdiction.

Amendments

The Business Combination Agreement may be amended or modified only by a written agreement executed and delivered by Chardan and Dragonfly.

Regulatory Approval

Other than customary Hart-Scott-Rodino Antitrust Improvements Act approvals required by the Business Combination Agreement, neither Chardan nor Dragonfly is aware of any federal or state regulatory requirements that must be complied with or approval that must be obtained in connection with the Business Combination.

Related Agreements

This subsection describes certain additional agreements entered into or to be entered into pursuant to the Business Combination Agreement, but does not purport to describe all of the terms of each agreement. Each of the following summaries are qualified its entirety by reference to the complete text of the applicable document. You are urged to read carefully each of the below agreements in their entirety.

Subscription Agreement

120

Table of Contents

The Sponsor may purchase shares of common stock of Chardan in the open market and reduce (i) its purchase price under the Subscription Agreement by an amount equal to the number of shares purchased in the open market multiplied by the per-share redemption amount received by public stockholders who elect to redeem their shares prior to Closing (such amount, the “Open Market Purchase Credit”) and (ii) the number of its PIPE Securities by an amount equal to the Open Market Purchase Credit divided by ten, rounded to the nearest whole share (the “Open Market Share Credit”). Such purchases (“Open Market Purchases”) will be made prior to the Closing and will be separate from the redemption process conducted in connection with the Business Combination. The purposes of any Open Market Purchases would be to reduce the number of shares of Chardan common stock that may be redeemed in connection with the Business Combination, and may include a business decision to increase such purchaser’s ownership at an attractive price. The Sponsor will only make Open Market Purchases to the extent the price per common stock of Chardan so acquired is no higher than the redemption price that would be available in connection with the redemption procedures described in this proxy statement. In addition, the Sponsor will waive any redemption rights with respect to any shares of Chardan common stock purchased in Open Market Purchases and will not vote any shares of Chardan common stock purchased in Open Market Purchases in favor of the Business Combination Proposal.

The Subscription Agreement will terminate with no further force and effect upon the earliest to occur of: (a) such date and time as the Business Combination Agreement is validly terminated in accordance with its terms; (b) the mutual written agreement of Chardan and the Sponsor or (c) May 15, 2023, if the Closing has not occurred on or before such date.

Registration Rights Agreement

When an effective shelf registration statement is on file with the SEC, the Sponsor, the Insiders, certain Dragonfly stockholders, the Sponsor and Holdings may each demand not more than one underwritten shelf takedown in any twelve month period, for an aggregate of not more than three underwritten shelf takedowns in any twelve month period, in each case, subject to certain customary limitations set forth in the Registration Rights Agreement, including the right of the underwriters to limit the number of securities to be included in an underwritten offering and New Dragonfly’s right to delay or withdraw a registration statement under certain circumstances. The holders party to the Registration Rights Agreement will also be entitled to certain piggyback registration rights and indemnification rights.

Sponsor Support Agreement

121

Table of Contents

Debt Commitment Letter and Backstop Commitment Letter

Concurrently with the execution of the Business Combination Agreement, Chardan and Dragonfly entered into a commitment letter (the “Debt Commitment Letter”) with CCM Investments 5 LLC, an affiliate of Chardan Capital Markets (“CCM 5” and in connection with the Term Loan, the “Chardan Lender”), and EICF Agent LLC (“EIP” and, collectively with the Chardan Lender, the “Initial Term Loan Lenders”), pursuant to which the Initial Term Loan Lenders have agreed to provide Dragonfly with a senior secured term loan facility in an aggregate principal amount of $75 million (the “Term Loan”) on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The obligations of the Initial Term Loan Lenders to provide the Term Loan will terminate on October 31, 2022 (or such later date reasonably acceptable to the Initial Term Loan Lenders) if the Closing Date has not occurred by such date. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender”), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto.

In connection with the Term Loan, New Dragonfly will also issue to EIP and, upon the consummation of the Backstop Lender’s purchase of the Backstopped Loans, the Backstop Lender (collectively, the “Term Loan Lenders”) the Penny Warrants, exercisable to purchase 3.6% of Dragonfly’s common stock on a fully diluted basis, calculated as of the Closing Date. The calculation of ownership of common stock “on a fully-diluted basis” will include (i) all outstanding common stock (ii) shares of common stock issuable upon conversion of outstandin convertible bonds, preferred stock and other securities convertible to common stock on an as-converted to common stock basis, and (iii) all shares of common stock subject to outstanding options. The Penny Warrants will have an exercise period of 10 years from the date of issuance. In addition, on the Closing Date, New Dragonfly will also issue to the Term Loan Lenders the $10 Warrants, which are exercisable to purchase 1.6 million shares of New Dragonfly’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. The Term Loan Lender Warrants will have weighted average anti-dilution protection against subsequent equity sales or distributions at less than the Term Loan Lender Warrant exercise price, subject to customary exclusions including for issuances upon conversion exercise or exchange of securities outstanding as of the Closing Date, issuances pursuant to agreements in effect as of the Closing Date (provided such issuances are taken into account in the calculation of “on a fully diluted basis” as provided above), issuances pursuant to employee benefit plans and similar arrangements, issuances in joint ventures, strategic arrangements or other non-financing type transactions, issuances in debt financings as equity kickers, issuances in public offerings and similar transactions. The shares issuable upon exercise of the Term Loan Lender Warrants shall have customary registration rights requiring New Dragonfly to file and keep effective a resale registration statement registering the resale of the shares of common stock underlying the Term Loan Lender Warrants.

The definitive documentation for the Term Loan and the Term Loan Warrants have not been finalized and, accordingly, the actual terms of the Term Loan and Term Loan Warrants, may differ from those described in this proxy statement/prospectus.

Equity Facility Letter Agreement

On May 15, 2022, Chardan, Dragonfly and CCM 5 (CCM 5 in connection with the Equity Facility, or such other affiliate investor as it may designate, the “Equity Facility Investor”), entered into a letter agreement (the “Equity Facility Letter Agreement”), pursuant to which Chardan and Dragonfly agreed to enter into definitive documentation (the “Equity Facility Definitive Documentation”) prior to the Closing to establish a committed equity facility (the “Equity Facility”). Pursuant to, on the terms of and subject to the satisfaction of the conditions to be set forth in the Equity Facility Definitive Documentation, New Dragonfly will have the right to sell to the Equity Facility Investor up to a maximum aggregate purchase price of $150,000,000 (subject to the limitations set forth in the Purchase Agreement), from time to time after the Commencement Date and during the 36-month term of the Equity Facility).

122

Table of Contents

including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly common stock issued to it under the Equity Facility Definitive Documentation and the receipt of a no-objection letter from FINRA. From and after the commencement date, subject to the continued satisfaction of conditions set forth in the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option over the 36-month term of the Equity Facility to direct the Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock (subject to the terms, conditions and limitations set forth in the Equity Facility Definitive Documentation) by delivering, during the morning prior to market open on any trading days it chooses for such purchases (each, a “Purchase Date”), written notice to the Equity Facility Investor in accordance with the terms, conditions and limitations of the Equity Facility Definitive Documentation. The purchase price for the shares of New Dragonfly common stock that New Dragonfly elects to sell to the Equity Facility Investor pursuant to the Equity Facility Definitive Documentation, if any, will be determined by reference to the VWAP on the applicable Purchase Date, less a fixed 3.5% discount (the “VWAP Purchase Price”). The Equity Facility will be structured to allow New Dragonfly, on the terms and subject to the conditions thereof, to raise funds from the issuance of equity on a periodic basis outside the context of a traditional underwritten follow-on offering.

The Equity Facility Investor will not be obligated to (but may, at its option, choose to) purchase shares of New Dragonfly common stock to the extent such purchase: (a) would exceed 20% of the number of shares of New Dragonfly common stock that would count towards VWAP on the applicable Purchase Date for such purchase, (b) would cause the aggregate purchase price on the applicable Purchase Date for such purchase to exceed $3 million or (c) would result in beneficial ownership (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by the Equity Facility Investor, together with its affiliates, of more than 9.9%.

Sales of shares of New Dragonfly common stock, if any, to the Equity Facility Investor under the Equity Facility Definitive Documentation, and the timing of any sales, will be determined by New Dragonfly from time to time in its sole discretion and will depend on a variety of factors, including, among other things, market conditions and the terms and conditions set forth in the Equity Facility Definitive Documentation.

In connection with the execution of the Equity Facility Definitive Documentation, New Dragonfly will agree to issue shares of New Dragonfly common stock having a value of $1 million determined based on the applicable trading price at the time of issuance (the “Equity Facility Commitment Shares”) to the Equity Facility Investor as consideration for its irrevocable commitment to purchase the shares of New Dragonfly common stock upon the terms and subject to the satisfaction of the conditions set forth in the Equity Facility Definitive Documentation.

The Equity Facility Definitive Documentation will also contain customary conditions, representations and warranties, registration rights and other covenants and indemnities. The Definitive Documentation will also contain customary termination rights and suspension events with respect to the Equity Facility Investor’s purchase obligation.

The Equity Facility Letter Agreement is not assignable by New Dragonfly or Chardan without the written consent of the other parties to the Equity Facility Letter Agreement. The Equity Facility Investor may assign its rights and obligations under the Equity Facility Letter Agreement to one or more of its affiliates.

The Equity Facility Definitive Documentation has not been finalized and, accordingly, the actual terms of the Equity Facility may differ from those described in this proxy statement/prospectus.

Interests of Certain Persons in the Business Combination

123

Table of Contents

●

It is anticipated that upon completion of the Business Combination and assuming no redemptions by Chardan public stockholders, the Sponsor, officers, directors and other affiliates and holders of Founder Shares will own approximately 6.5% of New Dragonfly (including the PIPE Investment). This level of ownership interest: (a) include the impact of the shares of Chardan common stock issuable upon exercise of the Penny Warrants due to their nominal exercise price but exclude the impact of the $10 Warrants and the shares issuable under the Equity Facility, (b) assume that no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, (c) assume that no shares are issued pursuant to the Dragonfly Incentive Plan and the 2022 Plan, (d) assume that no shares are issued pursuant to the vesting and exercise of New Dragonfly options for shares of New Dragonfly common stock and (e) assume no exercise of Chardan public warrants and Chardan private placement warrants. If the shares issuable under the Equity Facility, including the Commitment Shares, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,876,847 shares being issuable, subject the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution of Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15. If the redemption price is significantly less than the assumed VWAP of $10.15, Chardan’s public stockholders would experience considerable additional dilution. For example, based upon an assumed VWAP of $6.00, an additional 25,166,667 shares, which includes 166,667 Commitment Shares, would be issuable.

●

124

Table of Contents

gross proceeds of the Chardan IPO. Chardan Capital Markets will also receive a cash fee of $1,170,000 for other financial advisory services, including for advisory services provided with respect to placement of potential PIPE investments, and identifying and negotiating lender financing.

●

Simultaneously with the closing of the Chardan IPO, Holdings (an affiliate of Sponsor and Chardan Capital Markets) purchased an aggregate of 4,361,456 private warrants at a price of $0.93 per private warrant ($4,052,000 in the aggregate). Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Holdings purchased an additional 266,402 private warrants at a purchase price of $0.93 per private warrant. Each private warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share. The proceeds from the private warrants were added to the proceeds from the Chardan IPO to be held in the Trust Account. The private warrants had an aggregate market value of $1,395,666 based upon the closing price of approximately $0.32 per share on the Nasdaq on June 13, 2022. The private warrants will become worthless if Chardan does not consummate a business combination by August 13, 2022 (unless this deadline is extended pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents).

●

The current directors and officers will continue to be indemnified and the liability insurance of the directors and officers will continue.

●

125

Table of Contents

Proposal — Related Agreements — Equity Facility Letter Agreement” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

Pursuant to the Debt Commitment Letter, the Chardan Lender has agreed to provide 60% of the commitment with respect to the Term Loan on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into the Backstop Commitment Letter with the Backstop Lender. The Chardan Lender is entitled to payment of fees in connection with the Term Loan pursuant to the fee letter entered into in connection with the Debt Commitment Letter, but, in accordance with the terms of the Backstop Commitment Letter,such fees are to be paid to the Backstop Lenders on the Closing Date. For additional information, see the sections entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Debt Commitment Letter” and “Certain Relationships and Related Person Transactions — Chardan Related Party Transactions.”

●

The Sponsor and the initial stockholders, among others, will enter into the Registration Rights Agreement which will provide them with registration rights.

●

Background of the Business Combination

Chardan is a blank check company incorporated in Delaware on June 23, 2020. Chardan was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. Although Chardan is not limited to a particular industry or geographic region for purposes of consummating an initial business combination, Chardan has focused its search on disruptive technology companies.

On August 13, 2021, Chardan consummated the Chardan IPO of 11,000,000 units, at $10.00 per unit, generating gross proceeds of $110,000,000. Simultaneously with the closing of the Chardan IPO, Chardan NexTech 2 Warrant Holdings LLC, a Delaware limited liability company and an affiliate of the Sponsor (“Holdings”), purchased an aggregate of 4,361,456 private warrants at a price of $0.93 per warrant ($4,052,000 in the aggregate). Each private warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share. On August 18, 2021, the underwriters fully exercised the over- allotment option and purchased an additional 1,650,000 units at a purchase price of $10.00 per unit, generating gross proceeds of $16,500,000. Simultaneously with the closing of the

126

Table of Contents

exercise of the over-allotment option, Chardan consummated the sale of 266,402 private warrants at a purchase price of $0.93 per private warrant in a private placement to Holdings, generating gross proceeds of $247,500.

After deducting the underwriting discounts, offering expenses, and commissions from the Chardan IPO and the sale of the private warrants, a total of $128,397,500 was deposited into the trust account established for the benefit of Chardan’s public stockholders.

Chardan’s current certificate of incorporation provides that it will continue in existence only until August 13, 2022. If Chardan has not completed a business combination by such date, unless extended by resolution of the Chardan Board up to two times, each by an additional three months and subject to the Sponsor depositing additional funds of $2,300,000 into the trust account on or prior to the applicable deadline, Chardan will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably practicable following such redemption, subject to the approval of its remaining stockholders and the Chardan Board, proceed to commence a voluntary liquidation and thereby a formal dissolution of Chardan, subject (in the case of (ii) and (iii) above) to its obligations to provide for claims of creditors and the requirements of applicable law. Immediately after the closing of the Chardan IPO on August 13, 2021, the officers and directors of Chardan began to contact potential candidates for a business combination. In addition, Chardan was contacted by a number of individuals and entities with respect to business combination opportunities.

Chardan believes its management team has substantial expertise and background in all key aspects of the operation and development of businesses, as well as having a wide and active network of relationships in the technology, finance and energy sectors. Because of this combination of strengths, Chardan was able to rapidly and efficiently evaluate a wide range of potential business combination candidates to determine which ones met its transaction criteria, and then to quickly submit proposals for a business combination to final candidates. The transaction criteria of Chardan’s management team includes businesses that:

●

have a strong competitive industry position with demonstrated competitive advantages to maintain barriers to entry;

●

have a historic record of above average growth and strong free cash flow characteristics with high returns on capital;

●

have a strong, experienced management team which would benefit from its management’s network or expertise, such as additional management expertise, capital structure optimization, acquisition advice or operational changes to drive improved financial performance;

●

are positioned for continued organic growth and may grow through bolt-on acquisitions;

●

are fundamentally sound companies with proven track records;

●

have an operating model that has adapted or has an executable strategy to be able to meet the changing consumer or business behaviors in a COVID-19 or post-COVID 19 environment;

●

will offer attractive risk-adjusted return for our stockholders; and

●

can benefit from being a publicly traded company, are prepared to be a publicly traded company and can utilize access to broader capital markets.

The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement.

This chronology does not purport to catalogue every correspondence among representatives of Chardan and Dragonfly. Representatives of Chardan involved in the discussions and negotiations referenced herein included one or more of Jonas Grossman,

127

Table of Contents

CEO and Director of Chardan, Alex Weil, CFO and Director of Chardan, and Kerry Propper, Chairman of the Chardan Board. Representatives of Dragonfly involved in the discussions and negotiations referenced herein included one or more of Dr. Denis Phares, Co-Founder and CEO, Sean Nichols, Co-Founder and COO, and John Marchetti, CFO.

On February 5, 2021, Dragonfly executed a letter agreement with Stifel, Nicolaus & Company, Incorporated (“Stifel”), which was amended on September 1, 2021 and on October 27, 2021, pursuant to which Stifel agreed to provide financial advisory services to Dragonfly with respect to a potential acquisition by a SPAC.

Pursuant to the terms of the Business Combination Marketing Agreement Chardan engaged Chardan Capital Markets LLC, an affiliate of Chardan, as an advisor in connection with its business combination. Chardan Capital Markets will receive a cash fee for such services upon the consummation of the Merger in an amount equal to, in the aggregate, $4,427,500, being 3.5% of the gross proceeds of the Chardan IPO.

Between August 10, 2021, when the SEC declared the registration statement for the Chardan IPO effective, and October 15, 2021, Chardan, with the assistance of Chardan Capital Markets, reviewed and reached out to over 730 potential business combination candidates, and held frequent discussions, both internally and with a wide range of management teams at various potential targets. Chardan entered into non-disclosure agreements with eight candidates (none of which contained a “don’t ask, don’t waive” or a standstill “fall away” provision). Following a systematic process of evaluation and due diligence, Chardan ultimately submitted two formal proposals and one informal proposal to certain of these potential targets, including its formal proposal to Dragonfly. The remaining candidates did not receive a proposal from Chardan due to a combination of factors, including inadequate preparedness to be a publicly traded company or because Chardan did not believe that a business combination was actionable with such candidate. No discussions regarding a potential business combination with any candidate were held prior to Chardan’s IPO.

On August 14, 2021, Chardan reached out to Candidate 1 to initiate discussions about a potential business combination. Discussions continued over the next 24 hours and a non-disclosure agreement was subsequently executed on August 15, 2021. The non-disclosure agreement did not contain a “don’t ask, don’t waive” provision. A meeting between Candidate 1’s executives and Chardan was held on August 18, 2021 with in depth financial modeling discussions following on August 20, 2021. Significant diligence, including additional meetings with management, took place over the next 10 days culminating in a submission of a transaction proposal regarding a potential business combination by Chardan to Candidate 1 on September 1, 2021. Negotiations around the terms of the potential business combination continued over the next several days, ending with Chardan submitting a revised transaction proposal on September 11, 2021. After continued deliberation however, Candidate 1 ultimately informed Chardan that it was going to pause its SPAC merger process to pursue immediate private funding.

On August 23, 2021, Chardan received an inbound request from Candidate 2 to explore a potential business combination. On August 26, 2021, Chardan and Candidate 2 held an introductory call, which resulted in the execution of a non-disclosure agreement on September 7, 2021. The non-disclosure agreement did not contain a “don’t ask, don’t waive” provision. Chardan received an investor presentation from Candidate 2 the following week on September 15, 2021. Between September 15, 2021 and September 30, 2021, the parties continued to correspond as part of Chardan’s diligence process, resulting in the submission of an informal proposal regarding a potential business combination by Chardan to Candidate 2 on October 1, 2021. The discussions between the two parties were discontinued after Chardan notified Candidate 2 in mid-October that it was focusing its efforts on pursuing a combination with another company, as Chardan considered it did not meet several of its investment criteria, including strong industry position with demonstrated competitive advantages and preparedness to be a publicly traded company.

Chardan ultimately determined to pursue a business combination with Dragonfly and to abandon other potential business combination opportunities that it had explored because of, among other things: (i) the fact that the other business combination targets did not meet enough of Chardan’s transaction criteria for a business combination target, such as strong competitive position, lack of visibility for continued organic growth, and lack of preparedness to be a publicly traded company, (ii) Chardan directors’ and officers’ belief that Dragonfly met many of its transaction criteria, (iii) the level of engagement by, and discussions with, Dragonfly as compared to the other potential business combination candidates and (iv) Dragonfly’s preparedness and willingness to devote appropriate resources to negotiating and executing definitive agreements and to consummate the Business Combination and become a public company. See the section entitled “Business Combination Proposal — The Chardan Board’s Reasons for the Business Combination” for more information.

On September 30, 2021, Stifel, Dragonfly’s advisor, who had a business relationship related to Stifel’s services as a financial advisor and placement agent with certain principals of Chardan, contacted Chardan to discuss a potential business combination with Dragonfly.

128

Table of Contents

Following Stifel’s outreach, representatives of Chardan had discussions with Dragonfly’s CFO, Mr. Marchetti, to better understand the potential opportunity.

On October 1, 2021, Chardan and Dragonfly signed a non-disclosure agreement which did not contain a “don’t ask, don’t waive” provision, which was followed by Chardan’s scientific, business, financial and corporate due diligence process, including review of confidential materials in Dragonfly’s virtual data room. From October 5, 2021 to October 6, 2021, the Chardan team met with Dragonfly and its advisors in Reno, Nevada for a management presentation, a tour of the Company’s facilities, manufacturing and assembly facility, and research and development lab.

On October 5, 2021, Chardan sent an initial non-binding letter of intent (“Initial LOI”) to Dragonfly, which outlined the proposed terms of an initial potential business combination based on an initial equity value of $1.25 billion split into upfront consideration of $750 million and potential earnout consideration of $500 million based on certain share price milestones. The Initial LOI included a 90-day mutual exclusivity period. Chardan communicated with its board by email regarding the delivery of the Initial LOI, to which the board had no objections.

Between October 7, 2021 and October 15, 2021, the parties negotiated the terms of the Initial LOI. On October 8, 2021, Chardan management held a call with members of Dragonfly’s board of directors and executive team to discuss the outline of the structure and valuation of the proposed transaction. In addition, from October 7, 2021 to October 15, 2021, drafts of the Initial LOI were exchanged between Chardan and Dragonfly and additional meetings were held between the parties to discuss matters with respect to the Initial LOI, including the determination of equity value, exclusivity terms, conditions to closing, and the structure of the combined company.

On October 8, 2021, Chardan held a meeting of the Chardan Board by videoconference, which was joined by Chardan’s legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”). During the meeting, Chardan’s management provided updates regarding negotiations of potential transactions, including those with Dragonfly. The Chardan Board and management discussed developments related to the Initial LOI, Dragonfly’s business and potential transaction processes. The independent directors of the Chardan Board also held an executive session, and the Board voted to authorize Chardan to proceed with the negotiation and execution of an LOI with Dragonfly.

On October 15, 2021, Chardan and Dragonfly executed a non-binding letter of intent (“Oct 15 LOI”), which contemplated Chardan’s acquisition of all of the outstanding Dragonfly shares in exchange for 75,000,000 common shares of Chardan (valued at $10.00 per share), plus potential earnout consideration of 50,000,000 shares of Chardan common stock in the aggregate during the five years post-closing (in three separate installments of 15,000,000, 15,000,000 and 20,000,000 shares upon achieving respective share prices of $17.50, $22.50 and $32.50 per share). The Oct 15 LOI contemplated a minimum capital raise via private placement of $75,000,000. The Oct 15 LOI also included a 75-day exclusivity period which would automatically extend by an additional 15 days if at the end of the 75-day period the parties were continuing to negotiate in good faith with regard to the Business Combination.

On October 20, 2021, the Chardan and Dragonfly teams held a kick-off organizational call involving a working group with multiple parties including Chardan Capital Markets, Stifel, Skadden, O’Melveny & Myers LLP (“O’Melveny”, legal counsel to Dragonfly) and BDO USA, LLP (“BDO”, auditors to Dragonfly), aligning the teams on deliverables and timelines towards executing a potential business combination agreement. After the organizational call, the working group continued to hold regular calls to update and establish materials needed to launch the Business Combination.

Also on October 20, 2021, Chardan sent an initial due diligence request list to Dragonfly. Additional due diligence requests were sent by Chardan and its advisors to Dragonfly and its advisors over the following weeks.

From October 27, 2021 to October 31, 2021, members of the Chardan management team and Chardan Capital Markets traveled to Reno, Nevada to conduct financial due diligence with Dragonfly’s management team including Mr. Marchetti, CFO of Dragonfly. Chardan also engaged an industry consultant in connection with the Dragonfly diligence process.

On October 29, 2021, Skadden conducted a legal due diligence call with members of Dragonfly’s management team and O’Melveny, as well as certain individuals form Chardan and Chardan Capital Markets. A list of due diligence agenda questions and topics were sent to O’Melveny on October 26, 2021 in advance of the legal due diligence call. Skadden prepared a preliminary due diligence report based on the contents of the virtual data room and discussions on this legal due diligence call, which was delivered to Chardan management on December 1, 2021.

129

Table of Contents

On November 1, 2021, Chardan engaged and met with a technical expert (“Technical Expert 1”) to conduct due diligence on Dragonfly’s solid-state technology. Technical Expert 1 delivered their findings to Chardan on November 8, 2021, which included analyses of Dragonfly’s battery technology.

On November 3, 2021, members of the Dragonfly and Chardan teams met at the Chardan Capital Markets headquarters in New York, New York to rehearse Dragonfly’s management presentation and to finalize the outreach plan for potential PIPE investors.

On November 4, 2021, Chardan held due diligence calls with two OEM customers of Dragonfly to verify reputation, quality and potential commercial agreements. Members of Chardan Capital Markets were also included on the due diligence calls and there were no materially adverse findings as a result of such calls.

On November 8, 2021, Chardan engaged and spoke with a second technical expert (“Technical Expert 2”) to conduct due diligence on Dragonfly’s solid-state technology. In the days following this discussion, Technical Expert 2 had additional data requests to which Dragonfly responded. Technical Expert 2 delivered their findings to Chardan on November 11, 2021, which included analyses of Dragonfly’s battery technology and development.

On December 1, 2021, Chardan executed a letter agreement with Stifel pursuant to which Stifel agreed to act as a placement agent for Chardan and provide financial services in relation thereto, to which the Board had no objections.

Beginning on December 1, 2021, Stifel, in its capacity as placement agent, began contacting a limited number of potential PIPE investors. Investors interested in receiving confidential information agreed to “wall- cross” procedures. Stifel apprised these investors of the opportunity with Dragonfly as well as the proposed business combination and potential PIPE investment and to determine such investors’ potential interest in participating in a potential PIPE investment. Over the next few months and prior to the execution of the Merger Agreement, representatives of Chardan, Dragonfly and Stifel participated in various meetings with prospective participants in a potential PIPE investment.

Between December 1, 2021 and March 7, 2022, Stifel and Chardan Capital Markets contacted over 115 potential participants in connection with a PIPE investment. Out of the participants contacted, over 35 were brought “over the wall” and over 30 were granted access to the data room. Members of Dragonfly’s and Chardan’s management teams, along with their advisors, had meetings with 14 prospective participants. In addition to prospective participants in a PIPE investment, Stifel and Chardan Capital Markets contacted over 80 third-party lenders. Out of the lenders contacted, 50 were brought “over the wall” and 47 were granted access to the data room. Members of Dragonfly’s and Chardan’s management teams, along with their advisors had meetings with 12 prospective lenders.

On December 3, 2021, Skadden sent an initial draft of the Merger Agreement to O’Melveny for review.

On December 13, 2021, Chardan formally engaged Chardan Capital Markets, an affiliate of Sponsor, to provide financial advisory and placement agent services to Chardan with respect to a potential business combination. Mr. Grossman and Mr. Propper are members of the board of directors at Chardan Capital Markets. Further, Mr. Grossman is also Chardan Capital Market’s President and Mr. Weil is co-head of Fintech Investment Banking at Chardan Capital Markets. Mr. Grossman is also the sole member of Sponsor and Holdings. In accordance with Chardan’s Bylaws, this engagement received approval from the Board’s audit committee. Chardan Capital Markets will receive a cash fee of $1,170,000 for other financial advisory services, including for advisory services provided with respect to placement of potential PIPE investments. Chardan Capital Markets will also receive a cash fee for such services upon the consummation of the Merger in an amount equal to, in the aggregate, $4,427,500, being 3.5% of the gross proceeds of the Chardan IPO, pursuant to the Business Combination Marketing Agreement as discussed above. For more information, see the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

On December 21, 2021, O’Melveny sent an updated draft of the Merger Agreement to Skadden, which contained proposed revisions including to the scope of material adverse effect, earnout structure, covenants, and representations and warranties of the parties.

On January 12, 2022, Chardan and Dragonfly executed an exclusivity extension letter extending the exclusivity period until February 15, 2022. Chardan communicated with its board by email regarding the exclusivity extension, to which there were no objections.

130

Table of Contents

On January 20, 2022, Skadden sent a subsequent draft of the Merger Agreement to O’Melveny, which contained proposed revisions including with respect to entry into a registration rights agreement, earnout structure, covenants regarding management of working capital and employment arrangements, and representations and warranties of the parties.

Also on January 20, 2022, Stifel received verbal terms from one potential lender (“Potential Lender 1”) that was contemplating a senior secured term loan facility and an uncommitted delayed draw term loan facility with a requirement of a certain amount of subordinated debt or equity. Dragonfly and Chardan consulted with their advisors, Stifel and Chardan Capital Markets, respectively, on how to achieve the subordinated capital requirement. Chardan recommended a solution that would include an equity component from Chardan Capital Markets (“Chardan PIPE”) and a junior convertible term loan facility from ATW Partners LLC (“ATW Partners”), an affiliate of Sponsor. Mr. Propper is a founder and managing partner of ATW Partners LLC as well as a member of the board of Chardan Capital Markets. For more information, see the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

Throughout January 2022, members of the Chardan management team conducted interviews of several financial advisors, including Duff & Phelps, regarding the Chardan Board’s intention to have a financial advisor conduct a valuation analysis and render an opinion regarding the fairness, from a financial point of view to Chardan, of the Merger Consideration to be paid by Chardan to the Dragonfly shareholders in the Merger. After considering the qualifications of Duff & Phelps as a financial advisor, as well as the total fees of $450,000 and the reimbursement of reasonable expenses that Duff & Phelps would be entitled to for its engagement, the Chardan Board approved the engagement of Duff & Phelps on January 24, 2022 as its financial advisor to evaluate the fairness, from a financial point of view to Chardan, of the Merger Consideration to be paid by Chardan to the Dragonfly shareholders in the Merger. See the section of this proxy statement/prospectus entitled “Fairness Opinion of Duff & Phelps” for additional information about the Opinion.

On February 3, 2022, Chardan and Dragonfly received a term sheet for a junior security convertible term loan facility from ATW Partners in anticipation of a formal term sheet from Potential Lender 1. From February 4, 2022 to March 24, 2022, Dragonfly and Chardan and their respective financial advisors were in discussions with ATW regarding the term sheet.

On February 4, 2022, Chardan and Dragonfly received a draft term sheet from Potential Lender 1, which contemplated a senior secured term loan facility and an uncommitted delayed draw term loan facility with a requirement of subordinated capital. Chardan and Dragonfly consulted with their respective counsel and financial advisors and multiple drafts of the term sheet were subsequently exchanged among the parties. Pursuant to the draft term sheet from Potential Lender 1, the Sponsor would be required to contribute a PIPE investment of $5,000,000 in addition to the convertible term loan facility from ATW Partners.

On February 5, 2022, O’Melveny sent a revised draft of the Merger Agreement to Skadden, which contained proposed revisions including to the scope of material adverse effect and representations and warranties of the parties.

On February 9, 2022, the Chardan team met with Dragonfly and its advisors in Reno, Nevada to discuss the proposed transaction and review the Company’s performance. The Chardan team communicated with its board by email regarding potential delivery of a revised LOI to Dragonfly.

On February 15, 2022, following discussions between Chardan and Dragonfly, the parties executed an amendment to the Oct 15 LOI (the “First Amendment”) whereby the parties amended certain of the deal terms, including extension of the exclusivity period until March 31, 2022 and extended the earnout milestones to six years post-closing. The amended LOI considered acquisition of all of the outstanding Dragonfly shares in exchange for 50,000,000 common shares of Chardan (valued at $10.00 per share), plus potential earnout consideration of 50,000,000 shares of Chardan common stock in the aggregate during the five years post-closing (in three separate installments of 15,000,000, 15,000,000 and 20,000,000 shares upon achieving respective share prices of $17.50, $22.50 and $32.50 per share.) The First Amendment also contemplated a minimum capital raise via private placement and / or any other equity or debt of $20,000,000, a post-closing common stock equity line of credit of $50,000,000 and a junior secured convertible loan provided by ATW Partners. Chardan communicated with its board by email regarding the delivery of the First Amendment, to which there were no objections.

On February 16, 2022, Chardan and Dragonfly received a draft term sheet from one potential lender (“Potential Lender 2”), which contemplated a first lien term loan facility. Chardan and Dragonfly consulted with their respective counsel and financial advisors and multiple drafts of the term sheet were subsequently exchanged among the parties.

131

Table of Contents

On February 25, 2022, Chardan and Dragonfly received a draft investment term sheet from one potential lender (“Potential Lender 3”). Chardan and Dragonfly consulted with their respective advisors but no further discussions were had.

On March 4 2022, Chardan received a draft proposal letter and term sheet from Energy Impact Partners (“EIP”), which contemplated a senior secured term loan facility and a committed delayed draw term loan facility. Chardan and Dragonfly consulted with their respective counsel and financial advisors and multiple drafts of the proposal letter and term sheet were subsequently exchanged among the parties.

On March 9, 2022, the Chardan team communicated with its board by email regarding potential delivery of a revised LOI to Dragonfly.

On March 11, 2022, Chardan held a meeting of the Chardan Board by videoconference. During the meeting, Chardan management provided updates regarding proposed amendments to the First Amendment and on recent financial and other developments related to Dragonfly’s business and market conditions. Skadden also provided an overview of fiduciary duties to the Chardan Board. The independent directors of the Chardan Board also held an executive session to discuss.

On March 18, 2022, Chardan and Dragonfly received a draft term sheet from one potential lender (“Potential Lender 4”), which contemplated a revolving credit facility. Chardan and Dragonfly consulted with their respective advisors but no further discussions were had.

On March 21, 2022, Potential Lender 1 indicated that they would not be moving forward with the financing on the latest terms proposed by Chardan and Dragonfly. Despite Potential Lender 1’s decision not to move forward with the financing and the eventual termination of communications with ATW Partners (as further discussed below), the Sponsor determined that, based on its strong belief in the proposed Business Combination, it would maintain its obligation to contribute the $5,000,000 PIPE investment, which had been agreed to on standard PIPE investment terms and did not involve any further negotiation of economic terms between Dragonfly and the Sponsor.

On March 29, 2022, Chardan and Dragonfly executed a second amendment to the Oct 15 LOI (the “Second Amendment”), extending the exclusivity period until May 15, 2022 and including the following changes from the First Amendment: acquisition of all of the outstanding Dragonfly shares in exchange for 40,000,000 common shares of Chardan (valued at $10.00 per share), plus potential earnout consideration of 40,000,000 shares of Chardan common stock in the aggregate during the six years post-closing (in three separate installments of 15,000,000, 12,500,000 and 12,500,000 shares, the first installment to be paid upon achievement of certain revenue and operating income milestones, and the second and third installments to be paid upon achievement of share prices of $22.50 and of $32.50, respectively). The Second Amendment contemplated a minimum capital raise via private placement of $5,000,000 and a post-closing common stock equity line of credit of $100,000,000. Chardan communicated with its board by email regarding the delivery of the Second Amendment, to which there were no objections.

On March 30, 2022, Chardan, Dragonfly and EIP executed a proposal letter and non-binding term sheet (collectively, the “EIP Proposal Letter”) pursuant to which EIP proposed to provide to Dragonfly (i) a $75,000,000 term loan facility and (ii) a $45,000,000 delayed draw term loan facility, each anticipated to be subject to the terms and conditions specified therein including an additional $5 million equity contribution and a $100 million equity line of credit both expected to be provided by an affiliate of Chardan. The EIP Proposal Letter also contemplated the issuance by Dragonfly of warrants to EIP, each of which were expected to be subject to customary anti-dilution protections and registration rights. Dragonfly also agreed to an exclusivity period with EIP with respect to debt financing in relation to the Business Combination. The EIP Proposal Letter was not a firm commitment by EIP to provide debt financing, although EIP indicated at the time that it would subsequently provide a firm commitment to Dragonfly subject to, among other things, completion of satisfactory diligence and receipt of internal approvals.

On March 30, 2022, Chardan and Dragonfly terminated communications with other potential lenders following the signing of the EIP Proposal Letter with EIP, including ATW Partners.

Between March 31, 2022 and May 6, 2022, EIP conducted due diligence, which included review of financial information, discussions with Dragonfly management, customer calls and site visits.

132

Table of Contents

On April 5, 2022, Chardan Capital Markets sent an initial draft to Dragonfly of a proposed $100,00,000 committed equity facility. Chardan and Dragonfly consulted with their respective counsels and multiple drafts of the letter agreement and term sheet were subsequently exchanged among the parties.

On April 6, 2022, Skadden sent an initial draft of the Sponsor Support Agreement to O’Melveny for review. The draft of the Sponsor Support Agreement included terms related to, among other things, the Sponsor voting in favor of approval of the Business Combination and not redeeming shares, including shares purchased in the open market, in connection with the Merger. In addition, Skadden sent a subsequent draft of the Merger Agreement to O’Melveny, which contained proposed revisions including with respect to the establishment of an equity facility, debt financing, transaction bonuses and the earnout structure.

On April 9, 2022, Dragonfly and Chardan Capital Markets agreed to increase the committed equity facility aggregate amount from $100 million to $150 million, to further support New Dragonfly’s growth capital needs.

On April 12, 2022, O’Melveny sent Skadden further revisions to the draft Merger Agreement, which included updates with respect to the representations and warranties of the parties, the equity facility and debt financing. On April 21, 2022, Skadden sent additional updates to the draft Merger Agreement to O’Melveny, including with respect to the initial PIPE investor and to post-closing directors and officers.

On April 14, 2022, O’Melveny sent an initial draft of the Company Disclosure Schedules to Skadden and on April 18, 2022, Skadden sent an initial draft of the Acquiror Disclosure Schedules to O’Melveny. Between April 14, 2022, and May 15, 2022, Skadden and O’Melveny exchanged multiple drafts of the Disclosure Schedules.

On April 20, 2022, Skadden sent an initial draft of the Subscription Agreement to O’Melveny for review. The initial draft of the Subscription Agreement contemplated that Chardan would issue and sell to Chardan Capital Markets, an affiliate of Sponsor, 500,000 shares of Chardan common stock at a purchase price of $10.00 for an aggregate commitment of $5,000,000.

Also on April 20, 2022, Skadden sent a draft of the Registration Rights Agreement to O’Melveny for review. The draft of the Registration Rights Agreement included terms related to, among other things, a request for underwritten shelf takedowns, reductions of underwritten offerings and block trades.

On April 25, 2022, Chardan held a meeting of the Chardan Board by videoconference. During the meeting, Chardan management provided the Chardan Board with a general update regarding potential financing arrangements for the proposed business combination and of Dragonfly’s business and macroeconomic trends. The independent directors of the Chardan Board also held an executive session.

Also on April 25, 2022, O’Melveny sent comments to the Subscription Agreement to Skadden with respect to, among other things, certain closing conditions and representations and warranties.

On April 26, 2022, O’Melveny sent initial drafts of the New Dragonfly certificate of incorporation and bylaws. Between May 3, 2022 and May 12, 2022, O’Melveny and Skadden exchanged multiple drafts of the New Dragonfly certificate of incorporation and bylaws, revising, among other things, the number of shares to be authorized by New Dragonfly.

On April 27, 2022, Skadden conducted an additional legal due diligence call with members of Dragonfly’s management team and O’Melveny. A list of due diligence agenda questions and topics were sent to O’Melveny on April 25, 2022 in advance of the legal due diligence call.

On April 28, 2022, O’Melveny sent comments to the Registration Rights Agreement to Skadden with respect to, among other things, registration rights of the holders, block trades and company obligations.

On April 29, 2022, O’Melveny sent further comments to the draft Merger Agreement to Skadden, which included, among other things, updates with respect to representations and warranties of Dragonfly and the contemplated jurisdiction of New Dragonfly.

On May 3, 2022, Skadden sent a revised draft of the Registration Rights Agreement to O’Melveny, which included, among other things, further changes related to the lock-up, block trades and other coordinated offerings, the right of holders to withdraw from underwritten offerings, and certain other registration rights.

133

Table of Contents

On May 5, 2022, the Chardan Team, Dragonfly’s management team, and members of EIP met in Reno, Nevada for an onsite diligence session.

On May 6, 2022, Skadden sent a revised draft of the Subscription Agreement to O’Melveny, which included, among other things, further changes related to the trust account waiver.

On May 9, 2022, Duff & Phelps met with Chardan’s Board at a board meeting to review its preliminary valuation analysis.

Also on May 9, 2022, O’Melveny sent additional comments to Skadden on the Subscription Agreement related to termination and certain miscellaneous provisions, and also on the Registration Rights Agreement, related to, among other things, the lock-up, block trades and other coordinated offerings, and certain rights of holders related to underwritten offerings.

On May 10, 2022, Chardan and Dragonfly received a draft commitment letter from EIP. Between May 10, 2022, and May 13, 2022, EIP, Chardan, and Dragonfly and their respective counsel exchanged drafts of the commitment letter and negotiated terms including with respect to minimum cash balances, warrants and funding timeline.

On May 12, 2022, Skadden sent a revised draft of the Merger Agreement to O’Melveny, which included, among other things, updates related to key employment agreements, the commitment letter from EIP and covenants of Chardan.

On May 13, 2022, Chardan held a meeting of the Chardan board by videoconference. During the meeting, Duff & Phelps delivered to the board its executed opinion, dated May 13, 2022, that, as of the date thereof and based on the assumption made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained therein, the consideration to be paid by Chardan to the Dragonfly shareholders in the Business Combination pursuant to the Merger Agreement was fair to Chardan from a financial point of view. At the end of the board meeting, and following an executive session of the independent directors, the board unanimously approved the Business Combination.

Also on May 13, 2022, Skadden sent a revised draft of the Sponsor Support Agreement to O’Melveny, which included a change to the Sponsor covenants. Skadden also sent a revised draft of the Registration Rights Agreement, which included, among other things, changes related to block trades and certain indemnification provisions. O’Melveny further sent a revised draft of the New Dragonfly bylaws, which included a change to the lock-up provision.

Between May 13 and May 15, 2022, the parties exchanged and negotiated multiple drafts of the Merger Agreement, which included, among other things, changes to certain employment-related provisions, representations and warranties, Chardan and Dragonfly covenants and conditions to closing.

Between May 13 and May 15, 2022, the parties exchanged and negotiated drafts of other ancillary transaction documents, and on May 15, 2022, Chardan management provided an update to the Chardan board on the status of the Merger Agreement and other ancillary transaction documents.

On May 15, 2022, the Business Combination Agreement, the Debt Commitment Letter and the Equity Facility Letter Agreement were executed by Chardan, Dragonfly and the other parties thereto. Also on May 15, 2022, the Subscription Agreement was executed by Chardan and the Sponsor.

On May 16, 2022, the parties announced the Business Combination and its related transactions, and Chardan filed a Current Report on Form 8-K including, among other things, a press release, a copy of the Business Combination Agreement and a presentation for investors.

On May 20, 2022, the Backstop Commitment Letter was executed by the Chardan Lender and the Backstop Lender.

On July 12, 2022, Chardan, Dragonfly and Merger Sub executed an Amendment to the Business Combination Agreement to reflect a $15 million increase in the consideration to be issued in the business combination in connection with Dragonfly entering into a Stock Purchase Agreement with THOR Industries, Inc. (“THOR”), dated as of July 12, 2022, whereby for $15 million in cash, THOR purchased 1,267,502 shares of Dragonfly common stock (the “THOR Investment”). In connection with the THOR Investment, Dragonfly agreed to enter into a related distribution arrangement and joint IP development arrangement with THOR, the terms of which to be negotiated and agreed with THOR (i) include an initial term of 24 months, which THOR may renew for successive one-year

134

Table of Contents

periods; (ii) would make Dragonfly the sole provider of lithium-ion batteries to the US-based THOR family of companies for THOR sales in the United States, subject to agreed exceptions; (iii) include favored pricing for products and negotiated rebates or other incentives; (iv) would make THOR and its North American OEMs Dragonfly’s exclusive RV OEM customers for its products in North America, subject to agreed exceptions; and (v) include agreeable terms with respect to registered and unregistered intellectual property rights and technology rights (which do not include Dragonfly’s existing intellectual property, including Dragonfly's solid-state battery technologies and related IP rights), including necessary licenses between the parties, third party licenses, and allocation of ownership of any intellectual property rights and/or technology rights developed as a result of development efforts jointly undertaken between THOR and Dragonfly, subject to certain limitations.

The Chardan Board’s Reasons for the Approval of the Business Combination

The Chardan Board, in evaluating the transaction with Dragonfly, consulted with its legal counsel, financial and accounting advisors. Chardan Capital Markets and Duff & Phelps, as financial advisors to Chardan, led the financial and valuation analysis of Dragonfly. Skadden conducted the legal due diligence of Dragonfly, in its capacity as legal counsel to Chardan. In reaching its conclusion (i) that the terms and conditions of the Business Combination Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Chardan and its stockholders and (ii) to recommend that the stockholders adopt the Business Combination Agreement and approve the Business Combination, the Chardan Board considered and evaluated a number of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors considered in connection with its evaluation of the Business Combination, the Chardan Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. The Chardan Board viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of Chardan’s reasons for the Business Combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements.”

The members of Chardan’s management team and the Chardan Board are well-qualified to evaluate the transaction with Dragonfly. They have significant transactional experience, including in the renewables and energy storage industries. Chardan’s management team and the Chardan Board also include individuals with experience in executive management of multinational companies and in investing in companies in the energy sector.

The Chardan Board considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby, including but not limited to, the following material factors:

●

Developing disruptive lithium-ion batteries and solid-state technology. Dragonfly has created state-of- the-art lithium-ion batteries, equipped with a proprietary battery management system, that are currently used in recreational vehicles (“RVs”), marine vessels, material handlers, and off-grid and solar applications. Dragonfly’s integrated lithium-ion products not only replace the large and environmentally toxic lead-acid battery markets, but also provide safe, efficient, and affordable energy storage solutions for a clean, renewable future. Dragonfly is in the process of developing proprietary solid-state energy storage technology and manufacturing processes with an aim to drive the shift away from fossil fuels and to allow for a more stable power grid that incorporates renewable energy sources. The Chardan Board believes Dragonfly’s current and future technology and products possess advantages that are well-suited to achieve this.

●

Founded based on years of work and deep understanding of solid-state and lithium technologies. Dragonfly was founded by Dr. Denis Phares and Sean Nichols. Dr. Phares has served as Dragonfly’s Chief Executive Officer since it was incorporated in 2012 and Mr. Nichols has served as Dragonfly’s Chief Operating Officer since 2013. They lead a team that has a deep understanding of lithium ion and solid-state technologies and extensive sales and marketing experience.

●

Consulted with technical experts. The Chardan Board engaged technical experts who conducted due diligence on Dragonfly’s solid-state technologies and analyzed the potential of Dragonfly’s proprietary technology.

●

Addressing an area of high unmet green energy storage needs. 85% of the total global consumption of lead is for the production of lead-acid batteries according to the World Health Organization, and it is estimated that the cost of lost productivity due to lead exposure is around $1 trillion globally per a Stanford University study on lead poisoning. As consumers

135

Table of Contents

are moving away from lead-based storage, Dragonfly’s lithium-ion technology is well-positioned to enable widespread conversion to green, renewable energy. The Chardan Board believes Dragonfly’s lithium-ion batteries and solid-state technology will provide substantial competitive advantages that will enable expansion into end-markets estimated at $85 billion by 2025.

●

Potential for multiple follow-on product candidates. Dragonfly has been optimizing and developing energy storage cells and other technologies to eventually scale to mass production. Dragonfly’s research and development efforts have validated its proprietary processes and the Chardan Board believes Dragonfly will leverage its technologies and proprietary processes to expand its pipeline and continue finding battery solutions to address unmet energy storage needs.

●

Strong IP portfolio. Dragonfly has a vision to become a leading lithium-ion technology company and has 24 issued patents and 20 pending patent applications to protect its science. The Chardan Board believes Dragonfly’s IP portfolio, along with internal expertise, leaves Dragonfly well-positioned to further develop its technologies.

●

Financial analysis conducted by Chardan Management. The financial analysis conducted by Chardan’s management team and reviewed by the Chardan Board supported the equity valuation of Dragonfly. See the section entitled “Summary of Chardan Financial Analysis.”

●

Fairness opinion of Duff & Phelps. The Chardan Board reviewed the opinion delivered by Duff & Phelps to the Chardan Board, as of May 13, 2022, and subject to and based upon the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications therein, the consideration to be paid by Chardan to the Dragonfly shareholders in the Business Combination pursuant to the Merger Agreement was fair to Chardan, from a financial point of view. See the section entitled “Fairness Opinion of Duff & Phelps.”

The Chardan Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

●

Benefits not achieved. The risk that the potential benefits of the Business Combination may not be fully achieved, or may not be achieved within the expected timeframe.

●

Liquidation of Chardan. The risks and costs to Chardan if the Business Combination is not completed, including the risk of diverting management focus and resources from other businesses combination opportunities, which could result in Chardan being unable to effect a business combination by the completion deadline and forcing Chardan to liquidate.

●

Exclusivity. The fact that the Business Combination Agreement includes an exclusivity provision that prohibits Chardan from soliciting other business combination proposals and restricts Chardan’s ability to consider other potential business combinations so long as the Business Combination Agreement is in effect.

●

Stockholder Vote. The risk that Chardan’s stockholders may fail to provide the respective votes necessary to effect the Business Combination.

●

Post-Business Combination Corporate Governance. The Chardan Board considered the corporate governance provisions of the Business Combination Agreement and the proposed material provisions of the amendment to Chardan’s certificate of incorporation and the proposed amended bylaws and the effect of those provisions on the governance of the company post-Business Combination. See “— The Business Combination Agreement” and “Management of New Dragonfly After the Business Combination” for detailed discussions of the terms and conditions of these documents.

●

Closing Conditions. The fact that completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within Chardan’s control.

●

Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely delay consummation of the Business Combination.

136

Table of Contents

●

Potential Conflicts. The Chardan Board considered the potential additional or different conflicts of interests of Chardan’s directors, executive officers, the Sponsor and its affiliates, as described in the section entitled “— Interests of Certain Persons in the Business Combination.” The Chardan Board, including Chardan’s independent directors, with their outside counsel, reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and approving, as members of the Chardan Board, the Business Combination Agreement and the transactions contemplated thereby, including the Merger.

●

Fees and Expenses. The fees and expenses associated with completing the Business Combination.

●

Other Risks. Various other risks associated with the Business Combination, the business of Chardan and the business of Dragonfly described under the section entitled “Risk Factors.”

The Chardan Board concluded that the potential benefits that it expected Chardan and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, the Chardan Board determined that the Business Combination Agreement and the Business Combination were advisable, fair to, and in the best interests of, Chardan and its stockholders.

Summary of Chardan Financial Analysis

The following is a summary of the material financial analyses prepared by Chardan management and reviewed by the Chardan Board in connection with the valuation of Dragonfly. These analyses are separate from, and in addition to, the analyses provided in the Opinion of Duff & Phelps delivered to the Chardan Board (for the Opinion, see the section of this proxy statement/prospectus entitled “Fairness Opinion of Duff and Phelps”). The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by Chardan nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by the Chardan Board. Chardan may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Chardan’s view of the actual value of Dragonfly.

In performing analyses, the representatives of Chardan made numerous material assumptions with respect to, among other things, timing and quantum of sales orders from OEM customers, sales from DTC customers, cost of raw materials, timing and cost of development of solid state technology, market size, commercial efforts, industry performance, general business and economic conditions and numerous other matters, many of which are beyond the control of Chardan, Dragonfly or any other parties to the Business Combination. None of Dragonfly, Chardan, or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of Dragonfly do not purport to be appraisals or reflect the prices at which Dragonfly shares may actually be valued. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty.

Comparable Company Analysis

Chardan management reviewed certain financial information of Dragonfly and compared it to certain publicly traded companies selected based on the experience and the professional judgment of Chardan’s management team (the “Peer Group”).

Chardan considered certain financial and operating information for (a) certain publicly-traded companies that are developing solid state battery technology, (the “Solid State Companies”), (b) certain publicly-traded companies that focus on next-generation, technology-focused energy storage (the “Tech-Focused Energy Storage Companies”), (c) certain publicly-traded companies that manufacture lithium-ion (“li-ion”) batteries (the “Li-ion Battery Manufacturers”), and (d) certain publicly-traded companies that are vertically-integrated in the energy storage ecosystem (the “Vertically Integrated Energy Companies”), in each case, that Chardan deemed relevant for analysis. The selected companies were:

Solid State Companies:

Solid Power

137

Table of Contents

QuantumScape

Tech-Focused Energy Storage Companies

EOS Energy Storage

ESS

STEM

Li-ion Battery Manufacturers

Samsung SDI CATL

LG Energy Solutions

Enovix

Microvast

Vertically Integrated Energy

Tesla

Li-Cycle

BYD

None of the selected companies has characteristics identical to Dragonfly, and they were selected because they have a combination of comparable technologies, end-markets served, and energy storage focus, amongst other attributes. An analysis of selected publicly traded companies is not purely quantitative; rather it involves complex consideration and judgements concerning differences in financial and operating characteristics of the selected companies and other factors that could affect the public trading values of the companies reviewed. Chardan made qualitative judgments, based on the experience and professional judgment of its management team, concerning differences between the operational, business and/or financial characteristics of Dragonfly and the selected companies to provide a context in which to consider the results of the quantitative analyses.

Satisfaction of the 80% Test

After consideration of factors, including those identified and discussed in the section titled “The Business Combination Proposal — The Chardan Board’s Reasons for the Approval of the Business Combination” and in the Opinion of Duff & Phelps, the Chardan Board concluded that the Business Combination met all of the requirements disclosed in the prospectus for Chardan’s Initial Public Offering, including that the business of Dragonfly had a fair market value equal to at least 80% of the balance of funds in the trust account, less any taxes payable on interest earned, at the time of the execution of the Business Combination Agreement. In reaching this determination, the Chardan Board concluded that it was appropriate to base such valuation on Dragonfly’s future outlook and operational plans, as well as valuations and trading of publicly traded companies in similar and adjacent sectors.

Recommendation of the Chardan Board

THE CHARDAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE CHARDAN STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.

138

Table of Contents

PROPOSAL NO. 2 — THE CHARTER PROPOSAL

Overview

If the Business Combination is to be consummated, Chardan will replace the current certificate of incorporation of Chardan with the second amended and restated certificate of incorporation in the form attached to this proxy statement/prospectus as Annex B, which, in the judgment of the Chardan board, is necessary to adequately address the needs of New Dragonfly following the Closing.

As part of the Business Combination, existing shares of Dragonfly common stock will be converted into similar shares of New Dragonfly common stock.

The following table sets forth a summary of the principal proposed changes and the differences between the current certificate of incorporation and the second amended and restated certificate of incorporation. This summary is qualified by reference to the complete text of the second amended and restated certificate of incorporation, a copy of which is attached to this proxy statement/prospectus as Annex B. All stockholders are encouraged to read the second amended and restated certificate of incorporation in its entirety for a more complete description of its terms.


	Current Certificate of Incorporation	Second Amended and Restated Certificate of Incorporation
Number of Authorized Shares	Chardan is currently authorized to issue 51,000,000 shares of which 50,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As of March 25, 2022 there were 15,812,500 shares of common stock outstanding.	The total number of shares of capital stock that New Dragonfly is authorized to issue is 175,000,000 shares, consisting of 170,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share.

	Chardan’s certificate provides that, promptly after the consummation of the Business Combination, the shares sold pursuant to the Chardan IPO will be converted into cash at a per share price equal to the quotient determined by dividing (i) the amount then held inf the trust fund less any income taxes owed on such funds but not yet paid, calculated as of two business days prior to the consummation of the Business Combination or the filing of the amendment, as applicable, by (ii) the total number of the shares sold pursuant to the Chardan IPO then outstanding.	Immediately following consummation of the Business Combination, Dragonfly common stock will be cancelled in exchange for the right to receive, or the reservation of, an aggregate of 41,500,000 shares of New Dragonfly common stock, or, as applicable, shares underlying awards based on Dragonfly common stock, representing the Aggregate Merger Consideration. New Dragonfly is expected to have approximately [●] shares of New Dragonfly common stock outstanding, assuming no redemptions and no exercise of dissenter’s rights.

Name	Chardan NexTech Acquisition 2 Corp.	Dragonfly Energy Holdings Corp.

Purpose	The purpose of the Chardan is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.	The second amended and restated certificate of incorporation provides that the purpose of New Dragonfly is to engage in any lawful act or activity for which a corporation may be organized under the DGCL as the same exists or may hereafter be amended.

139

Table of Contents

	Current Certificate of Incorporation	Second Amended and Restated Certificate of Incorporation
Provisions Specific to a Blank Check Company	Article Fifth governs the Business Combination, but will be terminated upon the consummation of such Business Combination.	No specific provision exists as to operating as a blank check company.

Classified Board	Not applicable.	The directors of New Dragonfly (other than those directors elected by the holders of any series or class of preferred stock provided for or fixed pursuant to Article IV of the second amended and restated certificate of incorporation) shall be and are divided into three (3) classes, designated Class A, Class B and Class C.

		Each class shall consist, as nearly as may be possible, of one-third (1/3) of the total number of directors constituting the entire board. The board may assign members of the board already in office upon the effectiveness of the filing of the certificate with the Secretary of State of the State of Delaware (the “Effective Time”) to such classes. Subject to the rights of holders of any series or class of preferred stock to elect directors, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class A shall serve for a term expiring at New Dragonfly’s first annual meeting of stockholders held after the Effective Time; each director initially assigned to Class B shall serve for a term expiring at New Dragonfly’s second annual meeting of stockholders held after the Effective Time; and each director initially assigned to Class C shall serve for a term expiring at New Dragonfly’s third annual meeting of stockholders held after the Effective Time.

Choice of Forum	To the fullest extent permitted by law, unless Chardan consents in writing to the selection for an alternative forum, (a) any derivative action or proceeding, (b) any action asserting a claim for breach of a fiduciary duty owed by any current or former director, officer,	The second amended and restated certificate of incorporation generally designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for any stockholder (including a beneficial owner) to: (i) any derivative action or proceeding

140

Table of Contents

Current Certificate of Incorporation

Second Amended and Restated Certificate of Incorporation

employee, agent or stockholder of the Chardan to Chardan or the its stockholders, (c) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, the certificate of incorporation, or the bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, the forum shall be Court of Chancery of the State of Delaware (subject to certain exceptions).

The above provision does not apply to suits brought to enforce any duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. Additionally, unless Chardan consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

brought on behalf of New Dragonfly, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of New Dragonfly to New Dragonfly or New Dragonfly’s stockholders, (iii) any action asserting a claim against New Dragonfly, its directors, officers, or employees arising pursuant to any provision of the DGCL or the second amended and restated certificate of incorporation or the bylaws, (iv) any action asserting a claim against New Dragonfly, its directors, officers, or employees governed by the internal affairs doctrine, subject to certain exceptions. The exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. The federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

Reasons for the Amendments to Chardan’s Charter

In the judgment of the Chardan board, the second amended and restated certificate of incorporation are necessary to address the needs of New Dragonfly and Dragonfly stockholders following the Closing. In particular:

●

The greater number of authorized shares of capital stock is desirable for New Dragonfly to have sufficient shares to complete the Business Combination. Additionally, the Chardan Board believes that it is important for us to have available for issuance a number of authorized shares sufficient to support our growth and to provide flexibility for future corporate needs (including, if needed, as part of financing for future growth acquisitions). The shares would be issuable for any proper corporate purpose, including future acquisitions, capital raising transactions consisting of equity or convertible debt, stock dividends or issuances under current and any future stock incentive plans, pursuant to which we may provide equity incentives to employees, officers and directors. The Chardan Board believes that these additional shares will provide us with needed flexibility to issue shares in the future in a timely manner and under circumstances we consider favorable without incurring the risk, delay and potential expense incident to obtaining stockholder approval for a particular issuance.

●

The additional changes to the Chardan Charter, including the name change from “Chardan NexTech Acquisition 2 Corp.” to “Dragonfly Energy Holdings Corp.”, are necessary to adequately address the needs of New Dragonfly following the Closing.

●

We believe the three-class classified board structure will help to attract and retain qualified director candidates who are willing to make long-term commitments of their time and energy. In addition, the three-class classified board structure reduces New Dragonfly’s vulnerability to coercive takeover tactics and inadequate takeover bids, by encouraging persons seeking control of New Dragonfly to negotiate with the New Dragonfly Board and thereby better positioning the New Dragonfly Board to negotiate effectively on behalf of all of New Dragonfly’s stockholders. The three-class classified board structure is designed to safeguard against a hostile purchaser replacing a majority of New Dragonfly’s directors with its own nominees at a single meeting, thereby gaining control of New Dragonfly and its assets without paying fair value to the combined Company’s stockholders.

●

Chardan’s board believes the choice of forum provision is desirable to delineate matters for which the Court of Chancery of the State of Delaware or the federal district courts of the U.S., as applicable, is the sole and exclusive forum, in order that New

141

Table of Contents

Dragonfly is not subject to such types of claims in numerous jurisdictions, unless New Dragonfly consents in writing to the selection of an alternative forum.

Vote Required for Approval

The approval of the Charter Proposal will require the affirmative vote of holders of a majority of Chardan’s outstanding shares of common stock entitled to vote thereon at the special meeting. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the Charter Proposal will have the same effect as a vote “AGAINST” this proposal.

The Charter Proposal is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Director Election Proposal. Therefore, if the Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal, the ESPP Proposal and the Director Election Proposal are not approved, the Charter Proposal will have no effect, even if approved by our public stockholders.

Recommendation of the Chardan Board

THE CHARDAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CHARDAN STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE CHARTER PROPOSAL.

142

Table of Contents

PROPOSAL NO. 3 — THE NASDAQ PROPOSAL

Overview

Assuming the Business Combination Proposal and the Charter Proposal are approved, our stockholders also will be asked to approve the Nasdaq Proposal.

The Nasdaq Proposal is a proposal to approve, assuming the Business Combination Proposal and the Charter Proposal are approved and adopted, for the purposes of complying with the applicable listing rules of the Nasdaq, the issuance of more than 20% of our issued and outstanding common stock, including (i) pursuant to the PIPE Investment, (ii) pursuant to the Equity Facility, (iii) pursuant to the Term Loan Lender Warrants and (iv) pursuant to the terms of the Business Combination Agreement (including the Aggregate Merger Consideration and the Earnout Shares) that may result in Dragonfly equityholders acquiring shares owning more than 20% of our outstanding common stock, or more than 20% of the voting power, which could constitute a “change of control” under Nasdaq Listed Rules. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal.”

Reasons for the Approval of the Nasdaq Proposal

We are seeking stockholder approval in order to comply with Rules 5635(a), (b), and (d), as applicable, of the Nasdaq Listed Company Manual.

Pursuant to Nasdaq Listing Rule 5635(a), stockholder approval is required prior to the issuance of common stock or other securities convertible into or exercisable for common stock, in connection with the acquisition of the stock or assets of another company, if such securities are not issued in a public offering and (i) the common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such securities, or (ii) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of such securities. The aggregate number of shares of common stock that Chardan will issue in the Business Combination and pursuant to the PIPE Investment, the Equity Facility and the Term Loan Lender Warrants will exceed 20% of both the voting power and the shares of Chardan common stock outstanding before such issuance, and for this reason, Chardan is seeking the approval of its stockholders for the foregoing issuances.

Second, pursuant to Nasdaq Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change in control of the company. Here, the issuance of common stock to the equityholders of Dragonfly will result in a change of control of Chardan. Accordingly, Chardan is seeking the approval of its stockholders for such issuances.

Effect of the Proposal on Current Stockholders

If the Nasdaq Proposal is adopted, (i) 500,000 shares of common stock are issuable pursuant to the Subscription Agreement, (ii) and up to $150,000,000 in shares of common stock will be issuable pursuant to the Equity Facility, (iii) 3,665,432 shares of common stock will be issuable pursuant to the Term Loan Lender Warrants and (iv) up to 81,500,000 shares of common stock will be issued to Dragonfly equityholders (including 40,000,000 shares issuable to Dragonfly stockholders as part of the Earnout Shares) pursuant to the terms of the Business Combination Agreement, which will represent approximately 615% of the 15,812,500 shares of Chardan’s common stock outstanding before the Business Combination, assuming (a) none of Chardan’s public stockholders exercises redemption rights with respect to their public shares, (b) no exercise of Chardan’s 14,115,358 outstanding warrants at an exercise price of $11.50 per share (which warrants are not exercisable until 30 days after the completion of the Business Combination), and (c) that no shares are issued pursuant to the Incentive Plan.

In the event that this proposal is not approved by our stockholders, the Business Combination may not be consummated. In the event that this proposal is approved by our stockholders, but the Business Combination Agreement is terminated (without the Business Combination being consummated) prior to the issuance of shares of common stock pursuant to the Business Combination Agreement, Chardan will not issue the shares of common stock.

143

Table of Contents

Vote Required for Approval

The approval of the Nasdaq Proposal requires the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon at the special meeting. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the Nasdaq Proposal will have the same effect as a vote “AGAINST” this proposal.

The Nasdaq Proposal is conditioned on the approval of the Business Combination Proposal, the Charter Proposal, the Incentive Plan Proposal and the ESPP Proposal. Therefore, if the Business Combination Proposal, the Charter Proposal, Incentive Plan Proposal and the ESPP Proposal are not approved, the Nasdaq Proposal will have no effect, even if approved by our public stockholders.

Recommendation of the Chardan Board

THE CHARDAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE CHARDAN STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE NASDAQ PROPOSAL.

144

Table of Contents

PROPOSAL NO. 4 — THE INCENTIVE PLAN PROPOSAL

General

Assuming the Business Combination Proposal, the Charter Proposal and the Nasdaq Proposal are approved, stockholders are being asked to approve the New Dragonfly 2022 Equity Incentive Plan (the “2022 Plan”). Up to 3,285,900 shares of the New Dragonfly common stock (“Common Stock”) will initially be reserved for issuance under the 2022 Plan, and additional shares will become available for issuance under the 2022 Plan each year as described below under “Aggregate Share Limit.” Our Board of Directors has approved the 2022 Plan, subject to stockholder approval at the special meeting.

The 2022 Plan is intended to replace the Dragonfly Energy, Inc. 2019 Stock Incentive Plan and the Dragonfly Energy, Inc. 2021 Stock Incentive Plan (collectively, the “Prior Plans”), which the Company will assume in the Business Combination. Following the Closing, no additional awards will be granted under the Prior Plans, although all stock awards granted under the Prior Plans that are outstanding immediately prior to the Closing will be assumed by the Company and continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards and the terms of the applicable Prior Plan.

The Company believes that stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company, and that incentive compensation plans like the proposed 2022 Plan are an important attraction, retention and motivation tool for participants in the plan. Therefore, our Board of Directors recommends that our stockholders approve the 2022 Plan.

Summary Description of the 2022 Equity Incentive Plan

The principal terms of the 2022 Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2022 Plan, which appears as Annex B to this proxy statement/prospectus.

Purpose. The purpose of the 2022 Plan is to promote the success of the Company by providing an additional means for us to attract, motivate, retain and reward selected employees and other eligible persons through the grant of awards. Equity-based awards are also intended to further align the interests of award recipients and stockholders.

Administration. The Company’s Board of Directors or one or more committees appointed by the Board of Directors will administer the 2022 Plan. The Board of Directors or a committee thereof (within its delegated authority) may delegate different levels of authority to different committees or persons with administrative and grant authority under the 2022 Plan. The Board of Directors has delegated general administrative authority for the 2022 Plan to the Compensation Committee. (The appropriate acting body, be it the Board of Directors or a committee or other person within its delegated authority, is referred to in this proposal as the “Administrator”).

The Administrator has broad authority under the 2022 Plan, including, without limitation, the authority:

●

to determine eligibility and, from among such persons determined to be eligible, determine the type(s) of award(s) that they are to receive;

●

to grant awards and determine the terms and conditions of awards, including the price (if any) to be paid for the shares or the award and, in the case of share-based awards, the number of shares to be offered or awarded;

●

to determine any applicable vesting and exercise conditions for awards (including any applicable performance and/or time-based vesting or exercisability conditions) and the extent to which such conditions have been satisfied, or determine that no delayed vesting or exercise is required, to determine the circumstances in which any performance-based goals (or the applicable measure of performance) will be adjusted and the nature and impact of any such adjustment, to establish the events (if any) on which exercisability or vesting may accelerate (including specified terminations of employment or service or other circumstances), and to accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards (subject in the case of options and stock appreciation rights to the maximum term of the award);

●

to cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consents;

145

Table of Contents

●

subject to the other provisions of the 2022 Plan, to make certain adjustments to an outstanding award and to authorize the conversion, succession or substitution of an award;

●

to determine the method of payment of any purchase price for an award or shares of the Company’s common stock delivered under the 2022 Plan, as well as any tax-related items with respect to an award, which may be in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the Company’s common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third - party payment or cashless exercise on such terms as the Administrator may authorize, or any other form permitted by law;

●

to modify the terms and conditions of any award, establish sub-plans and agreements and determine different terms and conditions that the Administrator deems necessary or advisable to comply with laws in the countries where the Company or one of its subsidiaries operates or where one or more eligible participants reside or provide services;

●

to approve the form of any award agreements issued under the 2022 Plan; and

●

to construe and interpret the 2022 Plan and any award agreements issued thereunder, make rules for the administration of the 2022 Plan, and make all other determinations for the administration of the 2022 Plan.

No Repricing. In no case (except due to an adjustment to reflect a stock split or other event referred to under “Adjustments” below, or any repricing that may be approved by stockholders) will the Administrator (1) amend an outstanding stock option or stock appreciation right to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for an option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award.

Eligibility. Persons eligible to receive awards under the 2022 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. We estimate that, immediately following the Closing of the Business Combination, approximately 180 officers and employees of the Company and its subsidiaries (including all of the Company’s named executive officers), and each of the members of the Company’s Board of Directors who are not employed by the Company or any of its subsidiaries (“Non-Employee Directors”), will be considered eligible under the 2022 Plan. In addition, we estimate that approximately five individual consultants and advisors engaged by the Company and its subsidiaries will then be considered eligible under the 2022 Plan.

Aggregate Share Limit. The maximum number of shares of Common Stock that may be issued or transferred pursuant to awards under the 2022 Plan equals the sum of the following (such total number of shares, the “Share Limit”):

●

[3,285,900] shares, plus

●

the number of any shares subject to stock options granted under the Prior Plans and outstanding as of the date of stockholder approval of the 2022 Plan (the “Stockholder Approval Date”) which expire, or for any reason are cancelled or terminated, after the Stockholder Approval Date without being exercised, plus

●

the number of any shares subject to restricted stock awards granted under the Prior Plans that are outstanding and unvested on the Stockholder Approval Date that are forfeited, terminated, cancelled, or otherwise reacquired by the Company after the Stockholder Approval Date without having become vested.

In addition, the Share Limit shall automatically increase on the first trading day in January of each calendar year during the term of the 2022 Plan, with the first such increase to occur in January 2023, by an amount equal to the lesser of (i) four percent of the total number of shares of Common Stock issued and outstanding on December 31 of the immediately preceding calendar year or (ii) such number of shares of Common Stock as may be established by the Board of Directors.

146

Table of Contents

As of June 15, 2022, approximately 3,474,256 shares were subject to stock options then outstanding under the Prior Plans, and approximately 2,679,155 shares were subject to unvested restricted stock awards then outstanding under the Prior Plans. As noted above, no additional awards will be granted under the Prior Plans.

Additional Share Limits. The following other limits are also contained in the 2022 Plan. These limits are in addition to, and not in lieu of, the Share Limit for the plan described above.

●

The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the 2022 Plan is [6,571,800] shares. (For clarity, any shares issued in respect of incentive stock options granted under the 2022 Plan will also count against the overall Share Limit above.)

●

Awards that are granted under the 2022 Plan during any one calendar year to any person who, on the grant date of the award, is a Non-Employee Director shall not exceed the number of shares that produce a grant date fair value for the award that, when combined with (i) the grant date fair value of any other awards granted under the 2022 Plan during that same calendar year to that individual in his or her capacity as a Non-Employee Director and (ii) the dollar amount of all other cash compensation payable by the Company to such Non-Employee Director for his or her services in such capacity during that same calendar year (regardless of whether deferred and excluding any interest or earnings on any portion of such amount that may be deferred), is $[600,000]; provided that this limit is $[800,000] as to (1) a Non-Employee Director who is serving as the independent Chair of the Board of Directors or as a lead independent director at the time the applicable grant is made or (2) any new Non-Employee Director for the calendar year in which the non-employee director is first elected or appointed to the Board of Directors. For purposes of this limit, the “grant date fair value” of an award means the value of the award as of the date of grant of the award and as determined using the equity award valuation principles applied in the Company’s financial reporting. This limit does not apply to, and will be determined without taking into account, any award granted to an individual who, on the grant date of the award, is an officer or employee of the Company or one of its subsidiaries. This limit applies on an individual basis and not on an aggregate basis to all Non-Employee Directors as a group.

Share-Limit Counting Rules. The Share Limit of the 2022 Plan is subject to the following rules:

●

Shares that are subject to or underlie awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2022 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2022 Plan.

●

Except as described below, to the extent that shares are delivered pursuant to the exercise of a stock appreciation right granted under the 2022 Plan, the number of underlying shares which are actually issued in payment of the award shall be counted against the Share Limit. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the participant is 15,000 shares, 15,000 shares shall be charged against the Share Limit with respect to such exercise, and the 85,000 shares not issued shall not count against the Share Limit and shall be available for subsequent awards under the 2022 Plan.)

●

Shares that are exchanged by a participant or withheld by the Company as full or partial payment in connection with any award granted under the 2022 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award granted under the 2022 Plan, will be counted against the Share Limit and will not again be available for subsequent awards under the 2022 Plan.

●

To the extent that an award granted under the 2022 Plan is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the Share Limit and will again be available for subsequent awards under the 2022 Plan.

●

In the event that shares are delivered in respect of a dividend equivalent right granted under the 2022 Plan, the number of shares delivered with respect to the award will be counted against the Share Limit. (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Company pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the Share Limit.) Except as otherwise provided by

147

Table of Contents

the Administrator, shares delivered in respect of dividend equivalent rights shall not count against any individual award limit under the 2022 Plan other than the aggregate Share Limit.

In addition, the 2022 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2022 Plan. The Company may not increase the applicable share limits of the 2022 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).

Types of Awards. The 2022 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as cash awards. The 2022 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash.

A stock option is the right to purchase shares of the Company’s common stock at a future date at a specified price per share (the “exercise price”). The per share exercise price of an option generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant. The maximum term of an option is ten years from the date of grant. An option may either be an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “Federal Income Tax Consequences of Awards Under the 2022 Plan” below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2022 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.

A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of share of the Company’s common stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right. The base price will be established by the Administrator at the time of grant of the stock appreciation right and generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant.

The other types of awards that may be granted under the 2022 Plan include, without limitation, stock bonuses, restricted stock, performance stock, stock units or phantom stock (which are contractual rights to receive shares of stock, or cash based on the fair market value of a share of stock), dividend equivalents which represent the right to receive a payment based on the dividends paid on a share of stock over a stated period of time, or similar rights to purchase or acquire shares, and cash awards.

Any awards under the 2022 Plan (including awards of stock options and stock appreciation rights) may be fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.

Dividend Equivalents; Deferrals. The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals. The Administrator may provide that awards under the 2022 Plan (other than options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on the amount of dividends paid on outstanding shares of Common Stock, provided that any dividends and/or dividend equivalents as to the portion of an award that is subject to unsatisfied vesting requirements will be subject to termination and forfeiture to the same extent as the corresponding portion of the award to which they relate in the event the applicable vesting requirements are not satisfied (or, in the case of a restricted stock or similar award where the dividend must be paid as a matter of law, the dividend payment will be subject to forfeiture or repayment, as the case may be, if the related vesting conditions are not satisfied).

Assumption and Termination of Awards. If an event occurs in which the Company does not survive (or does not survive as a public company in respect of its common stock), including, without limitation, a dissolution, merger, combination, consolidation, conversion, exchange of securities, or other reorganization, or a sale of all or substantially all of the business, stock or assets of the Company, awards then-outstanding under the 2022 Plan will not automatically become fully vested pursuant to the provisions of the 2022 Plan so long as such awards are assumed, substituted for or otherwise continued. However, if awards then-outstanding under the 2022 Plan are to be terminated in such circumstances (without being assumed or substituted for), such awards would generally become fully vested (with any performance goals applicable to the award being deemed met at either the “target” performance level or based on performance through the applicable transaction, as determined by the Administrator in its discretion), subject to any exceptions that the Administrator may provide for in an applicable award agreement. The Administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2022 Plan. For example, the Administrator could provide for the acceleration of

148

Table of Contents

vesting or payment of an award in connection with a corporate event or in connection with a termination of the award holder’s employment.

Transfer Restrictions. Subject to certain exceptions contained in Section 5.6 of the 2022 Plan, awards under the 2022 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws and are not made for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting securities are held by the award recipient or by the recipient’s family members).

Adjustments. As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2022 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders.

No Limit on Other Authority. The 2022 Plan does not limit the authority of the Board of Directors or any committee to grant awards or authorize any other compensation, with or without reference to the Company’s common stock, under any other plan or authority.

Termination of or Changes to the 2022 Plan. The Board of Directors may amend or terminate the 2022 Plan at any time and in any manner. Stockholder approval for an amendment will be required only to the extent then required by applicable law or deemed necessary or advisable by the Board of Directors. Unless terminated earlier by the Board of Directors and subject to any extension that may be approved by stockholders, the authority to grant new awards under the 2022 Plan will terminate on [ ], 2032. Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the 2022 Plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder.

U.S. Federal Income Tax Consequences of Awards under the 2022 Plan

The U.S. federal income tax consequences of the 2022 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2022 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the U.S. Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.

With respect to nonqualified stock options, the company is generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, the company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax.

The current federal income tax consequences of other awards authorized under the 2022 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, stock units, and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the company will generally have a corresponding deduction at the time the participant recognizes income.

If an award is accelerated under the 2022 Plan in connection with a “change in control” (as this term is used under the U.S. Internal Revenue Code), the company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the U.S. Internal Revenue Code (and certain related excise taxes may be triggered). Furthermore, under Section 162(m) of the Code, the aggregate compensation in excess of $1,000,000 payable to current or former Named Executive Officers (including amounts attributable to equity-based and other incentive awards) may not be deductible by the Company in certain circumstances.

149

Table of Contents

Specific Benefits under the 2022 Equity Incentive Plan

The Company has not approved any awards that are conditioned upon stockholder approval of the 2022 Plan. The Company is not currently considering any other specific award grants under the 2022 Plan. If the 2022 Plan had been in existence in fiscal 2021, the Company expects that its award grants for fiscal 2021 would not have been substantially different from those actually made by the Company in that year. For information regarding share-based awards granted to the Named Executive Officers during fiscal 2021, see the material under the heading “Executive Compensation.”

Vote Required for Approval

The approval of the Incentive Plan Proposal requires the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon at the special meeting. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the Incentive Plan Proposal will have the same effect as a vote “AGAINST” this proposal.

The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the ESPP Proposal and the Director Election Proposal. Therefore, if the Business Combination Proposal, the Charter Proposal, Nasdaq Proposal, the ESPP Proposal and the Director Election Proposal are not approved, the Incentive Plan Proposal will have no effect, even if approved by our public stockholders.

Recommendation of the Chardan Board

THE CHARDAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE CHARDAN STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE INCENTIVE PLAN PROPOSAL.

150

Table of Contents

PROPOSAL NO. 5 — THE ESPP PROPOSAL

General

Assuming the Business Combination Proposal and the Nasdaq Proposal are approved, stockholders are being asked to approve the New Dragonfly Employee Stock Purchase Plan (the “ESPP”). A total of 2,464,400 shares of the New Dragonfly common stock (“Common Stock”) will initially be reserved for issuance under the ESPP, and additional shares will become available for issuance under the ESPP each year as described below under “Limits on Authorized Shares; Limits on Contributions.” Our Board of Directors has approved the ESPP, subject to stockholder approval at the special meeting.

Under the ESPP, shares of the Company’s common stock will be available for purchase by eligible employees who elect to participate in the ESPP. Eligible employees will be entitled to purchase, by means of payroll deductions, limited amounts of the Company’s common stock at a discount during periodic offering periods. The ESPP will not be effective without stockholder approval.

The Board of Directors believes that the ESPP will help the Company retain and motivate eligible employees and will help further align the interests of eligible employees with those of the Company’s stockholders. The Company has not yet determined the timing of the initial offering period under the ESPP.

Summary Description of the ESPP

The principal terms of the ESPP are summarized below. The following summary is qualified in its entirety by the full text of the ESPP, which appears as Annex H to this proxy statement/prospectus.

Purpose. The purpose of the ESPP is to provide eligible employees with an opportunity to purchase shares of the Company’s common stock at a favorable price and upon favorable terms in consideration of the participating employees’ continued services. The ESPP is intended to provide an additional incentive to participating eligible employees to remain in the Company’s employ and to advance the best interests of the Company and those of the Company’s stockholders.

Operation of the ESPP. It is currently expected that the ESPP will operate in successive six-month periods referred to as “Offering Periods.” The ESPP administrator may change the duration of Offering Periods from time to time in advance of the applicable Offering Period, provided that no Offering Period may be shorter than three months or longer than 27 months. The ESPP administrator may also provide that an Offering Period will consist of multiple “purchase periods,” with a purchase of shares under the ESPP to occur at the end of each such purchase period. However, only one Offering Period may be in effect at any one time.

On the first day of each Offering Period (referred to as the “Grant Date”), each eligible employee who has timely filed a valid election to participate in the ESPP for that Offering Period will be granted an option to purchase shares of the Company’s common stock. A participant must designate in the election the percentage of the participant’s compensation to be withheld from his or her pay during that Offering Period for the purchase of stock under the ESPP. The participant’s contributions under the ESPP will be credited to a bookkeeping account in his or her name. A participant generally may elect to terminate, but may not otherwise increase or decrease, his or her contributions to the ESPP during an Offering Period. Amounts contributed to the ESPP constitute general corporate assets of the Company and may be used for any corporate purpose.

Each option granted under the ESPP will automatically be exercised on the last day of the Offering Period with respect to which it was granted, or the last day of each purchase period for an Offering Period that consists of multiple purchase periods (each such date on which ESPP options are exercised is referred to as an “Exercise Date”). The number of shares acquired by a participant upon exercise of his or her option will be determined by dividing the participant’s ESPP account balance as of the Exercise Date by the Option Price for the applicable period. The determination of the Option Price for each Offering Period (or each purchase period within an Offering Period) will be established by the ESPP administrator in advance of the applicable period, except that in no event may the Option Price be lower than the lesser of (i) 85% of the fair market value of a share of the Company’s common stock on the applicable Grant Date, or (ii) 85% of the fair market value of a share of the Company’s common stock on the applicable Exercise Date. A participant’s ESPP account will be reduced upon exercise of his or her option by the amount used to pay the Option Price for the shares acquired by the participant. No interest will be paid to any participant or credited to any account under the ESPP.

151

Table of Contents

Eligibility. Only certain employees will be eligible to participate in the ESPP. To participate in an Offering Period, on the Grant Date of that period an individual must:

●

be employed by the Company or one of its subsidiaries that has been designated as a participating subsidiary;

●

be customarily employed for more than 20 hours per week; and

●

be customarily employed for more than five months per calendar year.

We estimate that, immediately following the Closing of the Business Combination, approximately 180 officers and employees of the Company and its subsidiaries (including all of the Company’s Named Executive Officers), would be eligible to participate in the ESPP if the plan were then in effect.

Limits on Authorized Shares; Limits on Contributions. If stockholders approve the ESPP, a maximum of 2,464,400 shares of the Company’s common stock will initially be available for delivery under the ESPP. In addition, this share limit will automatically increase on the first trading day in January of each of the calendar years during the term of the ESPP, with the first such increase to occur in January 2023, by an amount equal to the lesser of (A) one percent of the total number of shares of Common Stock issued and outstanding on December 31 of the immediately preceding calendar year, (B) [1,500,000] shares of Common Stock, or (C) such number of shares of Common Stock as may be established by the Board of Directors.

Participation in the ESPP is also subject to the following limits:

●

A participant cannot contribute less than 1% or more than 15% of his or her compensation to the purchase of stock under the ESPP in any one payroll period.

●

A participant cannot purchase more than [10,000] shares of the Company’s common stock under the ESPP in any one Offering Period (subject to adjustment by the ESPP administrator for any Offering Period that is longer or shorter than six months).

●

A participant cannot purchase more than $25,000 of stock (valued at the start of the applicable Offering Period and without giving effect to any discount reflected in the purchase price for the stock) under the ESPP in any one calendar year.

●

A participant will not be granted an option under the ESPP if it would cause the participant to own stock and/or hold outstanding options to purchase stock representing 5% or more of the total combined voting power or value of all classes of stock of the Company or one of its subsidiaries or to the extent it would exceed certain other limits under the U.S. Internal Revenue Code (the “Code”).

We have the flexibility to change the contribution limits and the individual-share limit referred to above from time to time without stockholder approval. However, we cannot increase the aggregate-share limit under the ESPP, other than to reflect stock splits and similar adjustments as described below, without stockholder approval. The $25,000 and the 5% ownership limitations referred to above are required under the Code.

Antidilution Adjustments. As is customary in stock incentive plans of this nature, the number and kind of shares available under the ESPP, as well as ESPP purchase prices and share limits, are subject to adjustment in the case of certain corporate events. These events include reorganizations, mergers, combinations, consolidations, recapitalizations, reclassifications, stock splits, stock dividends, asset sales or other similar unusual or extraordinary corporate events, or extraordinary dividends or distributions of property to our stockholders.

Termination of Participation. A participant’s election to participate in the ESPP will generally continue in effect for all Offering Periods until the participant files a new election that takes effect or the participant ceases to participate in the ESPP. A participant’s participation in the ESPP generally will terminate if, prior to the applicable Exercise Date, the participant ceases to be employed by the Company or one of its participating subsidiaries or the participant is no longer scheduled to work more than 20 hours per week or five months per calendar year.

152

Table of Contents

If a participant’s ESPP participation terminates during an Offering Period for any of the reasons discussed in the preceding paragraph, the participant will no longer be permitted to make contributions to the ESPP for that Offering Period and, subject to limited exceptions, the participant’s option for that Offering Period will automatically terminate and his or her ESPP account balance will be paid to him or her in cash without interest. However, a participant’s termination from participation will not have any effect upon his or her ability to participate in any succeeding Offering Period, provided that the applicable eligibility and participation requirements are again then met.

Transfer Restrictions. A participant’s rights with respect to options or the purchase of shares under the ESPP, as well as contributions credited to his or her ESPP account, may not be assigned, transferred, pledged or otherwise disposed of in any way except by will or the laws of descent and distribution.

Administration. The ESPP is administered by the Board of Directors or by a committee appointed by the Board of Directors. The Board of Directors has appointed the Compensation Committee of the Board of Directors as the administrator of the ESPP. The administrator has full power and discretion to adopt, amend or rescind any rules and regulations for carrying out the ESPP and to construe and interpret the ESPP. Decisions of the ESPP administrator with respect to the ESPP are final and binding on all persons.

No Limit on Other Plans. The ESPP does not limit the ability of the Board of Directors or any committee of the Board of Directors to grant awards or authorize any other compensation, with or without reference to the Company’s common stock, under any other plan or authority.

Amendments. The Board of Directors generally may amend or terminate the ESPP at any time and in any manner, provided that the then-existing rights of participants are not materially and adversely affected thereby. Stockholder approval for an amendment to the ESPP will only be required to the extent necessary to meet the requirement of Section 423 of the Code or to the extent otherwise required by law or applicable listing rules. The ESPP administrator also may, from time to time, without stockholder approval, designate those subsidiaries of the Company whose employees may participate in the ESPP and make certain other administrative changes as authorized by the plan.

Termination. No new Offering Periods will commence under the ESPP on or after [ ], 2032, unless the Board of Directors terminates the ESPP earlier. The ESPP will also terminate earlier if all of the shares authorized under the ESPP have been purchased. If an event occurs in which the Company does not survive (or does not survive as a public company in respect of its common stock), subject to any provision made by the Board of Directors for the assumption or continuation of the options then outstanding under the ESPP, the Offering Period then in progress will be shortened and the outstanding options will automatically be exercised on a date established by the ESPP administrator that is not more than 10 days before the closing of the transaction.

Federal Income Tax Consequences of the ESPP

Following is a general summary of the current federal income tax principles applicable to the ESPP. The following summary is not intended to be exhaustive and does not describe state, local or international tax consequences.

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. Participant contributions to the ESPP are made on an after-tax basis. That is, a participant’s ESPP contributions are deducted from compensation that is taxable to the participant and for which the Company is generally entitled to a tax deduction.

Generally, no taxable income is recognized by a participant with respect to either the grant or exercise of his or her ESPP option. The Company will have no tax deduction with respect to either of those events. A participant will generally recognize income (or loss) only upon a sale or disposition of any shares that the participant acquires under the ESPP. The particular tax consequences of a sale of shares acquired under the ESPP depend on whether the participant has held the shares for a “Required Holding Period” before selling or disposing of the shares. The Required Holding Period starts on the date that the participant acquires the shares under the ESPP and ends on the later of (1) two years after the Grant Date of the Offering Period in which the participant acquired the shares, or (2) one year after the Exercise Date on which the participant acquired the shares.

If the participant holds the shares for the Required Holding Period and then sells the shares at a price in excess of the purchase price paid for the shares, the gain on the sale of the shares will be taxed as ordinary income to the participant to the extent of the lesser of (1) the amount by which the fair market value of the shares on the Grant Date of the Offering Period in which the participant acquired the shares exceeded the purchase price of the shares (calculated as though the shares had been purchased on the Grant Date), or (2) the

153

Table of Contents

gain on the sale of the shares. Any portion of the participant’s gain on the sale of the shares not taxed as ordinary income will be taxed as long-term capital gain. If the participant holds the shares for the Required Holding Period and then sells the shares at a price less than the purchase price paid for the shares, the loss on the sale will be treated as a long-term capital loss to the participant. The Company will not be entitled to a tax deduction with respect to any shares held by the participant for the Required Holding Period, regardless of whether the shares are eventually sold at a gain or a loss.

The participant has a “Disqualifying Disposition” if the participant disposes of the shares before the Required Holding Period has been met. If the participant sells the shares in a Disqualifying Disposition, the participant will realize ordinary income in an amount equal to the difference between the purchase price paid for the shares and the fair market value of the shares on the Exercise Date on which the participant acquired the shares, and the Company generally will be entitled to a corresponding tax deduction. In addition, if the participant makes a Disqualifying Disposition of the shares at a price in excess of the fair market value of the shares on the Exercise Date, the participant will realize capital gain in an amount equal to the difference between the selling price of the shares and the fair market value of the shares on the Exercise Date. Alternatively, if the participant makes a Disqualifying Disposition of the shares at a price less than the fair market value of the shares on the Exercise Date, the participant will realize a capital loss in an amount equal to the difference between the fair market value of the shares on the Exercise Date and the selling price of the shares. The Company will not be entitled to a tax deduction with respect to any capital gain realized by a participant.

Specific Benefits

The benefits that will be received by or allocated to eligible employees under the ESPP cannot be determined at this time because the amount of contributions set aside to purchase shares of the Company’s common stock under the ESPP (subject to the limitations discussed above) is entirely within the discretion of each participant.

Vote Required for Approval

The approval of the ESPP Proposal requires the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon at the special meeting. Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the ESPP Proposal will have the same effect as a vote “AGAINST” this proposal.

The ESPP Proposal is conditioned on the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal the Incentive Plan Proposal and the Director Election Proposal. Therefore, if the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal and the Director Election Proposal are not approved, the ESPP Proposal will have no effect, even if approved by our public stockholders.

Recommendation of the Chardan Board

THE CHARDAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE CHARDAN STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ESPP PROPOSAL.

154

Table of Contents

PROPOSAL NO. 6 — THE DIRECTOR ELECTION PROPOSAL

Overview

Assuming the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal and the ESPP Proposal are approved, our stockholders also will be asked to are being asked to elect seven (7) directors to the New Dragonfly board, effective upon the Closing, with each Class A director having a term that expires at New Dragonfly’s first annual meeting of stockholders following the effectiveness of the NewCo second amended and restated certificate of incorporation, each Class B director having a term that expires at New Dragonfly’s second annual meeting of stockholders following the effectiveness of the second amended and restated certificate of incorporation and each Class C director having a term that expires at New Dragonfly’s third annual meeting of stockholders following the effectiveness of the second amended and restated certificate of incorporation, or, in each case, until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death.

[●] and [●] have been nominated as Class A Directors, [●] and [●] have been nominated as Class B Directors, and [Perry Boyle], [●] and [●] have been nominated as Class C Directors. See the section entitled “Management of New Dragonfly After the Business Combination.”

Upon the consummation of the Business Combination, the New Dragonfly board is expected to consist of a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq relating to director independence requirements. In addition, New Dragonfly will be subject to the rules of the SEC and Nasdaq relating to the membership, qualifications, and operations of the audit committee, as discussed below. [●] will be the lead independent director under Nasdaq rules. See the section entitled “Management of New Dragonfly After the Business Combination.”

Vote Required

The Director Election Proposal is conditioned on the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal and the ESPP Proposal. Therefore, if the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal and the ESPP Proposal are not approved, the Director Election Proposal will have no effect, even if approved by our public stockholders.

Recommendation of the Chardan Board

THE CHARDAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE CHARDAN STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE DIRECTOR ELECTION PROPOSAL.

155

Table of Contents

PROPOSAL NO. 7 — THE ADJOURNMENT PROPOSAL

The Adjournment Proposal allows the Chardan Board to submit a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Charter Proposal, the Nasdaq Proposal, the Incentive Plan Proposal, the ESPP Proposal or the Director Election Proposal.

In no event will Chardan solicit proxies to adjourn the special meeting or consummate the Business Combination beyond the date by which it may properly do so under its current certificate of incorporation and Delaware law. The purpose of the Adjournment Proposal is to provide more time for the Sponsor, Chardan and/or their respective affiliates to make purchases of public shares or other arrangements that would increase the likelihood of obtaining a favorable vote on such proposal and to meet the requirements that are necessary to consummate the Business Combination. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

In addition to an adjournment of the special meeting upon approval of an Adjournment Proposal, the Chardan Board is empowered under Delaware law to postpone the meeting at any time prior to the special meeting being called to order. In such event, Chardan will issue a press release and take such other steps as it believes are necessary and practical in the circumstances to inform its stockholders of the postponement.

Consequences if the Adjournment Proposal is Not Approved

If an Adjournment Proposal is presented at the special meeting and is not approved by the stockholders, the Chardan Board may not be able to adjourn the special meeting to a later date. In such event, the Business Combination would not be completed.

Vote Required

The approval of the Adjournment Proposal requires the affirmative vote of holders of the majority of Chardan’s shares of common stock present at the special meeting and entitled to vote thereon at the special meeting Accordingly, if a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting with regard to the Adjournment Proposal will have the same effect as a vote “AGAINST” this proposal.

Adoption of the Adjournment Proposal is not conditioned upon the adoption of any of the other proposals. If a valid quorum is established, a Chardan stockholder’s failure to vote by proxy or to vote at the special meeting, abstentions with regard to the Adjournment Proposal will have the same effect as a vote “AGAINST” such proposal and a broker non-votes will have no effect on the outcome of the Adjournment Proposal.

Recommendation of the Chardan Board

THE CHARDAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE CHARDAN STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.

156

Table of Contents

U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a discussion of U.S. federal income tax considerations generally applicable to (i) holders of Chardan public shares that elect to have their public shares redeemed for cash if the Merger is completed and (ii) Dragonfly stockholders that exchange, pursuant to the Merger, their Dragonfly common stock for New Dragonfly common stock (including the Earnout Shares). This discussion applies only to public shares and Dragonfly common stock that are held as a capital asset for U.S. federal income tax purposes (generally, property held for investment).

This discussion does not describe all U.S. federal income tax considerations that may be relevant to a holder of Chardan public shares or Dragonfly common stock in light of the holder’s particular circumstances or to holders of Chardan public shares or Dragonfly common stock that may be subject to special treatment under U.S. federal income tax laws, including:

●

banks and financial institutions;

●

insurance companies;

●

brokers and dealers in securities, currencies or commodities;

●

taxpayers subject to mark-to-market accounting rules;

●

regulated investment companies and real estate investment trusts;

●

governments or agencies or instrumentalities thereof;

●

persons holding public shares as part of a “straddle,” hedge, integrated transaction or similar transaction;

●

persons that acquired our securities pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation, or in connection with services;

●

U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;

●

partnerships or other pass-through entities for U.S. federal income tax purposes (and investors therein);

●

certain former citizens or long-term residents of the United States;

●

controlled foreign corporations and passive foreign investment companies;

●

qualified foreign pension funds;

●

any holder of Chardan Founder Shares; and

●

tax-exempt entities.

In addition, this discussion does not address considerations relating to the alternative minimum tax, the Medicare tax on net investment income, or any state, local or non-U.S. tax considerations or any tax considerations other than U.S. federal income tax considerations. The effects of other U.S. federal tax laws, such as estate and gift tax laws, are not discussed.

For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of public shares that, for U.S. federal income tax purposes, is or is treated as:

●

a citizen or individual resident of the United States,

157

Table of Contents

●

a corporation organized in or under the laws of the United States or any state thereof or the District of Columbia,

●

a trust if (a) a court within the United States is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (b) it has made a valid election to be treated as a United States person for U.S. federal income tax purposes, or

●

an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.

For purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of public shares (other than an entity or arrangement classified as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder.

If a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes) holds public shares, the U.S. federal income tax treatment of the partners in the partnership will generally depend on the status of the partners, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships that hold public shares and their partners should consult their tax advisors regarding the U.S. federal income tax consequences to them of the matters discussed below.

The following discussion is a summary only and does not discuss all aspects of U.S. federal income taxation relating to redemptions of public shares by public stockholders or the Merger. This discussion is based on the Code, Treasury Regulations, judicial decisions, published positions of the IRS, and other applicable authorities, all as in effect as of the date hereof and all of which are subject to change or differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect public stockholders to which this discussion applies and could affect the accuracy of the statements herein. Chardan has not sought and will not seek any rulings from the IRS regarding any matter discussed in this summary. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to those described below.

This discussion is not tax advice. Holders should consult their tax advisors with respect to the application of U.S. federal income tax laws to a redemption in light of their particular circumstances, as well as any tax consequences arising under the U.S. federal estate or gift tax laws or under the laws of any state, local or non-U.S. taxing jurisdiction or under any applicable income tax treaty.

Redemption of Public Shares by Public Stockholders

If a public stockholder’s public shares are redeemed pursuant to the redemption provisions described in “Special Meeting of Chardan Stockholders — Redemption Rights,” the treatment of the redemption for U.S. federal income tax purposes will depend on whether or not the redemption qualifies as a sale or other exchange of public shares under Section 302 of the Code.

Whether a redemption of public shares qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held by the redeemed public stockholder before and after the redemption relative to all of our shares outstanding both before and after the redemption. The redemption of public shares by a public stockholder will generally be treated as a sale of public shares (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate” with respect to such stockholder, (ii) results in a “complete termination” of such stockholder’s interest in Chardan or (iii) is “not essentially equivalent to a dividend” with respect to such stockholder.

In determining whether any of the foregoing tests result in a redemption qualifying for sale treatment, a public stockholder should take into account not only stock actually owned by such stockholder, but also stock that is treated as constructively owned by such stockholder. A public stockholder may be treated as constructively owning stock owned by certain related individuals and entities in which such stockholder has an interest or that have an interest in such stockholder, as well as any stock that such stockholder has a right to acquire by exercise of an option, which would generally include public shares that can be acquired upon the exercise of warrants. Moreover, any of our stock that a public stockholder directly or constructively acquires pursuant to the Merger should generally be included in determining the U.S. federal income tax treatment of the redemption.

In order to meet the substantially disproportionate test, the percentage of our outstanding voting stock actually and constructively owned by a public stockholder immediately following the redemption of public shares must, among other requirements, be less than eighty percent (80%) of the percentage of our outstanding voting stock actually or constructively owned by such stockholder immediately before the redemption (taking into account both redemptions by other public stockholders and the public shares to be issued

158

Table of Contents

pursuant to the Merger). There will be a complete termination of such stockholder’s interest if either (i) all of the shares of Chardan common stock actually and constructively owned by such stockholder are redeemed or (ii) all of the shares of Chardan common stock actually owned by such stockholder are redeemed and such stockholder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of our stock owned by certain family members and such stockholder does not constructively own any other Chardan common stock. The redemption of public shares will not be essentially equivalent to a dividend if the redemption results in a “meaningful reduction” of the public stockholder’s proportionate interest in Chardan. Whether the redemption results in a meaningful reduction in a public stockholder’s proportionate interest in Chardan will depend on such stockholder’s particular facts and circumstances. The IRS has indicated in a published ruling that even a small reduction in the proportionate interest in a publicly held corporation held by a small minority stockholder that exercises no control over corporate affairs may constitute such a “meaningful reduction.”

If none of the foregoing tests is satisfied, then the redemption of public shares will generally be treated as a distribution to the redeeming public stockholder with the consequences to U.S. Holders as described below under “— U.S. Holders — Taxation of Redemptions Treated as Distributions,” and the consequences to Non-U.S. Holders as described below under “— Non-U.S. Holders — Taxation of Redemptions Treated as Distributions.”

U.S. Holders

Taxation of Redemptions Treated as Sales

If the redemption of a U.S. Holder’s public shares qualifies as a sale of such stock, the U.S. Holder will generally recognize gain or loss on the redemption in an amount equal to the difference between its amount realized and its adjusted tax basis in the public shares surrendered in the redemption. A U.S. Holder’s amount realized is the sum of the amount of cash and the fair market value of any property received in the redemption. A U.S. Holder’s adjusted tax basis in the public shares surrendered in the redemption will generally equal its acquisition cost. Gain or loss recognized on the redemption will generally be capital gain or loss and will generally be long-term capital gain or loss if the U.S. Holder’s holding period for the redeemed shares of public shares exceeds one year at the time of the redemption. It is unclear, however, whether a U.S. Holder’s redemption rights with respect to its public shares suspends the running of the U.S. Holder’s holding period for this purpose. Long-term capital gains recognized by non-corporate U.S. Holders will generally be subject to tax at preferential rates. The deductibility of capital losses is subject to limitations.

Taxation of Redemptions Treated as Distributions

If the redemption of a U.S. Holder’s public shares does not qualify as a sale of such stock, the U.S. Holder will generally be treated as receiving a distribution with respect to its public shares in an amount equal to its redemption proceeds. Any such amount will be treated as a dividend to the extent it is paid out of Chardan’s current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Any such amount in excess of Chardan’s current and accumulated earnings and profits will generally be applied against and reduce (but not below zero) the U.S. Holder’s tax basis in its public shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the public shares with the consequences described above under “— Taxation of Redemptions Treated as Sales.” A U.S. Holder’s remaining tax basis (if any) with respect to public shares surrendered in the redemption will generally be added to such holder’s adjusted tax basis in its remaining public shares, or, if it has none, to such holder’s adjusted tax basis in its warrants or, possibly, to the basis of such holder’s constructively-owned public shares.

Dividends received by corporate U.S. Holders will generally qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends received by non-corporate U.S. Holders will generally constitute “qualified dividends” that are subject to tax at preferential long-term capital gains rates. It is unclear, however, whether a U.S. Holder’s redemption rights with respect to its public shares suspend the running of the applicable holding period for purposes of the dividends received deduction or the preferential tax rate on qualified dividend income.

159

Table of Contents

Non-U.S. Holders

Taxation of Redemptions Treated as Sales

If the redemption of a Non-U.S. Holder’s public shares qualifies as a sale of such stock, gain realized by the Non-U.S. Holder on the redemption will generally not be subject to U.S. federal income tax unless:

●

The gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States), in which case the gain will generally be subject to U.S. federal income tax on a net income basis at the graduated U.S. federal income tax rates generally applicable to United States persons and, in the case of a Non-U.S. Holder that is a corporation, may also be subject to a branch profits tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) after application of certain adjustments;

●

The Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the redemption and certain other requirements are met, in which case the gain will generally be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) and may be offset by U.S. source capital losses if certain requirements are satisfied; or

●

We are or have been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the redemption or the period during which the Non-U.S. Holder held public shares (and, if the public shares are treated as regularly traded on an established securities market for purposes of these rules, the Non-U.S. Holder has owned directly, indirectly or constructively more than five percent (5%) of the public shares during such period), in which case the gain will generally be subject to tax on a net income basis at the U.S. federal income tax rates generally applicable to United States persons.

Chardan believes that it is not, and has not at any time since its formation been, a U.S. real property holding corporation, and Chardan does not expect to be a U.S. real property holding corporation immediately after the Merger is completed. However, this determination is factual in nature and subject to change, and no assurance can be provided regarding the status of Chardan as a U.S. real property holding corporation currently, following the Merger or at any future time.

The applicable withholding agent may not be able to determine the proper characterization of a redemption of a Non-U.S. Holder’s public shares. Accordingly, it is possible that the withholding agent will treat the redemption of a Non-U.S. Holder’s public shares as a distribution subject to withholding tax as described below under “— Taxation of Redemptions Treated as Distributions.” In addition, unless the public shares are regularly traded on an established securities market, the applicable withholding agent may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized by a Non-U.S. Holder on a redemption of public shares that qualifies as a sale. There can be no assurance that the public shares will be treated as regularly traded on an established securities market.

Taxation of Redemptions Treated as Distributions

If the redemption of a Non-U.S. Holder’s public shares does not qualify as a sale of such stock, the Non-U.S. Holder will generally be treated as receiving a distribution with respect to its public shares in an amount equal to its redemption proceeds. Any such amount will be treated as a dividend to the extent it is paid out of Chardan’s current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Any such dividend will generally be subject to U.S. withholding tax at a rate of 30% unless the Non-U.S. Holder timely provides certification of its eligibility for a reduced rate under an applicable income tax treaty (usually on an IRS Form W-8BEN or W-8BEN-E) or furnishes a valid IRS Form W-8ECI certifying that the dividend is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States. Any redemption proceeds in excess of Chardan’s current and accumulated earnings and profits will generally be applied against and reduce (but not below zero) the Non-U.S. Holder’s tax basis in its public shares. Any remaining excess will be treated as gain realized on the sale or other disposition of the public shares with the consequences described above under “— Taxation of Redemptions Treated as Sales.” A Non-U.S. Holder’s remaining tax basis (if any) with respect to public shares surrendered in the redemption will generally be added to such holder’s adjusted tax basis in its remaining public shares, or, if it has none, to such holder’s adjusted tax basis in its warrants or, possibly, to the basis of such holder’s constructively-owned public shares, if any.

160

Table of Contents

A dividend that is effectively connected with a Non-U.S. Holder’s conduct of a trade or business within the United States will generally be subject to U.S. federal income tax on a net income basis at the U.S. federal income tax rates generally applicable to United States persons. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Non-U.S. Holders of Chardan common stock should consult their tax advisors regarding the application of the foregoing rules in light of their particular circumstances and the procedures for claiming treaty benefits or otherwise establishing an exemption from U.S. withholding tax with respect to any redemption proceeds payable to them.

FATCA Withholding Taxes

Under the Foreign Account Tax Compliance Act and the regulations and administrative guidance promulgated thereunder (“FATCA”), withholding at a rate of thirty percent (30%) will generally be required on dividends (including constructive dividends received pursuant to a redemption of stock) in respect of securities (including public shares) that are held by or through certain “foreign financial institutions” (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied, or an exemption applies (typically certified as to by the delivery of a properly completed IRS Form W-8BEN or W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Non-U.S. Holders should consult their tax advisers regarding the effects of FATCA on their investment in public shares.

Tax Consequences of the Merger to U.S. Holders of Dragonfly Common Stock

The Merger has been structured to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Based upon customary assumptions and representations made by the Company and Dragonfly in tax representation letters delivered by such parties, as well as certain covenants and undertakings of the Company and Dragonfly, O’Melveny & Myers LLP, tax counsel to Dragonfly, will deliver an opinion that the Merger should qualify as a reorganization. Such opinion will be filed as Exhibit 8.1 to the registration statement of which this proxy statement/prospectus forms part. The qualification of the Merger as a reorganization depends on numerous facts and circumstances, some of which may change between the date of this proxy statement/prospectus and the closing of the Business Combination and cause the opinion of counsel to no longer be in effect.

Neither the Company’s nor Dragonfly’s obligation to complete the Merger is conditioned upon the receipt of an opinion of counsel (as of the date of the closing of the Business Combination or otherwise) regarding the qualification of the Merger as a reorganization for U.S. federal income tax purposes. An opinion of counsel is not binding on the Internal Revenue Service or any court. Accordingly, even if the Company and Dragonfly report the Merger as qualifying as a reorganization, there can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to the position taken by the Company and Dragonfly.

Assuming the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code and subject to the statements below relating to imputed interest, the U.S. federal income tax consequences for U.S. Holders who receive shares of New Dragonfly common stock in exchange for shares of Dragonfly common stock pursuant to the Merger are as follows: (i) such U.S. Holders will generally not recognize gain or loss upon exchanging Dragonfly stock for New Dragonfly common stock (including the Earnout Shares), (ii) the aggregate tax basis in the shares of New Dragonfly common stock (including the Earnout Shares) that a U.S. Holder of Dragonfly stock receives pursuant to the Merger (other than any shares of New Dragonfly common stock treated as imputed interest) will generally equal such U.S. Holder's aggregate adjusted tax basis in the shares of Dragonfly common stock surrendered and such aggregate adjusted tax basis will be allocated to the New Dragonfly common stock (including the Earn-Out Shares) that it receives; and (iii) except with respect to any shares of New Dragonfly common stock treated as imputed interest, such a Holder's holding period for the shares of New Dragonfly common stock it receives pursuant to the Merger (including the Earnout Shares) will generally include such Holder's holding period in the shares of Dragonfly common stock it surrenders. A U.S. Holder of Dragonfly common stock will generally not recognize gain or loss on the forfeiture of any Earnout Shares as a result of such Earnout Shares remaining unvested at the end of the Earnout Periods; however, the aggregate adjusted tax basis in the shares of Dragonfly common stock that such Holder surrendered in the Merger will be re-allocated to the New Dragonfly common stock that it ultimately holds at the end of the Earnout Periods. A portion of the Earn-Out Shares (if any) actually received by a U.S. Holder may be characterized as ordinary interest income for U.S. federal income tax

161

Table of Contents

purposes. A U.S. Holder’s tax basis in that portion of the Earn-Out Shares should be equal to the fair market value thereof on the date of receipt, and the U.S. Holder’s holding period for those Earn-Out Shares should begin on the day following the date of receipt.

If a U.S. Holder has acquired different blocks of Dragonfly stock at different times or at different prices, then such holder’s tax basis and holding period in the shares of New Dragonfly common stock received in the Merger generally should be determined with reference to each block of Dragonfly stock. Any such holders should consult their tax advisors with respect to identifying the bases or holding periods of the shares of New Dragonfly common stock received in the Merger.

In the event that the Internal Revenue Service successfully asserts that the Merger does not qualify as a reorganization, a U.S. Holder of Dragonfly stock would generally recognize capital gain or loss in the Merger on the exchange of their Dragonfly stock for shares of New Dragonfly common stock.

A holder of Dragonfly stock should consult its tax advisors as to the it particular tax consequences from the Merger.

162

Table of Contents

OTHER INFORMATION RELATED TO CHARDAN

Introduction

Chardan was incorporated on June 23, 2020, for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses or entities. Chardan’s efforts to identify a prospective target business were not limited to any particular industry or geographic region. Prior to executing the Business Combination Agreement, Chardan’s efforts were limited to organizational activities, completion of the Chardan IPO and the evaluation of possible initial business combinations.

Initial Public Offering and Simultaneous Private Placement

On August 13, 2021, Chardan consummated its initial public offering of 11,000,000 units, with each unit consisting of one share of Chardan common stock and three-quarters of one warrant to purchase one share of Chardan common stock. On August 18, 2021, the underwriters fully exercised their over-allotment option and Chardan sold an additional 1,650,000 units. At $10.00 per unit, the units from the Chardan IPO and exercise of the underwriters’ over-allotment option generated total gross proceeds of $126,500,000. Simultaneously with the consummation of the Chardan IPO, Chardan consummated the private placement of 4,361,456 warrants at a price of $0.93 per warrant, generating total proceeds of $4,052,000. Simultaneously with the closing of the exercise of the underwriters’ over-allotment option, Chardan consummated the sale of an additional 266,402 private warrants at a purchase price of $0.93 per private warrant in a private placement to Holdings, generating gross proceeds of $247,500. Transaction costs amounted to approximately $1,080,141 consisting of $500,000 of underwriting fees and $580,141 of other offering costs. Part of the underwriting fee was deferred and conditioned on the completion of a business combination, and the aggregate deferred underwriting fee is $4,427,500.

Lock-Up of Founder Shares

The Founder Shares were also placed into an escrow account maintained by Continental acting as escrow agent. 50% of the Founder Shares may not be transferred, assigned, sold or released from escrow until the earlier of (i) six months after the date of the consummation of the Business Combination or (ii) the date on which the closing price of shares of Chardan common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 10 trading days within any 30-trading day period commencing after our initial business combination. The remaining 50% of the Founder Shares may not be transferred, assigned, sold or released from escrow until six months after the date of the consummation of the Business Combination or earlier, in either case, if, subsequent to the Business Combination, Chardan consummates a subsequent liquidation, merger, stock exchange or other similar transaction that results in all of Chardan’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Fair Market Value of Target Business

The target business or businesses that Chardan acquires must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account (net of taxes payable) at the time of the execution of a definitive agreement for its initial business combination, although Chardan may acquire a target business whose fair market value significantly exceeds 80% of the trust account balance. The Chardan Board determined that this test was met in connection with the proposed business combination with Dragonfly as described in the section titled “Proposal No. 1 — The Business Combination Proposal — Background of the Business Combination” and “Proposal No. 1 — The Business Combination Proposal — Summary of Chardan Financial Analysis.”

163

Table of Contents

Stockholder Approval of Business Combination

Under Chardan’s current certificate of incorporation, in connection with any proposed business combination, Chardan must seek stockholder approval of an initial business combination at a meeting called for such purpose at which public stockholders may seek to redeem their public shares for cash, regardless of whether they vote for or against the proposed business combination, subject to the limitations described in the prospectus for Chardan’s Initial Public Offering. Accordingly, in connection with the Business Combination with Dragonfly, the Chardan public stockholders may seek to redeem their public shares for cash in accordance with the procedures set forth in this proxy statement.

Voting Restrictions in Connection with Stockholder Meeting

In connection with any vote for a proposed business combination, including the vote with respect to the Business Combination Proposal, the Sponsor and the Insiders have agreed to vote the Founder Shares as well as any shares of common stock acquired in the market in favor of such proposed business combination.

At any time prior to the special meeting, during a period when they are not then aware of any material nonpublic information regarding Chardan or its securities, the Sponsor, Dragonfly and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Business Combination Proposal, or execute agreements to purchase such shares from them in the future, or they may enter into transactions with such persons and others to provide them with incentives to acquire shares of Chardan common stock or vote their shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that the business combination be approved where it appears that such requirements would otherwise not be met. All shares repurchased by Chardan’s affiliates pursuant to such arrangements would be voted in favor of the proposed business combination.

Liquidation if No Business Combination

If we do not complete a business combination by August 13, 2022 (unless this deadline is extended to February 13, 2023 pursuant to Chardan’s covenant to extend such deadline under the Business Combination Agreement and pursuant to the Chardan Organizational Documents), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Pursuant to the Investment Management Trust Agreement, the only way to extend the time available for us to consummate our initial business combination is for the Insiders or their affiliates or designees, upon five days’ advance notice prior to the applicable deadline, to deposit into the trust account $1,000,000, or $1,150,000 if the over-allotment option is exercised in full ($0.10 per share in either case, or an aggregate of $2,000,000, or $2,300,000 if the over- allotment option is exercised in full), on or prior to the date of the applicable deadline. Public stockholders will not be offered the opportunity to vote on or redeem their shares in connection with any such extension. In the event that the Insiders elected to extend the time to complete a business combination and deposited the applicable amount of money into trust, the Insiders would receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that we are unable to close a business combination unless there are funds available outside the trust account to do so. In the event that we receive notice from our insiders five days prior to the applicable deadline of their intent to effect an extension, we intend to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, we intend to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely deposited. The Insiders and their affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial business combination. To the extent that some, but not all, of the Insiders, decide to extend the period of time to consummate our initial business combination, such insiders (or their affiliates or designees) may deposit the entire amount required. If we are unable to consummate our initial business combination within such time period, we will, as promptly as possible but not more than 10 business days thereafter, redeem 100% of our outstanding public shares for a pro rata portion of the funds held in the trust account, including a pro rata portion of any interest earned on the funds held in the trust account and not previously released to us to pay our taxes, and then seek to dissolve and liquidate. However, we may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the allotted time period.

164

Table of Contents

Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any Founder Shares held by them if we fail to complete our initial business combination within 12 months (or up to 18 months, as applicable) from August 13, 2022. However, if our sponsor, officers or directors acquire public shares, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted time period.

Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months (or up to 18 months, as applicable) from August 13, 2022 or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes divided by the number of then outstanding public shares. However, we may only redeem our public shares so long as our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public shares in the event we do not complete our initial business combination within the required time period may be considered a liquidation distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any redemptions are made to stockholders, any liability of stockholders with respect to a redemption is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.

Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution. It is our intention to redeem our public shares as soon as reasonably possible after August 13, 2022, or as extended by the Insiders up to two times by an additional three months each time (to February 13, 2023 for a total of up to 18 months to complete a business combination), but not more than five business days thereafter, and, therefore, we do not intend to comply with the above procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

Because we will not be complying with Section 280 of the DGCL, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to seeking to complete an initial business combination, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.

We will seek to have all third parties (including any vendors or other entities we engage) and any prospective target businesses enter into valid and enforceable agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account.

As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public stockholders. Nevertheless, there is no guarantee that vendors, service providers and prospective target businesses will execute such agreements. In the event that a potential

165

Table of Contents

contracted party was to refuse to execute such a waiver, we will execute an agreement with that entity only if our management first determines that we would be unable to obtain, on a reasonable basis, substantially similar services or opportunities from another entity willing to execute such a waiver. Examples of instances where we may engage a third-party that refused to execute a waiver would be the engagement of a third-party consultant who cannot sign such an agreement due to regulatory restrictions, such as our independent public registered accounting firm, who are unable to sign due to independence requirements, or whose particular expertise or skills are believed by management to be superior to those of other consultants that would agree to execute a waiver or a situation in which management does not believe it would be able to find a provider of required services willing to provide the waiver. There is also no guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account. The holders of our Founder Shares have agreed that they will be jointly and severally liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below $10.15 per public share, except as to any claims by a third party who executed a valid and enforceable agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account. Our board of directors has evaluated the Insiders’ financial net worth and believes they will be able to satisfy any indemnification obligations that may arise. However, the Insiders may not be able to satisfy their indemnification obligations, as we have not required the Insiders to retain any assets to provide for their indemnification obligations, nor have we taken any further steps to ensure that they will be able to satisfy any indemnification obligations that arise. Moreover, the Insiders will not be liable to our public stockholders and instead will only have liability to us. As a result, if we liquidate, the per-share distribution from the trust account could be less than approximately $10.15 due to claims or potential claims of creditors. We will distribute to all of our public stockholders, in proportion to their respective equity interests, an aggregate sum equal to the amount then held in the trust account, inclusive of any interest not previously released to us, (subject to our obligations under Delaware law to provide for claims of creditors as described below).

If we are unable to consummate an initial business combination and are forced to redeem 100% of our outstanding public shares for a portion of the funds held in the trust account, we anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after such date and anticipate it will take no more than five business days to effectuate the redemption of our public shares. The Insiders have waived their rights to participate in any redemption with respect to their Founder Shares. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, the Insiders have agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000) and have agreed not to seek repayment of such expenses. Each holder of public shares will receive a full pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust account and not previously released to us or necessary to pay our taxes. The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of public stockholders.

Our public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete our initial business combination in the required time period or if the stockholders seek to have us redeem their respective shares of common stock upon a business combination which is actually completed by us. In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.

If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per share redemption or redemption amount received by public stockholders may be less than $10.15.

If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. Claims may be brought against us for these reasons.

Facilities

Chardan currently maintains its executive offices at 17 State Street, 21st Floor, New York, NY 10004. The Sponsor is making this space available to Chardan free of charge. Chardan considers its current office space adequate for its current operations.

166

Table of Contents

Upon consummation of the Business Combination, the principal executive offices of Chardan will be those of Dragonfly.

Employees

Chardan currently has three executive officers. These individuals are not obligated to devote any specific number of hours to Chardan’s matters but they intend to devote as much of their time as they deem necessary to its affairs until completion of the initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the business combination process Chardan is in. Chardan does not intend to have any full time employees prior to the consummation of its initial business combination.

Management, Directors and Executive Officers

Chardan’s current directors and executive officers are as follows:


Name		Position
Kerry Propper		Co-Founder and Director (Chairman)
Jonas Grossman		Co-Founder, Chief Executive Officer, President, Secretary, Treasurer and Director
Alex Weil		Chief Financial Officer and Director
Jonathan Biele		Director
Perry Boyle		Director
Roderick Hardamon		Director
Jory Des Jardins		Director
Hitesh Thakrar		Director
Todd Thomson		Director

Kerry Propper, 47, is our co-founder and has served as chairman of our board of directors since August 2021. Mr. Propper is a 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 and has been an executive or senior advisor for six SPACs. 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. Mr. Propper also sits on the board of 340Basics, Credit Sesame, PierianDx, and China Networks. Mr. Propper dedicates much of his time to philanthropy and is a founding member of Nadia’s Initiative. He also serves on the board of trustees of the International Crisis Group and sits on the executive boards of Keep A Child Alive, Voices of Rwanda and Yazda. Mr. Propper earned his B.A. in Economics and International Studies from Colby College. We believe Mr. Propper is qualified to serve on our board of directors because of his extensive industry and transaction expertise and wide network of relationships with industry participants.

Jonas Grossman, 48, is our co-founder and has been our Chief Executive Officer and a member of our board of directors since June 2020 and our President, Secretary, and Treasurer since July 2020. He is also a member of our audit committee. Since July 2020, Mr. Grossman has served as Chief Executive Officer and director of Chardan NexTech 1. Mr. Grossman was the Chief Executive Officer and President of Chardan Healthcare Acquisition 2 Corp., a SPAC, from April 2020 until its merger with Renovacor, Inc. (NYSE: RCOR) in September 2021. He is currently a director of Renovacor Inc. 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 SPAC from March 2020 until its merger with Vincera Pharma, Inc. (NASDAQ: VINC) in December of 2020. Since December 2020, Mr. Grossman has served as a director of Ventoux CCM. Since May 2021, Mr. Grossman has served as a director of CleanTech. Since September 2021, he has served as a director of Monterey Bio. 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 Chardan’s investment banking and capital markets activities and initiatives. He has extensive transactional experience having led or managed more than 500 transactions during his tenure at Chardan. Under Mr. Grossman’s leadership, Chardan has become one of the most notable underwriters, advisors, and sponsors of SPACs, having been in involved in 115 SPAC IPO transactions raising over $14.6 billion, serving as advisor to 29 SPAC transactions totaling over $11.4 billion in transaction value, and having sponsored or co-sponsored 14 SPAC transactions. 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. Mr. Grossman is also the sole member of Sponsor and Holdings. He holds a B.A. in Economics from Cornell University and an M.B.A. from NYU’s Stern

167

Table of Contents

School of Business. Mr. Grossman has served on the board of directors for UNICEF since December 2016. We believe Mr. Grossman is qualified to serve on our board of directors because of his long-running capital markets experience as well as his previous company board positions.

Alex Weil, 50, has served as our Chief Financial Officer since April 2021 and a member of our board of directors since August 2021. Mr. Weil has served as chief financial officer of Chardan NexTech 1 since March 2021, and as a member of the board of directors since April 2021. 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 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. We believe Mr. Weil is qualified to serve on our board of directors because of his extensive capital markets and transaction management experience and network of relationships.

Jonathan C. “Jon” Biele, 52, has served as an independent member of our board of directors since August 2021. He is also a member of our compensation committee. In March 2022, Mr. Biele joined AB Bernstein a FINRA-regulated broker dealer as Global Head of Equity Capital Markets. In November 2020, Mr. Biele 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. Previously, 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 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 completed a third term as a trustee of Burke Mountain Academy, a premier ski academy in the United States, in 2020 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. We believe that Mr. Biele’s vast experience in corporate finance and strategy, in addition to his vast network of relationships, is an extremely valuable contribution to our board of directors.

Perry Boyle, 58, has served as an independent member of our board of directors since August 2021. He is also a member of our audit committee. Mr. Boyle was with Point72 Asset Management, L.P. (“Point 72”), and Point 72 affiliates and predecessors 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 LauchPoint 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 has agreed to serve on the board of directors of Chardan NexTech 1 upon the effectiveness of its registration statement. 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 currently serves as the Chairman of the BOMA Project, a poverty graduation program for women, youth, and displaced persons in sub-Saharan Africa. He is also the President of the Affordable Housing Coalition of Ketchum, an advocacy organization for workforce housing in Ketchum, Idaho. 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 of Law and Diplomacy at Tufts University. He has lectured on investing at Brown, Yale, Dartmouth, Columbia, Tufts, Harvard, Cambridge and the University of North

168

Table of Contents

Carolina, and delivered testimony to Congress on financial regulation. We believe Mr. Boyle is qualified to serve on our board of directors because of industry leadership and capital markets experience from research to fundraising.

Roderick Hardamon, 45, has served as an independent member of our board of directors since August 2021. He is a member of and chairs our audit committee. 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. We believe Mr. Hardamon is qualified to serve on our board of directors because of his extensive experience in business innovation, mergers and acquisitions, and senior executive leadership.

Jory Des Jardins, 49, has served as an independent member of our board of directors since August 2021. She also is a member of and chairs our compensation committee. Ms. Des Jardins is the chief marketing officer of Countable, a community software as a service platform and serves as an advisor to The @ Company, where she previously served as chief marketing officer, as well as to AboveBoard, DigitalCultureWorks and The Juggl. She has also served as VC-in-Residence at the W Fund since July 2020. Ms. Des Jardins served as the head of global startup marketing at Amazon Web Services from July 2019 to May 2020. Before her time at Amazon Web Services, she served as the global head of community at ConsenSys from June 2018 to July 2019. Ms. Des Jardins served as consumer digital partner at Tribal Advisors from 2016 to 2018. In 2005, she co-founded BlogHer and served as the company’s president until its acquisition in November 2015, and she served as senior Vice President of global strategic alliances for her acquiring company, SheKnowsMedia from 2014 to 2016. Ms. Des Jardins graduated from the University of Illinois at Urbana-Champaign in 1993 where she studied history, literature, and psychology. We believe that Ms. Des Jardins is qualified to serve on our board of directors given her exposure to dozens of scaling startups as well as her experience with disruptive technology.

Hitesh Thakrar, has served as an independent member of our board of directors since August 2021. 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 venture fund in life sciences, a position he has held since February 2016. Since December 2018, he has also served as a Governance Board Member of KQ Labs at the Francis Crick Institute, the United Kingdom’s national medical research institute. 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. He is the Chair of the Renumeration Committee and sits on the Audit and Risk Committee. 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, joined as a Trustee of the Royal National Orthopedic Hospital Charity in July 2020 and is a member of the Grants Committee and the Finance and Audit Committee. In January 2021, Mr. Thakrar was appointed Chair of the South London Health Innovation Network, a U.K. NHS-funded body to drive health innovation in the region. 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. We believe Mr. Thakrar is qualified to serve as a member of our board of directors given his decades of technology investing and public company expertise.

Todd Thomson, 61, has served as an independent member of our board of directors since August 2021. He is also a member of our compensation committee. Mr. Thomson 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,

169

Table of Contents

Mr. Thomson served as Co-founder and Chairman of Dynasty Financial Partners(“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 over $60 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 1, upon the effectiveness of its registration statement. We believe Mr. Thomson is qualified to serve on our board of directors because of his experience in public company corporate finance and early-stage investing.

Director Independence

So long as we obtain and maintain a listing for our securities on Nasdaq, a majority of our board of directors generally must be independent, subject to certain limited exceptions and phase-in period set forth under the rules of Nasdaq. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that each of Messrs. Biele, Boyle, Hardamon, Thakrar and Thomson and Ms. Jardins, is an “independent director” as defined in the Nasdaq listing standards and applicable SEC rules. We expect a majority of our board of directors to be comprised of independent directors within 12 months from the date of listing to comply with the majority independent board requirement in Rule 5605(b) of the Nasdaq listing rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

Meetings of the Board of Directors

The Chardan Board met two times in the fiscal year ended December 31, 2021.

Audit Committee

The audit committee of the board of directors consists of Messrs. Hardamon, Boyle and Grossman. Messrs. Hardamon and Boyle are each an independent director under the Nasdaq corporate governance standards. Mr. Hardamon is the Chairperson of the audit committee. The audit committee met three times in the fiscal year ended December 31, 2021. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:

●

the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us;

●

pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

●

setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;

●

setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

●

obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;

●

reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

170

Table of Contents

●

reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

Financial Experts on Audit Committee

Pursuant to Nasdaq corporate governance standards, the audit committee will at all times be composed exclusively of “independent directors” who are able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.

In addition, we must certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication. The board of directors has determined that Mr. Hardamon qualifies as an “audit committee financial expert,” as defined under rules and regulations of Nasdaq and the SEC.

Compensation Committee

Our compensation committee of the board of directors consists of Ms. Jardins, Mr. Biele and Mr. Thomson, each of whom is an independent director under the Nasdaq corporate governance standards. Ms. Jardins is the Chairperson of the compensation committee. The compensation committee did not meet in the fiscal year ended December 31, 2021. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:

●

reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;

●

reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers;

●

reviewing on an annual basis our executive compensation policies and plans;

●

implementing and administering our incentive compensation equity-based remuneration plans;

●

assisting management in complying with our proxy statement and annual report disclosure requirements;

●

approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;

●

if required, producing a report on executive compensation to be included in our annual proxy statement; and

●

reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

The compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.

Director Nominations

We do not have a standing nominating committee, although we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605 of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent

171

Table of Contents

directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. All of our independent directors will participate in the consideration and recommendation of director nominees. In accordance with Rule 5605 of the Nasdaq rules, each of Messrs. Biele, Boyle, Hardamon, Thakrar and Thomson and Ms. Jardins is independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.

The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws. However, prior to our initial business combination, holders of our public shares will not have the right to recommend director candidates for nomination to our board of directors.

We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.

Code of Ethics

We have adopted a Code of Ethics applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics and our audit and compensation committee charters as exhibits to our Registration Statement. You may review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.

Legal Proceedings

We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. There is no material litigation, arbitration or governmental proceeding currently pending against us or any of our officers or directors in their capacity as such, and we and our officers and directors have not been subject to any such proceeding in the 12 months preceding the date of this registration statement.

Periodic Reporting and Audited Financial Statements

We have registered the offer and sale of our units, shares of common stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual report contained financial statements audited and reported on by our independent registered public accountants.

We will provide audited financial statements of Dragonfly as part of any proxy solicitation sent to stockholders to assist them in assessing Dragonfly’s business. In all likelihood, the financial information included in the proxy solicitation materials will need to be prepared in accordance with U.S. GAAP or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. The financial statements may also be required to be prepared in accordance with U.S. GAAP for the Form 8-K announcing the closing of an initial business combination, which would need to be filed within four business days thereafter. We cannot assure you that Dragonfly will have the necessary financial information. To the extent that this requirement cannot be met, we may not be able to acquire Dragonfly.

We will be required to comply with the internal control requirements of the Sarbanes-Oxley Act beginning with the fiscal year ending December 31, 2022. Dragonfly may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of Dragonfly to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as amended, or the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding

172

Table of Contents

executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following August 13, 2026, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior year’s second quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K promulgated by the SEC. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.

173

Table of Contents

CHARDAN’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a blank check company formed under the laws of the State of Delaware on June 23, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of the Chardan IPO and the sale of the private warrants, the proceeds of the sale of our securities in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the Chardan IPO or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful.

Financial information included in this section are as of March 31, 2022 and for the year ended December 31, 2020 as in our December 31, 2021 Form 10-K filed with the SEC on March 29, 2022.

Recent Developments

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We have adopted ASU 2020-06 effective January 1, 2021 using the full retrospective method of transition. We are currently assessing the impact, if any, that ASU 2020-06 would have on our financial position, results of operations or cash flows. The adoption of ASU 2020-06 did not have a material impact on the financial statements for the quarter ended March 31, 2022 or the fiscal year ended December 31, 2021.

Our management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.

Results of Operations

We have neither engaged in any operations nor generated any operating revenues to date. Our only activities for the three months ended March 31, 2022 and for the period from June 23, 2020 (inception) through three months ended March 31, 2022 were organizational activities, those necessary to prepare for the Chardan IPO, described below, and, after the Chardan IPO, activities related to identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents held after the Chardan IPO. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended March 31, 2022, we had net income of $1,191,840, which resulted from a gain on change in the fair value of warrant liabilities of $1,434,636, and a net gain on investments held in Trust Account in the amount of $16,066, which was partially offset by operating and formation costs of $208,206, and franchise tax expense of $50,656.

For the period from June 23, 2020 (inception) through March 31, 2022, we had no income or expenses.

174

Table of Contents

Liquidity and Capital Resources

As of March 31, 2022 and December 31, 2021, we had $647,178 and $799,808 in cash held outside of the Trust Account, respectively, and a working capital surplus of $729,325 and $998,187, respectively.

Our liquidity needs prior to the consummation of the Chardan IPO were satisfied through the proceeds of $25,000 from the sale of the Founder Shares, and a loan of up to $250,000 under an unsecured and non-interest bearing promissory note. Subsequent to the consummation of the Chardan IPO, our liquidity will be satisfied through the net proceeds from the private placement held outside of the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. As of December 31, 2021, there were no amounts outstanding under any such loans.

For the three months ended March 31, 2022, net cash used in operating activities was $152,630, which was due to the change in fair value of warrants of $1,434,636, changes in operating assets and liabilities of $106,232, and net gain on investments in the Trust Account of $16,066, partially offset by our net income of $1,191,840.

For the three months ended March 31, 2022, net cash used in operating activities was solely a result of payment of deferred offering costs of $77,118.

For the three months ended March 31, 2021, net cash provided by financing activities was solely a result of proceeds from a promissory note of $125,000.

On August 13, 2021, we consummated the Chardan IPO of 11,000,000 units, at $10.00 per unit, generating gross proceeds of $110,000,000. Each unit consisted of one public share and three-quarters of one public warrant. Each public warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per whole share.

On August 18, 2021, the underwriters fully exercised the over-allotment option and, purchased an additional 1,650,000 units at a purchase price of $10.00 per unit, generating gross proceeds of $16,500,000.

Simultaneously with the closing of the exercise of the over-allotment option, we consummated the sale of 266,402 private warrants at a purchase price of $0.93 per private warrant in a private placement to Holdings, generating gross proceeds of $247,500.

A portion of the proceeds from the private warrants was added to the proceeds from the Chardan IPO to be held in the trust account. If we do not complete our initial business combination by August 13, 2022 (or February 13, 2023, as applicable), the proceeds of the sale of the private warrants will be used to fund the redemption of the public shares (subject to the requirements of applicable law) and the private warrants and all underlying securities will be worthless. There will be no redemption rights or liquidating distributions from the trust account with respect to the private warrants.

We intend to use substantially all of the net proceeds from the Chardan IPO, including the funds held in the trust account, to acquire a target business or businesses and to pay our expenses relating thereto. To the extent that our share capital is used in whole or in part as consideration to effect our initial business combination, the remaining proceeds held in the trust account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees that we incur prior to the completion of our initial business combination, if the funds available to us outside of the trust account were insufficient to cover such expenses.

175

Table of Contents

We do not believe we will need to raise additional funds following our Chardan IPO to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination.

Off-Balance Sheet Financing Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2022 or December 31, 2021.

Contractual Obligations

As of March 31, 2022 and December 31, 2021, we did not have any long-term debt, capital or operating lease obligations. We entered into an administrative services agreement pursuant to which we will pay our Sponsor for office space and secretarial and administrative services provided to members of our management team, in an amount not to exceed $10,000 per month.

Registration and Stockholder Rights Agreement

The holders of the Founder Shares and private warrants (and any shares of common stock issuable upon the exercise of the private warrants) are entitled to registration rights pursuant to a registration rights agreement dated as of August 10, 2021, by and between Chardan, the Sponsor, Holdings, and the other parties thereto. The holders of a majority of these securities are entitled to make up to two demands that Chardan register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the private warrants (and underlying securities) can elect to exercise these registration rights at any time after Chardan consummates a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to Registration Statements filed subsequent to the consummation of a business combination. Chardan will bear the expenses incurred in connection with the filing of any such Registration Statements.

Underwriting Agreement

We granted the underwriters a 45-day option to purchase up to 1,650,000 additional units to cover over- allotments at the Chardan IPO price, less the underwriting discounts and commissions. On August 18, 2021, the underwriters fully exercised the over-allotment option to purchase an additional 1,650,000 units at an offering price of $10.00 per unit for an aggregate purchase price of $16,500,000. In addition, the underwriters were paid a cash underwriting discount of $500,000 upon the closing of the Chardan IPO.

Business Combination Marketing Agreement

We have engaged Chardan Capital Markets as an advisor in connection with the Business Combination to assist us in holding meetings with the stockholders to discuss the potential Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities, assist us in obtaining stockholder approval for the Business Combination and assist us with press releases and public filings in connection with the Business Combination. We will pay Chardan Capital Markets a cash fee for such services upon the consummation of the initial Business Combination in an amount equal to, in the aggregate, $4,427,500, being 3.5% of the gross proceeds of the Chardan IPO. As a result, Chardan Capital Markets will not be entitled to such fee unless we consummate the initial Business Combination. Mr. Grossman is the Chief Executive Officer of, and Mr. Weil is Managing Director and Co-Head of Fintech Investment Banking of, Chardan Capital Markets, an affiliate of the Sponsor. Mr. Grossman and Mr. Propper are also members of the board of directors of Chardan Capital Markets. Chardan Capital Markets will also receive a cash fee of $1,170,000 for other financial advisory services, including for advisory services provided with respect to placement of potential PIPE investments, and identifying and negotiating lender financing.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and

176

Table of Contents

liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Warrant Liabilities

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants will be recognized as a non-cash gain or loss on the statements of operations.

We account for the Private Warrants issued concurrently in connection with the Chardan IPO in accordance with ASC 815-40, under which the private warrants will not meet the criteria for equity classification and must be recorded as liabilities. As the private warrants meet the definition of a derivative as contemplated in ASC 815, the private warrants will be measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement (“ASC 820”), with changes in fair value recognized in the statements of operations in the period of change.

The public warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and each balance sheet date thereafter.

Common Stock Subject to Possible Redemption

We account for our common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as liability instruments and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, 12,650,000 shares of common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our balance sheet. Effective with the closing of the Chardan IPO, we recognized the accretion from the initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

We recognize changes in redemption value immediately as they occur and adjust the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit.

177

Table of Contents

Net Income (Loss) Per Share of Common Stock

Net income (loss) per common share is computed by dividing net earnings by the weighted-average number of shares of common stock outstanding during the period. We have not considered the effect of the warrants sold in the Chardan IPO and private placement to purchase an aggregate of 14,115,358 shares in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

Recent Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

178

Table of Contents

INFORMATION ABOUT DRAGONFLY

The following discussion reflects the business and operations of Dragonfly prior to the Closing. Unless the context otherwise requires, all references in this section to “we,” “us,” or “our” refer to Dragonfly and its subsidiaries prior to the Closing which will be the business and operations of New Dragonfly and its subsidiaries following the Closing.

Overview

Formed in 2012 and based in Reno, Nevada, we are a manufacturer of non-toxic deep cycle lithium-ion batteries that caters to customers in the recreational vehicle (“RV”), marine vessel and off-grid residence industries, with disruptive solid-state cell technology currently under development. We believe that green energy is more than just a trend. Our goal is to develop technology to deliver environmentally impactful solutions for energy storage to everyone globally. We believe that the innovative design of our lithium-ion batteries is ideally suited for the demands of modern customers who rely on consumer electronics, connected devices and smart appliances that require continuous, reliable electricity, regardless of location.

Our deep cycle lithium iron phosphate (“LFP”) batteries provide numerous advantages compared to incumbent products, such as lead-acid batteries. LFP batteries are non-toxic and environmentally friendly, do not rely on scarce or controversial metals and are a highly cost-effective storage solution. LFP batteries use lithium iron phosphate (LiFePO₄) as the cathode material for lithium-ion cells rather than nickel or cobalt. Although the energy density of LFP batteries is lower, they have a longer cycle life and experience a slower rate of capacity loss. LFP is also intrinsically safer due to its thermal and chemical stability, meaning our LFP batteries are less flammable than alternative products. As we develop our proprietary solid-state cell technology, we believe our use of LFP will continue to provide significant advantages over the lithium-ion technology in development by other companies, which still incorporate less stable components in their chemistries (such as sulfide glasses, which are chemically unstable and form hydrogen sulfide when exposed to air).

We have a dual-brand strategy, Dragonfly Energy (“Dragonfly Energy”) and Battle Born Batteries (“Battle Born”). Battle Born branded products are primarily sold direct to consumers, while the Dragonfly Energy brand is primarily sold to original equipment manufacturers (“OEMs”). However, with the growing popularity and brand recognition of Battle Born, these batteries have become increasingly popular with our OEM customers. Based on the extensive research and optimization undertaken by our team, we have developed a line of products with features including a proprietary battery management system and an internal battery heating feature for cold temperatures, and we expect to launch our unique battery communication system during the first half of 2023. We currently source the LFP cells incorporated into our batteries from a limited number of carefully selected suppliers that can meet our demanding quality standards and with whom we have developed long-term relationships.

We began as an aftermarket-focused business initially targeting direct-to-consumer sales in the RV market. Since 2018, we have sold over 165,000 batteries. For the three months ended March 31, 2021 and 2022, we sold 18,027 and 19,664 batteries, respectively, and had $15.6 million and $18.3 million in net sales, respectively. For the years ended December 31, 2020 and 2021, we sold 51,434 and 74,652 batteries, respectively, and had $47.2 million and $78.0 million in sales, respectively. Over time, we have increased total sales through a combination of: increasing direct-to-consumer sales of batteries for RV applications; expanding into the marine vessels and off-grid storage markets with related direct-to-consumer sales; selling batteries to RV OEMs; increasing sales to distributors; and reselling accessories for battery systems. Our RV OEM customers currently include Keystone, who has agreed to fulfill certain of its LFP battery requirements exclusively through us for at least one year (with potential annual renewals), THOR, who has made a strategic investment in our business and with whom we intend to enter into a future, mutually agreed exclusive two-year North American distribution agreement (with potential annual renewals), Airstream, and REV, and we are in ongoing discussions with a number of additional RV OEMS to further increase adoption of our products.

179

Table of Contents

We currently offer a line of batteries across our two brands, each differentiated by size, power and capacity, consisting of eight different models, four of which come with a heated option. The following chart highlights the key features of each of our models:

To supplement our battery offerings, we are also a reseller of accessories for battery systems. These include chargers, inverters, monitors, controllers and other system accessories from brands such as Victron Energy, Progressive Dynamics, Magnum Energy and Sterling Power.

Our battery packs are designed and assembled in-house in the United States. In April 2021, we opened our new 99,000 square foot facility, allowing us to increase our production capacity and giving us the ability to increase sales to existing customers and penetrate new markets. Our facility provides a streamlined, partially autonomous production process for our current batteries, which comprises module assembly and battery assembly, with the availability to expand the number of lines to handle increased volumes and the additional battery modules we intend to introduce in the near future. We plan to continue to expand our production capacity as needed and estimate that our current production facility will allow for over $500 million in manufacturing sales capacity once fully utilized.

We currently focus on three main end markets: RVs, marine vessels and off-grid storage and, in the medium- to longer-term, we plan on expanding into several new markets. Within our current markets, our aim is to replace incumbent lead-acid batteries. Our batteries are primarily designed to provide consumers with a long-lasting, highly efficient power source for powering appliances, consumer electronics and other smart devices located inside RVs, marine vessels or off-grid residences and, other than for certain smaller marine vessels, are not intended for propulsion. Our batteries are powertrain agnostic with the ability to operate on internal combustion engine vehicles or electric vehicles.

Our proven sales and marketing strategy has allowed us to penetrate our current end markets efficiently. We use a variety of methods to educate consumers on the benefits of LFP batteries and why they are a better investment compared to the legacy lead-acid batteries currently found in our target end markets today. We also have an extensive social media program, where we partner with content creators in our target markets to share with consumers the benefits of our products. Lastly, we participate in a variety of industry productions, including features on RV podcasts and TV shows, and attend sponsored industry events such as the Bassmaster Classic, RV rallies and boat shows.

In addition to our conventional LFP batteries, our experienced research and development team, headed by our co-founder and CEO, is currently developing the next generation of LFP solid-state cells. Running in parallel with our current business operations, to date we have fully self-funded our solid-state R&D efforts. Since our founding, we have been developing proprietary solid-state cell technology and manufacturing processes for which we have issued patents and pending patent applications, where appropriate. Solid-state lithium-ion technology eliminates the use of a liquid electrolyte, which addresses the residual heat and flammability issues arising from lithium-ion batteries. The unique competitive advantage of our solid-state battery cell is highlighted by our dry deposition technology, which completely displaces the need for toxic solvents in the manufacturing process and allows for the rapid and scalable production of solid-state cells having an intercalation anode, like graphite or silicon. Other solid-state technology companies are focused on a denser lithium metal anode, which tends to form icicle-like dendrites inside the cell and lacks the cyclability of an intercalation anode. Our design allows for a much safer, more efficient cell that we believe will be a key differentiator in the energy storage market. Additionally, our

180

Table of Contents

internal production of solid-state cells will streamline our supply chain, allowing us to vertically integrate our cells into our batteries, thereby lowering our production costs as a result of our proprietary cost-effective manufacturing processes.

As the world transitions towards greater clean energy use and energy storage, we will continue to deliver on our mission of developing innovative technology to make clean energy accessible and affordable for everyone globally. We will continue to focus on our core competencies of providing innovative technology, expanding our brand portfolio and providing affordable, sustainable and accessible energy, all while being designed and manufactured in the United States.

Industry Background

For decades, lead-acid batteries have been the dominant player in power and energy markets worldwide. Since the introduction of the absorbed glass mat (“AGM”) lead-acid battery in the mid-1970s, the technological advancements in lead-acid battery technology have been limited. LFP batteries have numerous advantages over the incumbent lead-acid batteries used in today’s markets:

●

Environmentally Friendly, Socially Responsible and Safer. Lead-acid batteries that are not recycled or disposed of properly are extremely toxic and can cause areas of poisonous groundwater and lead buildups, impacting both humans and the environment. Research by EcoMENA shows that a single lead-acid battery disposed of incorrectly into a municipal solid waste collection system could contaminate 25 tonnes of municipal solid waste and prevent recovery of organic resources due to high lead levels. Lithium-ion batteries, specifically LFP batteries, have no toxic elements and are 100% environmentally friendly. LFP batteries also do not rely on controversial elements such as cobalt as part of their chemistry. Compared to lead-acid batteries, there is no concern of “off-gassing,” or the emission of noxious gases, for lithium-ion batteries, and therefore no need to take into consideration required ventilation or off-gas related fire risk when installing or recharging our LFP batteries.

●

Longer Lifespan. Lithium-ion batteries have longer lifecycles compared to lead-acid batteries. LFP batteries are able to cycle (i.e., discharge and charge) 3,000 to 5,000 times before hitting the 80% capacity mark. Comparatively, lead-acid batteries degrade quickly, only cycling 300-500 times before hitting 50% of their original capacity. Our third-party validated internal research suggests that if a typical AGM lead-acid battery and our LFP battery were cycled once every day, the AGM battery and our LFP battery would have a respective lifespan of 1.98 years and 19.18 years before reaching 80% depth of discharge (i.e., 80% of our battery would have been discharged relative to the overall capacity of the battery in that lifespan). In many storage applications, lithium-ion batteries have a lifespan exceeding the lifetime of the project with very limited maintenance requirements, compared to lead- acid batteries, which have a one- to two-year useful life in most applications.

●

Power and Performance. As new technologies evolve and people consume more electricity, the importance of battery power and performance increases. Compared to lead-acid batteries, lithium-ion batteries can discharge power at a higher voltage and more consistently through the discharge cycle (i.e., until they are 100% discharged) while utilizing a smaller physical space and weighing less. In addition, unlike lead-acid batteries, lithium-ion batteries can be discharged below 50% capacity without causing irreparable harm to the battery. Lithium-ion batteries also provide the same energy capacity with one-fifth the weight of a standard lead-acid battery. Lithium-ion batteries are also significantly more reliable and efficient, especially in cold temperatures, allowing for year-round all-climate usage.

●

Charging. Lead-acid batteries were the first rechargeable batteries on the market. However, due to new advancements in energy density (i.e., the amount of energy stored by mass volume) and charge/ discharge rates, lithium-ion batteries now significantly outperform traditional lead-acid batteries. LFP batteries currently charge five times faster than their lead-acid counterparts, with even faster charging rates expected for the next generation of lithium-ion cells. With the appropriate battery management system, lithium-ion batteries can be charged in cold temperatures, something lead-acid batteries are unable to do, resulting in two to three times more power delivered.

●

Maintenance-Free. LFP batteries provide the benefit of being a maintenance-free option compared to lead-acid batteries. Unlike lead-acid batteries which have no battery management system to regulate current flow and charging rates, all our LFP battery packs include a proprietary battery management system that regulates current and provides temperature, short circuit and cold charging protection. Our LFP batteries also do not require cleaning or water, eliminating the need for periodic

181

Table of Contents

maintenance found in today’s lead-acid batteries. While our LFP batteries are generally designed to replace and physically fit into racks made for existing lead-acid batteries, our batteries can be installed in any position and without the need for venting.

End Markets

Current Markets

According to a Frost and Sullivan report commissioned by us (“Frost & Sullivan”), the total addressable market (“TAM”) of our three current end markets is estimated to be approximately $12 billion by 2025.

●

Recreational Vehicles. The growth of the RV market is expected to continue to drive demand for LFP storage batteries. According to the RV Industry Association (“RVIA”), there are over 11 million RVs on the road in America and 9.6 million households intend to purchase an RV within the next five years. RV interiors are becoming more modern as customers adopt the full-time RV lifestyle, with additional appliances and electronics being installed, increasing the need for reliable power. According to the RVIA and THOR Industries, North American RV shipments have had an estimated 10-year compound annual growth rate (“CAGR”) of 6.8% from 2012 to 2022, with RV shipments estimated to be over 549,900 in 2022. The need for greater power and power storage capabilities to power interiors is driving a shift towards the use of LFP batteries. Incumbent lead-acid batteries are heavy, take up a lot of space, have inefficient power discharge and require ventilation. Our solution addresses all of these problems by allowing for shorter charge times, weighing one-fifth of a standard lead-acid battery, providing a reliable and consistent source of power and being maintenance-free. Our market focus has traditionally been on motorized RVs (i.e., driveable RVs). OEMs have begun to introduce batteries into towable units (i.e., RVs that require another vehicle to drive them), which will create a new potential subsector in the RV market for LFP batteries. According to the RVIA’s 2021 RV Market Report, approximately 91% of wholesale RV units shipped in 2021 were towable units, representing a significant opportunity for LFP batteries.

●

Marine Vessels. As boating becomes more popular in North America, the need for a reliable, non- flammable energy storage system is becoming increasingly apparent. According to the 2020 Recreational Boating Statistics and the 2020 National Recreational Boating Safety Survey, in 2018 over 84 million Americans participated in some form of boating activity, with a total of over 11.8 million boats on the water as of 2020, of which 93% are power boats. We believe that the marine vessel market will grow to approximately $8 billion by 2025. Similar to the RV market, customers are becoming more technologically advanced and are adding more electronics to their vessels, in turn driving demand for larger and more reliable energy storage, such as LFP batteries. Tightening marina regulations are also driving the need for electric docking motors on more vessels and increasing the focus on safety, which LFP batteries are well-suited to address.

●

Off-Grid Residences. Many people are turning to off-grid housing and, as individuals and governments become more conscious of their carbon footprint, a shift towards renewable energy sources for off-grid housing will be increasingly popular. Solar installations continue to see an increase globally, with global PV installations projected to rise from 144 GW (DC) in 2020 to 334 GW (DC) in 2030 according to BloombergNEF. According to the Solar Energy Industries Association (“SEIA”), approximately 11% of solar installations in 2021 were supplemented with a battery system for efficient storing of excess energy generated during daylight hours. However, the number of new behind-the-meter solar systems with supporting battery systems is projected to rise to over 29% by 2025. LFP batteries are able to solve the weakest part of renewable energy adoption, which is the lack of consistent, reliable and efficient energy storage that is safer than alternative energy storage options currently on the market. As this shift towards clean energy becomes more prominent and cost-effective, the LFP battery market will be able to penetrate the largely untapped off-grid markets.

Addressable Markets

Our addressable markets are areas with significant growth potential that we will be positioned to penetrate as customers turn towards LFP and other lithium-ion batteries as replacements for traditional lead-acid batteries. As these medium- and long-term markets mature, we intend to deploy our solid-state technology, once developed, while concurrently continuing to further displace the incumbent lead-acid technology. According to Frost & Sullivan, our TAM is estimated to be $85 billion by 2025.

182

Table of Contents

●

Industrial / Material Handlings / Work Truck. The industrial vehicle market includes work trucks, material handling and warehousing equipment and compact construction equipment. As industrial vehicles increase in terms of automation and incorporate more onboard tools, the need for a long- lasting, reliable and environmentally friendly energy source grows. The continuous growth of e-commerce is increasing the demand for warehousing and automated equipment. According to material handling equipment manufacturer Hyster-Yale Materials Handling, in 2021 the global market volume in units for lift trucks was approximately 2.3 million, most of which were powered by traditional lead-acid batteries, presenting a large retrofitting opportunity for LFP batteries.

●

Specialty Vehicles. According to Mordor Intelligence, as of 2019, approximately 40% of the specialty vehicle market in the United States consists of medical and healthcare vehicles and approximately 30% consists of law enforcement and public safety vehicles. The market for emergency vehicles has grown as the baby boomer generation continues to age, and there has been increased demand for electrified devices and equipment on board these emergency vehicles. Our LFP batteries are well-suited to capture this market as they offer a more reliable power source with longer lifecycles compared to lead-acid batteries. In addition, LFP batteries are safer, lighter and modular, allowing for more tools to be stored on-board emergency vehicles without sacrificing the performance of the battery system.

●

Emergency and Standby Power. Demand for reliable emergency and standby power sources is expected to continue to drive demand for effective power storage for residential, commercial and industrial uses. Power outages in the United States cost an estimated $150 billion per year, according to the Department of Energy, increasing the demand for uninterrupted power sources. The need for reliable emergency and standby power exists in both hazardous and non-hazardous environments and is particularly acute in areas where the existing grid service is subject to intermittencies or is otherwise inefficient (including as a result high peak electricity usage, grid and related equipment age or severe weather and other environmental factors). LFP batteries are able to offset grid-related intermittencies and inefficiencies and assist in providing grid stabilization. Importantly, LFP batteries achieve these benefits in a clean, reliable and safe manner by supplanting or reducing the use of fossil fuel backup generators.

●

Telecom. Demand for mobile data continues to increase and network providers are investing heavily in 5G networks, particularly in unserved and underserved regions, to support this demand. According to the CTIA’s 2021 annual survey, there were 417,215 cell sites in the United States in 2020. Batteries provide backup power to these sites when external power is interrupted. While lead-acid batteries are commonly used as backup batteries today, the compact nature of lithium-ion batteries, together with the fact that they are safer and more environmentally friendly, make them ideal alternatives as new wireless sites are built and the older wireless sites require upgrades. LFP batteries are maintenance free and have a longer lifespan, allowing for a more efficient and reliable power source for large wireless sites. The ability to monitor the battery systems remotely enables telecom operators to reduce onsite maintenance checks, thereby reducing overall operational costs while ensuring network uptime.

●

Rail. Rail transportation is a large potential market, with an estimated market size of $98.6 billion in 2022, according to IBISWorld. Many railroad operators have invested in infrastructure and equipment upgrades in recent years, in an attempt to boost capacity and productivity. As noted in a study conducted by the International Energy Analysis Department and the Lawrence Berkeley National Laboratory, a shift from fossil fuel-based rail cars to emission-free power sources will greatly affect the economic and environmental impact from the rail industry. Two suggested pathways from this study were (1) electrifying railway tracks and using emission-free electricity which requires significant storage combined with renewable electricity on the grid, and (2) adding battery storage cars to diesel-electric trains.Abattery-electric rail sector would provide more than 200GWh of modular and mobile storage, which could in turn provide grid services and improve the resilience of the power system.

●

Data Centers. Data centers have seen strong growth in recent years, with over 2,750 data centers in the United States as of January 2022 according to Statista. Constant technological advancements and larger amounts of data generated and stored by companies for increasingly longer periods of time are driving growth in the importance, and the amount, of physical space dedicated to data centers. As software companies, such as Google and Oracle, continue to develop new technologies, such as artificial intelligence, data centers where the computer and storage functions are co-located also continue to grow. As the industry seeks to cut operating costs, become more efficient and minimize dedicated physical space, we expect there to be a

183

Table of Contents

shift towards light, compact lithium-ion batteries that can reduce overall costs and provide a reliable power supply without sacrificing performance. Lithium-ion batteries are designed to operate in environments with higher ambient temperatures than incumbent energy storage methods (such as lead-acid batteries). This ability for lithium-ion batteries to withstand and operate at higher temperatures can also reduce cooling costs.

●

On-grid Storage. On-grid energy storage is used on a large-scale platform within an electrical power grid in conjunction with variable renewable energy sources such as solar and wind projects. These storage units (including large-scale stationary batteries) store energy when electricity is plentiful, and discharge energy at peak times when electricity is scarce. Because of the low cost of fossil fuels, the adoption of large-scale batteries has been slow. However, according to the U.S. Energy Information Administration 2021 report on battery storage in the United States, lithium-ion battery installations in large-scale storage grew from less than 50 MWh of energy capacity annual additions in 2010 to approximately 400 MWh in 2019. As lithium-ion battery production scales, the related cost of storage for all lithium-ion batteries will decline and the cost of renewable energy (including associated storage costs) is expected to approach $0.05 per kWh, which is the amount required to be cost competitive with the price of power from the electrical grid. We believe our ability to cost-effectively develop and manufacture LFP solid-state batteries will position renewable energy projects deploying these batteries to reach “grid parity” sooner.

Our Competitive Strengths

We believe that we possess the largest share in the markets we operate in, due to our following business strengths, which distinguish us in this competitive landscape and position us to capitalize on the anticipated continued growth in the energy storage market:

●

Premier Lithium-Ion Battery Technology. Each of our innovative batteries features custom designed components to enhance power and performance in any application or setting. Our batteries feature LFP chemistry that is environmentally friendly, does not heat up or swell when charging or discharging, and generates more power in less physical space than competing lead-acid batteries. Unlike our competitors, our internal heating technology keeps our batteries within optimal internal conditions without drawing unnecessary energy and sustaining minimal energy drain. To protect our products, our batteries possess a proprietary battery management system that shuts off the ability to charge at 24 degrees Fahrenheit and stops drawing power from the battery at -4 degrees Fahrenheit. This technology increases performance in cold weather conditions while possessing a unique heating solution that does not require an external energy source.

●

Extensive, Growing Patent Portfolio. We have developed and filed patent applications on commercially relevant aspects of our business including chemical compositions systems and production processes. To date, we have possessed 24 issued patents, with an additional 20 patent applications pending, in the United States, China, Europe, Australia, Canada and other regions.

●

Proven Go-To-Market Strategy. We have successfully established a direct-to-consumer platform and have developed strong working relationships with major RV OEMs, custom designing products for new and existing applications as evidenced by 16 consecutive quarters of profitability, which we measure by positive EBITDA. We see opportunities to continue to leverage our success in the aftermarket to expand our relationships to other leading OEMs and distributors while further enhancing our direct-to-consumer offerings. Extensive informational videos and exceptional customer service provide sales, technical and hands-on service support to facilitate consumer transition from traditional lead-acid or incumbent lithium-ion batteries to our products.

●

Established Customer Base with Brand Recognition. We have a growing customer base of approximately 13,500 customers featuring OEMs, distributors, upfitters and end consumers across diverse end markets and applications including RV, marine vessels and off-grid residences. Customer demand and brand recognition of Battle Born batteries from an aftermarket sales perspective have helped drive significant adoption from RV OEMs (with a CAGR of over 180% since 2018) with visibility for future growth through further expansion of our existing relationships.

●

High Quality Manufacturing Process. Unlike competitors that outsource their manufacturing processes, our batteries are designed, assembled and tested in the United States, ensuring that our manufacturing process is thoroughly tested and our batteries are of the highest quality.

184

Table of Contents

●

Drop-in Replacement. Our battery modules are largely designed to be “drop-in replacements” for traditional lead-acid batteries, which means that they are designed to fit standard RV or marine vessel configurations without any adjustments. Our target applications are powering devices and appliances in larger vehicles and low speed industrial vehicles. We offer a full line of compatible components and accessories to simplify the replacement process and provide consumers with customer service to ensure a seamless transition to our significantly safer and environmentally friendly battery. Over their lifetime, our batteries are significantly cheaper from both an absolute cost and a cost per energy perspective. These lifetime costs, at current costs and capacity, will naturally drop as we continue to take advantage of economies of scale.

Our Growth Strategy

We intend to leverage our competitive strengths, technology leadership and market share position to pursue our growth strategy through the following:

●

Expand Product Offerings. In the short-term, our aim is to further diversify our product offerings to give consumers, as well as RV OEMs and distributors, more options for additional applications. This will be accelerated by the expansion of our production capacity in our new manufacturing facility. We intend to launch and scale production of additional 12 voltage and 24 voltage batteries and introduce 48 voltage batteries, which we believe will extend our market reach in each of our targeted end markets. We believe the natural evolution of our product offering is to become a system integrator for solar and other energy solutions.

●

Expand End Markets. We have identified additional end markets that we believe in the medium- to longer-term will increasingly look to alternative energy solutions, such as LFP batteries. Markets, such as standby power, industrial vehicles, specialty vehicles and utility-grade storage, are in the early stages of adoption of lithium-ion batteries (including LFP batteries), and we aim to be at the forefront of this movement by continuing to develop and produce products with these end users in mind.

●

Commercialize Solid-State Technology. We believe solid-state technology presents a significant advantage to all products currently on the market, with the potential to be lighter, smaller, safer and cheaper. Once we have optimized the chemistry of our LFP solid-state batteries to enhance conductivity and power, we intend to use our first solid-state cells in our Battle Born batteries, after which we will scale up for mass production of separate solid-state batteries for various applications and use cases.

Our Products and Technology

Chemistry Comparison

Lead-acid batteries were the first form of rechargeable battery to be developed and modified across different platforms for a variety of uses, from powering small electronics to use for energy storage in back-up power supplies in cell phone towers. Since the development in the 1970s of AGM lead-acid batteries, a form of sealed lead-acid battery that enables operation in any position, there has been limited innovation in lead-acid battery technology. The push to develop longer-lasting, lower-cost, more environmentally-friendly and faster- charging batteries has led to the development of lithium-ion batteries and, within the lithium-ion battery market, different chemistries.

There are several dominant battery chemistries in the lithium-ion market that can be used for different purposes. Two widely adopted chemistries found in the market today are nickel manganese cobalt (“NMC”), and nickel cobalt aluminum (“NCA”). The higher energy density and shorter cycle life found in NMC and NCA batteries are suitable for markets where fast charging and high energy density are required, such as electric vehicle powertrains and consumer electronics. LFP batteries are best suited for energy storage markets where

185

Table of Contents

long life and affordability are paramount, such as RV, marine vessel, off-grid storage, onboard tools, material handling, utility-grade storage, telecom, rail and data center markets.

NMC batteries are highly dependent on two metals that present significant constraints — nickel, which is facing an industry-wide shortage, and cobalt, a large percentage of which comes from conflict-ridden countries. According to an article by McKinsey & Company titled “Lithium and Cobalt: A tale of two commodities”, global forecasts for cobalt show supply shortages arising as early as 2022, slowing down NMC battery growth. Both of these elements are also subject to commodity price fluctuations, making NMC and NCA batteries less cost-effective than LFP batteries. LFP batteries do not contain these elements and materials can be sourced domestically, and are therefore not subject to these shortages, geopolitical concerns or commodity price fluctuations. In fact, LFP batteries have no toxic elements, offering a much safer environmental alternative. The temperature threshold for thermal runaway (i.e., lithium-ion battery overheating that can result in an internal chemical reaction) is roughly 700 degrees Fahrenheit for LFP batteries, compared to 350 degrees Fahrenheit for NMC and NCA batteries, making LFP batteries less flammable and safer.

LFP batteries have a useful life of approximately 10 to 15 years compared to one to two years for lead- acid batteries, and typically charge up to five times faster. LFP batteries are also not constrained by weight (having the same energy capacity at one-fifth of the weight) or temperature (having the ability to generate power even in low temperatures and to not swell or heat up when charging or discharging) and are generally maintenance free.

In the electric vehicle market, the race to provide the highest energy density facilitating frequent, rapid acceleration, greatest range and fastest charging battery — all while competing on cost — is where many new battery companies are prioritizing their efforts. Success in the electric vehicle market requires use of chemistries capable of optimization to these requirements. In our targeted stationary storage markets, the ideal solution requires a safe, long-lasting battery in terms of discharge/charge cycles with a focus on providing a steady power stream. LFP batteries are better suited for the stationary storage market compared to NMC and NCA batteries, as LFP batteries are safer and have a significantly longer life cycle making them more cost-effective. The market for utility grade storage, particularly for clean energy projects, and the related adoption of lithium- ion batteries (including LFP batteries) is expected to increase as the fully-loaded cost of energy (production and storage) approaches cost parity with inexpensive fossil fuel energy provided through the electric grid. Compared to NMC and NCA batteries, LFP batteries are at or much closer to grid parity.

Solid-State Cells

LFP batteries are not without their disadvantages. While less flammable than other chemistries, the existence of a flammable liquid electrolyte still poses safety risks. Like all liquid-based lithium-ion batteries, LFP batteries have a tendency to produce solid lithium dendrites, icicle-like formations which can pierce the physical separators in LFP batteries, which are necessary in LFP batteries to separate the positively charged liquid electrolyte from the negatively charged liquid electrolyte, and which, over time, will degrade the performance of LFP batteries and potentially result in fire-related risks. The next phase in the development of lithium-ion batteries is solid-state cell development, which contains a solid, rather than a liquid, electrolyte, eliminating many of the current disadvantages to LFP batteries while increasing the safety of the battery cells. We believe that the development of our solid-state technology will provide us with a unique competitive advantage.

Compared to current lithium-ion technology, where lithium-ions cross a liquid electrolyte barrier between a battery’s anode (negative electrode) and cathode (positive electrode), solid-state batteries aim to use a solid electrolyte to regulate the lithium-ions. As a battery charges and discharges, an electrochemical reaction occurs creating a flow of electrical energy between the cathode, electrolyte and anode as the electrodes lose and reacquire electrons. In addition to the use of non-toxic electrode components, the removal of a liquid electrolyte will eliminate the risk of fire, making solid-state cells inherently safe. The move to a non-liquid electrolyte also means

186

Table of Contents

that solid-state batteries will be, on average, smaller and lighter than existing lithium-ion batteries. The process for manufacturing our solid-state cells is described below under “— Research and Development”.

Our Products

We currently offer non-toxic deep cycle LFP batteries for use in the RV, marine vessel and off-grid storage markets. We believe that the innovative design of our LFP batteries is ideally suited for the demands of modern customers who rely on consumer electronics, connected devices and smart appliances that require continuous, reliable electricity. We also offer chargers and other accessories either individually or as part of bundled packages.

For the three months ended March 31, 2021 and 2022 we sold 18,027 and 19,664 batteries, respectively, and had $15.6 million and $18.3 million in sales, respectively. Net income for the three months ended March 31, 2021 was $1.1 million and net loss for the three months ended March 31, 2022 was $2.3 million, respectively, and Adjusted EBITDA was $1.6 million and $(1.9) million, respectively. For the years ended December 31, 2020 and 2021 we sold 51,434 and 74,652 batteries, respectively, and had $47.2 million and $78.0 million in sales, respectively. Net income for the years ended December 31, 2020 and 2021 was $6.9 million and $4.3 million, respectively, and Adjusted EBITDA was $9.4 million and $8.7 million, respectively. For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, information on why we consider Adjusted EBITDA useful and a discussion of the material risks and limitations of this measure, please see the section entitled, “Dragonfly’s Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.”

Our core products are LFP battery modules with a built-in battery management system offered under our two brand names: Dragonfly Energy, which sells only to OEMs, and Battle Born Batteries, which sells direct to consumers and increasingly to OEMs. We currently offer eight LFP battery models across our two brands, each differentiated by size, power and capacity:

Each battery model is capable of being discharged to a 100% depth of discharge and takes approximately five hours to charge to full capacity, which is five times faster than a traditional lead-acid battery. Each module is designed to last between 3,000 and 5,000 cycles, at which point the battery still holds 75% to 80% of its energy capacity. This equates to approximately 10 to 15 years of use (under typical conditions), which is why each battery comes with an industry-leading 10-year full replacement manufacturers’ defect warranty. Our battery modules are largely designed to be “drop-in replacements” for traditional lead-acid batteries, which means that they are designed to fit standard RV or marine vessel configurations without any adjustments. Our LFP batteries are versatile and designed to be compatible not just with standard chargers, but also with wind and solar power systems, and to be modular, and can be combined in series or in parallel depending on customer needs.

We also offer certain of our battery models as an internally heated battery, which utilizes our proprietary technology to maintain optimal internal settings in cold weather conditions, allowing customers to charge the battery even in low temperatures. The unique heating technology does not require an external energy source and the self-regulating internal heater is only activated when needed, minimizing energy drain and extending the useful life of the battery. Unlike traditional batteries, our batteries are maintenance free and do not require cleaning, adding of water or venting for “off gassing”.

187

Table of Contents

In addition to our core battery products, we offer customers a number of adjacent products and accessories manufactured by third parties. We offer a range of charging components that are designed for every application: inverter chargers (which allow users to recharge a DC battery bank with AC power and also turn DC battery power into AC power), converter chargers (which allow users to charge from an AC power source) and solar charge controllers (which manage power transfer from solar arrays to battery banks).

We also offer customers a full suite of accessories and components to facilitate the installation of our products. These include plugs, fuses, cables, adapters, sensors and interfaces pictured below.

We offer specially designed bundled packages of battery modules and accessories tailored to specific applications for both RVs, marine vessels and off-grid residences, ranging in price from $675 to over $19,000, as shown below.

With our batteries being designed and assembled exclusively in-house, we are able to guarantee that we deliver high-quality batteries to customers. We test our products to ensure they meet federal and local governmental regulations for both performance and safety. Our testing and compliance with required standards and measurements are validated by a third-party lab, which includes UL Standard 2054, IEC 62133 and the UN 38.3 shipping certification.

188

Table of Contents

Battery Management System

Our proprietary battery management system is designed, developed and tested in-house. It offers a complete solution for monitoring and controlling our complex battery systems and is designed to protect battery cells from damage in various scenarios. We believe our battery management system is industry-leading for a number of reasons:

●

it enables batteries to draw power between -4 degrees Fahrenheit and 135 degrees Fahrenheit, and is designed to cut off charging at 24 degrees Fahrenheit to protect cells;

●

it actively monitors the rate of change of currents to detect and prevent short circuiting, and also protects against potential ground faults;

●

it allows for up to an average of 300 amps continuously, 500 amp surges for 30 seconds, and momentary, half second maximum capacity surges;

●

it enables batteries to recharge even if completely drained;

●

it utilizes larger resistors to ensure balanced loads to improve performance and extend useful life; and

●

it facilitates scalability by enabling batteries to be combined in parallel and in series.

Battery Communication System

We have developed a battery hub communication system, for which a U.S. non-provisional patent application and an international PCT patent application have been filed, to be used with Dragonfly Energy OEM systems and Battle Born batteries and bundles. This communication system will enable end customers to monitor each battery in real time, providing information on energy input and output and current or voltage imbalances. The communication system will be able to communicate with up to 24 batteries in a bank at one time and aggregate the data received from these batteries into a central system such as a phone or tablet. We expect to begin offering this hub to customers as an adjacent component and in our product bundles during the first half of 2023.

Product Pipeline

Beyond our current battery modules, we have several LFP products in development that will enable us to access additional end markets.

●

New Products. Our current offerings feature battery products that serve the RV, marine vessel and off-grid markets. Although manufacturing operations were previously capacity constrained the expansion into our new manufacturing facility will allow us to add production capacity and increase product offerings and scale based on demand.

●

The majority of our current batteries are 12 voltage batteries, which provide 85 amp hours of power and are an affordable solution to customers utilizing smaller or lower power applications. The smaller stature and drop-in replacement nature of these batteries have made these popular within the RV and marine vessel markets. Through the expansion of our 12 voltage battery product offerings, we will be able to penetrate further into additional applications including towable RVs, truck campers and trolling motors for small boats.

●

We also offer 24 voltage batteries, ranging from 125 to 175 amp hours, and plan to further expand our 24 voltage battery offerings to provide additional drop-in replacements for AGM batteries. A single 24 voltage battery is more efficient than two 12 voltage batteries due to the ability to power directly from the source without sacrificing power through cables and connectors. This attractive power source is ideal for off-grid housing, telecommunication, solar, marine and motorized home markets, providing enhanced power to larger scale applications. A vast majority of telecommunication cell sites utilize 24 voltage batteries, greatly expanding our addressable market.

189

Table of Contents

●

We intend to offer 48 voltage batteries that will range from an anticipated 60 to 85 amp hours. The 48 voltage batteries provide further efficiency gains with higher voltage. These higher voltage batteries are currently more suitable for luxury mobile homes, larger off-grid uses, and high-end marine applications. We aim to further expand our 48 voltage batteries’ end market exposure into other highly attractive industries including standby power for data center and utility grade energy storage.

System Integrator. A natural evolution of our business is to offer customers a system integration solution providing more efficient power solutions at a cost-effective price point. We currently offer direct parts, accessories, chargers and bundles to customers under the Battle Born Energy and Battle Born Solar brands to help establish our products as part of new green energy and solar power solutions. We have an in-house expert customer service team that assists customers in fully integrating their applications to our technologies for a seamless transition. Through our evolving technology and the customized architecture and application of our products, we are able to offer customers a seamless transition to creating a centralized coordinated system.

Research and Development

Our research and development is primarily focused on the advanced manufacturing of solid-state lithium- ion batteries using an LFP catholyte, a solid electrolyte and an intercalation-based anolyte (intercalation being the reversible inclusion of a molecule or ion into layered solids). We believe that solid-state batteries present a significant advantage to all products currently on the market, with the potential to be lighter, smaller, safer and cheaper. Since our founding, our research team, led by our co-founder and CEO, has been developing solid-state cell manufacturing technology and we aim to be a fully vertically integrated solid-state battery manufacturer. We have successfully tested and are currently in the process of optimizing the composite materials that comprise the cathode, anode and electrolyte of the all-solid-state battery. In addition, we are one of the only companies to focus on a true solid-state chemistry that conducts lithium with sufficiently high conductivity and cycles lithium phosphate against graphite with positive results, and are in the process of testing more complicated layered electrolyte compositions to maximize our cycling and power results. Our aim is to begin producing solid-state pouch cells from a pilot production line during 2022.

Compared to current lithium-ion technology, where lithium-ions cross a liquid electrolyte barrier between a battery’s anode (negative electrode) and cathode (positive electrode), solid-state batteries aim to use a solid electrolyte to regulate the lithium-ions. Our solid-state batteries are designed to be multilayered pouch cells comprised of highly integrated layers of catholyte, electrolyte and anolyte contained within industry standard aluminum foil at the cathode and industry standard copper or nickel foil at the anode, which are then combined into larger battery packs. An illustrative solid state cell is shown below.

We have developed proprietary processes, systems and materials that are protected by issued patents and pending patent applications that we believe place us at the forefront of solid-state storage-focused battery technology. Our cells utilize a layered electrolyte design, which increases stability by forming a stable solid electrolyte interface at both electrodes. Rather than requiring a solid-state separator, we have designed a patent- pending spray drying process that encapsulates each grain of cathode (LFP) or anode (graphite) with a solid electrolyte, which completely integrates the solid-state component, creating higher interface density and, therefore, more effective connectivity. In addition, our cathodes and anodes do not require any liquid component, making this truly solid-state. In lieu of lithium

190

Table of Contents

metal, our cathode component incorporates an intercalation material, such as graphite or silicon. This mitigates the risk of forming lithium dendrites, which degrades cell performance and could potentially cause an internal short circuit.

The utilization of our innovative, completely dry powder deposition technology in our manufacturing process is expected to result in faster manufacturing times with lower upfront capital costs due to the elimination of expensive dryers and vacuum ovens. We believe this will allow our production process to shift from batch production and convert to continuous production faster than our competitors. Our spray powder coating application is highly automated, allowing us to utilize less space and fix overhead costs while increasing the precision of our products and manufacturing capacity of the facility. Our manufacturing process is modular, allowing us to scale up depending upon demand.

The next stage in our technical development is to construct the battery to optimize performance and longevity to meet and exceed industry standards for our target storage markets. Ongoing testing and optimizing of more complicated batteries incorporating layered pouch cells will assist us in determining the optimal cell chemistry to enhance conductivity and increase the number of cycles (charge and discharge) in the cell lifecycle.

We intend to integrate our initial solid-state cells into Dragonfly Energy and Battle Born batteries exclusively and eventually scale to mass production of separate solid-state cells. We aim to be a vertically integrated LFP solid-state cell manufacturer with our technology incorporated into our own-branded products for sale to our own customers (including our OEM customers) but also other battery manufacturers.

Headquarters, Manufacturing and Production

Our headquarters is located in our 99,000 square foot manufacturing facility in Reno, Nevada. The lease for this building was entered into on March 1, 2021 and expires on April 30, 2026. We do not own any real property.

Our facility provides a streamlined, partially autonomous production process for our current batteries, which comprises module assembly and battery assembly. We currently have two production lines, with the availability to expand the number of lines to handle increased volumes and the additional battery modules we intend to introduce in the near future. We plan to continue to expand our production capacity as needed and estimate that our current production facility will allow for over $500 million in manufacturing sales capacity once fully utilized.

191

Table of Contents

Our manufacturing process is set out below:

Our manufacturing process is divided into two aspects: (i) module assembly (including assembly of LFP cells) and (ii) battery assembly. We use a combination of trained employees and automated processes to increase production capacity and lower costs while maintaining the same level of quality our customers expect from our products. Module assembly is a significantly automated process, implementing custom-designed equipment and systems to suit our production needs. This includes cycling of individual cells to detect faulty components and to enable sorting by capacity. Our custom-designed automated welders spot weld individual cells that are assembled into specified module jigs based on the desired amp hour. Completed modules are then discharged to empty, recharged to full charge and sorted by capacity. Battery assembly is performed largely by hand by our trained employees, although we continue to look for innovative ways to integrate automation into this process. Our proprietary battery management system is thoroughly tested for quality cutoffs, then mounted onto individual modules, before the modules are bolted into its casing. We aim to automate the battery management system testing and installation process, which we expect could increase production capacity fourfold. We are currently implementing an automated process for the gluing and sealing process, which would incorporate a two-robot system for gluing and epoxying, as well as a glue pallet system to move finished batteries. After the assembled batteries are tested and sealed, they are processed for outbound distribution.

On February 8, 2022, we entered into a 124-month lease for an additional 390,240 square foot warehouse, which, once built, we intend to utilize for the manufacture of our solid-state batteries.

Supplier Relationships

We have a well-established, global supply chain that underlies the sourcing of the components for our products, although we source domestically wherever possible. We aim to maintain approximately six months’ worth of all components, other than cells, which we pre-order in advance for the year to ensure adequate supply. For nearly all of our components, other than our battery management system, we ensure that we have alternative suppliers available. Our battery management system is sourced from a single supplier based in China who we have a nearly 10-year relationship with and who manufactures this component exclusively for us based on our proprietary design. Our cells are sourced from two different, carefully selected cell manufacturers in China who are able to meet our demanding quality standards. As a result of our long- standing relationships with these suppliers, we are able to source LFP cells on favorable terms and within reasonable lead-times.

As we look toward the production of our solid-state cells, we have signed a Memorandum of Understanding with a lithium mining company located in Nevada for the supply of lithium.

Customers ; RV OEM Strategic Arrangements

We currently serve over 13,500 customers in North America. Our existing customers consist of leading OEMs (such as Keystone, Thor, REV Group and Airstream); distributors (who purchase large quantities of batteries from us and sell to consumers); upfitters (who augment or customize vehicles for specific needs); and retail customers (who purchase from us directly). For the three months ended March 31, 2022, OEM sales represented 17.4% of our total revenues and for the years ended December 31, 2020 and 2021, OEM sales represented 7.4% and 10.6% of our total revenues, respectively, which we expect to increase to approximately 37% of our total revenues by 2023(including as a result of the strategic arrangements described below).

We have deep, long-standing relationships with many of our customers. We also have a diverse customer base, with our top 10 customers accounting for approximately 20.4% of our revenue for the three months ended March 31, 2021. Our customers primarily utilize our products for RVs, marine vessels and off-grid residences. We work directly with OEMs to ensure compatibility with existing designs and also collaborate on custom designs for new applications.

192

Table of Contents

The RV market is characterized by low barriers to entry. In North America, there are two large publicly traded RV companies, THOR Industries and REV Group, in addition to a number of independent RV OEMs. THOR and REV each own a number well-known RV OEM brands and their related companies. These brands compete on a number of factors such as format (e.g., motorized or towable), price, design, value, quality and service. In January 2022, we entered into a long-term supply arrangement with Keystone, a member of the THOR group and the largest towable RV OEM in North America. Under this supply arrangement we will be the exclusive supplier to Keystone for certain of its future LFP battery requirements, solidifying our long-standing relationship with Keystone.

In July 2022, we strengthened our ties with the THOR group of RV OEMs when (i) THOR Industries made a $15,000,000 strategic investment in us and (ii) we agreed to enter into a future, mutually agreed distribution arrangement and joint IP development arrangement. This arrangement and the Keystone arrangement facilitate our ongoing efforts to drive adoption of our products (leveraging the trend of LFP batteries increasingly replacing lead-acid batteries) by, among other things, increasing the number of RV OEMs that “design in” our batteries as original equipment and entering into arrangements with members of the various OEM dealer networks to stock our batteries for service and for aftermarket replacement sales. Once the distribution agreement has been negotiated and signed, during a to-be-agreed transition period, we will use commercially reasonable efforts to cease marketing and selling our products to other RV OEMs and suppliers to RV OEMs in North America. Although the full distribution agreement with THOR will be negotiated and agreed with THOR in the future, its terms are expected to include: (i) an initial term of 24 months, which THOR may renew for successive one-year periods; (ii) a requirement that we be the sole provider of lithium-ion batteries to the US-based THOR family of companies for THOR sales in the United States, subject to agreed exceptions; (iii) favored pricing for products and negotiated rebates or other incentives; (iv) a requirement that THOR and its North American OEMs be our exclusive RV OEM customers for our products in North America, subject to agreed exceptions; and (v) agreeable terms with respect to registered and unregistered intellectual property rights and technology rights (which do not include our existing intellectual property, including our solid-state battery technologies and related IP rights), including necessary licenses between the parties, third party licenses, and allocation of ownership of any intellectual property rights and/or technology rights developed as a result of development efforts jointly undertaken between THOR and us, subject to certain limitations.

We continue to seek to grow our customer base within our existing segments; however, we also believe that our products are well suited to address the needs in additional segments, including residential, commercial and/or industrial standby power, industrial vehicles (such as forklifts, material handling equipment and compact construction equipment) and specialty vehicles (such as emergency vehicles, utility vehicles and municipal vehicles) and we will seek to expand our market share in these segments in the future.

Sales and Marketing

Our proven sales and marketing strategy has allowed us to penetrate our current end markets efficiently. We use a variety of methods to educate consumers on the benefits of LFP batteries and why they are a better investment compared to the legacy lead-acid batteries found in our target end markets today. Through informational videos found on our website and social media platforms that educate consumers on the benefits of LFP batteries and various “DIY” videos, we assist consumers on what they need for their battery system and how to install and use batteries and accessories.

We utilize a multi-pronged sales and marketing strategy to ensure that the Dragonfly Energy and Battle Born brands are at the forefront of their respective end markets. We have established strong relationships, particularly in the RV industry, through participation in trade shows and other sponsored industry events, which have allowed us to reach both OEMs and retail customers and ensure we are aware of evolving customer preferences. We are then able to leverage this customer feedback to collaborate with major OEMs to custom design products for new and existing applications.

In addition to traditional print and media advertising, we have leveraged the growing influence of social media (such as YouTube, Instagram and Facebook) and professional influencers to increase market awareness of our brands. We work closely with these influencers, as well as with professional anglers, to create a lasting relationship that showcases the performance of our products, rather than one-off promotions. Our products have also been featured in television shows and on podcasts that cater specifically to RV enthusiasts.

We also value our direct relationships with retail customers. Our website and our customer service are key elements to our sales strategy. Our website enables customers to purchase Battle Born products directly and provides access to a range of videos covering product information, technological benefits and installation guides. We have a team of experts dedicated to supporting our customers’ sales, technical and service needs.

193

Table of Contents

Competition

Our key competitors are principally traditional lead-acid battery and lithium-ion battery manufacturers, such as Samsung, CATL and Enovix, in North America. We also compete against smaller LFP companies, who primarily either import their products or manufacture products under a private label. Of these companies, there is no other company that has penetrated our core end markets to the same extent as we have, and we believe that this is in large part due to the technological advantages that our products offer compared to other products in the market. Our batteries are purpose-built to enhance the power and performance in any application or setting. We have specifically designed our battery cases to fit into existing AGM battery racks and cabinets and offer a suite of compatible components and accessories in order to make the replacement process simple enough for customers to do it themselves. We have optimized our technology to produce a lighter, yet higher performing battery with a longer lifespan than incumbent lead-acid batteries. Our propriety battery management system and internal heat technology enables our batteries to outperform not only traditional lead-acid batteries, but other lithium-ion products.

With regard to solid-state technology, we have two main competitors, QuantumScape and Solid Power. While both of these competitors are focused on the development of solid-state technology for use in the propulsion of electric vehicles, we are focused on power storage applications, which has different requirements. We believe that our proprietary processes, systems and materials provide us with a significant competitive advantage in developing a fully solid-state, non-toxic and highly cost-effective energy solution.

As our solid-state technology comes to fruition and we begin to commercialize this product, we intend to become a vertically integrated battery company, internalizing all aspects of the manufacturing and assembly process. This is comparable to companies such as Tesla, BYD Limited and Li-Cycle. Our solid-state technology will also enable us to further penetrate the energy storage market, and we expect to compete with technology- focused energy storage companies such as EOS Energy, ESS and STEM.

Intellectual Property

The success of our business and our technology leadership is supported by our proprietary battery technology. We have received patents and filed patent applications in the United States and other jurisdictions to provide protection for our technology. We rely upon a combination of patent, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in our proprietary technologies. In addition, we seek to protect our intellectual property rights through non-disclosure and invention assignment agreements with our employees and consultants and through non-disclosure agreements with business partners and other third parties.

As of May 10, 2022 we owned 24 issued patents and 20 pending patent applications. The patents and patent applications cover the United States, China, Europe (with individual patents in Germany, France and the United Kingdom), Australia, Canada and other regions. We periodically review and update our patent portfolio to protect our products and newly developed technologies. Currently, we have a combination of issued patents and pending patent applications protecting the design of our GC2 and GC3 batteries, the device and method for monitoring battery systems, powderized solid-state electrolyte and electroactive materials, preparation and film deposition of these pre-coated powders and the manufacturing process for the solid-state cell technology which includes the manufacturing of conductive particle films for lithium-ion batteries and the dry powder coating of an electrochemical cell. Our issued patents start expiring on May 30, 2033.

We periodically review our development efforts to assess the existence and patentability of new intellectual property. We pursue the registration of our domain names and trademarks and service marks in the United States and other jurisdictions. In an effort to protect our brand, as of May 10, 2022, we own four trademark registrations to cover our house marks in the United States and we have seven pending trademark applications relating to our design logos and slogans in the United States.

Government Regulation and Compliance

We currently operate from a dedicated leased manufacturing facility located in Reno, Nevada and a leased R&D facility in Sparks, Nevada. We have never owned any facility at which we operated. Operations at our facilities are subject to a variety of environmental, health and safety regulations, including those governing the generation, handling, storage, use, transportation, and disposal of hazardous materials. To conduct our operations, we have to obtain environmental, health, and safety permits and registrations and prepare plans. We are subject to inspections and possible citations by federal, state, and local environmental, health, and safety regulators. In transit, lithium-ion batteries are subject to rules governing the transportation of “dangerous goods.” We have policies and programs in place to

194

Table of Contents

assure compliance with our obligations (for example, machine guarding, hot work, hazardous material management and transportation). We train our employees and conduct audits of our operations to assess our fulfillment of these policies.

We are also subject to laws imposing liability for the cleanup of releases of hazardous substances. Under the law, we can be liable even if we did not cause a release on real property that we lease. We believe we have taken commercially reasonable steps to avoid such liability with respect to our current leased facilities.

Employees and Human Capital Resources

As of March 31, 2022, we have 151 employees; 143 full-time, 7 part-time and 1 seasonal. We have adopted our Code of Ethics to support and protect our culture, and we strive to create a workplace culture in line with our values: “Tell the Truth,” “Be Fair,” “Keep Your Promises,” “Respect Individuals,” and “Encourage Intellectual Curiosity.” As part of our initiative to retain and develop our talent, we focus on these key areas:

●

Safety — Employees are regularly educated in safety around their workspaces, and employees participate in volunteer roles on a safety committee, and in emergency readiness roles. We have a dedicated safety coordinator who tracks and measures our performance, and helps us benchmark our safety programs against our peers.

●

Diversity, Equity & Inclusion — Our culture has benefitted from the diversity of our workforce from the very beginning. Inclusion and equity are “baked into the bricks” of our values, which our employees demonstrate every day. Our human resources department and all our corporate officers and directors have an open door policy, and are able to constructively communicate with employees to resolve issues when they arise.

●

Collaboration — As we grow, opportunities for cross-functional collaboration are not as organic as they used to be. We have responded to that change by staying mindful and acting intentionally to gather cross-functional input on new initiatives and continuous improvement efforts.

●

Continuous Improvement — We apply continuous improvement measures to processes as well as people. We encourage professional development of our employees, through ongoing learning, credentialing, and collaboration with their industry peers.

Attracting and retaining high quality talent at every level of our business is crucial to our continuing success. We have developed relationships with the University of Nevada Reno and the Nevada System of Higher Education to further our recruitment reach. We provide competitive compensation and benefits packages, including performance based compensation that rewards individual and organizational achievements.

Legal Proceedings

From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

195

Table of Contents

MANAGEMENT OF DRAGONFLY

The following table sets forth certain information regarding Dragonfly’s executive officers and directors as of May 15, 2022.

Name	Age	Position(s) Held
Dr. Denis Phares	49	Co-Founder, Chief Executive Officer and Chairman of the Board
Sean Nichols	46	Co-Founder and Chief Operating Officer
John Marchetti	51	Chief Financial Officer
Nicole Harvey	44	General Counsel, Compliance Officer and Corporate Secretary
Luisa Ingargiola	54	Independent Director
Brian Nelson	51	Independent Director

Executive Officers

Dr. Denis Phares has served as Dragonfly’s Chief Executive Officer and Chairman of the Board since it was incorporated in 2012. From 2005 until 2012 Dr. Phares served as a faculty member of the Aerospace & Mechanical Engineering Department at the University of Southern California, where he worked extensively on renewable energy technologies and received tenure in 2010. Dr. Phares holds a M.B.A. from University of Nevada — Reno, a Ph.D. in Engineering from the California Institute of Technology and a B.S. in Physics from Villanova University. Dr. Phares is qualified to serve on the New Dragonfly Board based on his substantial business, leadership, and management experience as the CEO and Chairman of the Board of Dragonfly.

Sean Nichols has served as Dragonfly’s Chief Operating Officer since 2013. From 2008 until 2016, Mr. Nichols served as Vice President of Sales and Operations of AIMS Power, Inc., a power inverter company, focusing on off-grid power systems. From 2007 to 2009, Mr. Nichols served as Customer Relationship Manager of Metamation, Inc., a CAD/CAM manufacturing software provider. From 2004 to 2007, Mr. Nichols served as Vice President of Sales of 3rd Time LLC dba The Mobile Team, a mobile phone company. Mr. Nichols holds a M.B.A. and a B.A. in Business from University of Nevada — Reno.

John Marchetti has served as Dragonfly’s Chief Financial Officer since September 2021. Mr. Marchetti has over 20 years of experience in the technology and financial services industries. Prior to joining Dragonfly, Mr. Marchetti served as a Managing Director and senior research analyst at Stifel, focused on communications infrastructure and applied technology markets, including advanced battery technologies. From 2016 to 2018, Mr. Marchetti served as Senior Vice President for Strategy and Business Development of Cloudbus and, from 2012 to 2015, he served as Chief Strategy Officer and Executive Vice President at Fabrinet. Prior to joining Fabrinet, Mr. Marchetti was a senior equity analyst at Cowen & Co. and Morgan Stanley. Mr. Marchetti also served for five years as an officer in the United States Marine Corps. Mr. Marchetti holds a M.B.A. in Finance from the University of Connecticut and a B.A. in Political Science from Virginia Tech. Mr. Marchetti is qualified to serve on the New Dragonfly Board based on his decades of experience in the technology and financial services industries as well as his business and leadership experience serving as Vice President of both Cloudbus and Fabrinet.

Nicole Harvey has served as Dragonfly’s General Counsel and Compliance Officer since October 2021, and as Dragonfly’s Corporate Secretary since April 2022. From 2017 through 2019, Ms. Harvey served Harley- Davidson Financial Services as an American Bankers’ Association Certified Compliance and Risk Manager. In 2018, Ms. Harvey worked for Corix Group of Companies as Senior Corporate Counsel, overseeing the development and implementation of corporate policies, and providing legal services to affiliate and subsidiary companies. In 2020, Ms. Harvey returned to private practice with the law firm of Blanchard, Krasner & French, where she focused on business transactions and litigation, including outside counsel services for Dragonfly. In 2021, Ms. Harvey had the opportunity to serve Northern Nevada HOPES, a non-profit providing medical and social services in Northern Nevada, as its General Counsel and Compliance Officer prior to joining Dragonfly as its full time General Counsel in October 2021. Ms. Harvey holds a J.D. from Arizona State University Sandra Day O’Connor College of Law, and a B.S. in Economics from the University of Nevada, Reno. She has been licensed to practice law in the State of Nevada since 2008.

Non-Employee Directors

Luisa Ingargiola has served as a member of Dragonfly’s board of directors since August 5, 2021. Since 2017, Ms. Ingargiola has served as Chief Financial Officer of Avalon GlobalCare Corp., a publicly listed bio-tech health care company. Prior to joining Avalon GlobalCare Corp., Ms. Ingargiola served as the Chief Financial Officer and Co-Founder of MagneGas Corporation from 2007 to 2016. Ms. Ingargiola has also served as Board Director and Audit Committee Chair for various over-the-counter and Nasdaq companies.

196

Table of Contents

Ms. Ingargiola has served as a member of the Board of Directors and as Audit Committee Chair for Progress Acquisition Corporation since 2020, as a member of the Board of Directors and as Audit Committee Chair for AgEagle Aerial Systems since 2019, and as a member of the Board Directors and as Audit Committee Chair for Electra Meccanica since 2018. Ms. Ingargiola holds a M.B.A. in Health from the University of South Florida and a B.S. in Finance from Boston University. Ms. Ingargiola is qualified to serve on the New Dragonfly Board based on her previous roles serving as Chief Financial Officer for multiple companies and extensive experience serving on multiple boards of directors for Nasdaq companies.

Brian Nelson has served as a member of Dragonfly’s board of directors since April 18, 2022. Mr. Nelson has served as the Chief Executive Officer of Precision Surfacing Solutions Group (formerly known as the Lapmaster Group) since 2003 and as the President since 2002. Mr. Nelson was hired in the sales department of Lapmaster in 1996 and he purchased the company in 2003. In 1996, Mr. Nelson served as a Sales Engineer for TII Technical Education Systems, and from 1993 to 1995, he served as a Staff Engineer for Rust Environment & Infrastructure. Mr. Nelson holds an M.B.A. in Entrepreneurship from the DePaul University Charles H. Kellstadt School of Business and a B.S. in Civil & Environmental Engineering from Marquette University. He is a member of the Association of Manufacturing Technology and Young President’s Organization. Mr. Nelson is qualified to serve on the New Dragonfly Board based on his years of business experience as President and Chief Executive Officer of Precision Surfacing Solutions Group and Lapmaster.

Family Relationships

There are no family relationships among any of Dragonfly’s executive officers.

197

Table of Contents

MANAGEMENT OF NEW DRAGONFLY AFTER THE BUSINESS COMBINATION

New Dragonfly anticipates that the current executive officers of Dragonfly will become executive officers of New Dragonfly following the Business Combination. The following persons are expected to serve as executive officers and directors of New Dragonfly upon consummation of the Business Combination. See “Management of Dragonfly” for biographies of the Dragonfly executive officers and directors who will serve in the positions listed above following the Business Combination.


Name	Age	Position(s) Held
Dr. Denis Phares	49	Chairman, President and Chief Executive Officer
Sean Nichols	51	Chief Operating Officer
John Marchetti	51	Chief Financial Officer
Nicole Harvey	44	General Counsel, Compliance Officer and Corporate Secretary
Luisa Ingargiola	54	Director
Brian Nelson	51	Director
Perry Boyle	58	Director

(1) Member of the New Dragonfly audit committee, effective upon the consummation of the Business Combination.

(2)	Member of the New Dragonfly compensation committee, effective upon the consummation of the Business Combination.

(3)	Member of the New Dragonfly nominating and corporate governance committee, effective upon the consummation of the Business Combination.

Directors

Perry Boyle. Upon consummation of the Business Combination, Mr. Boyle will serve as a member of the New Dragonfly Board. Mr. Boyle was with Point 72 and its affiliates and predecessors 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 LauchPoint 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 has agreed to serve on the board of directors of Chardan NexTech 1 upon the effectiveness of its registration statement. 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 currently serves as the Chairman of the BOMA Project, a poverty graduation program for women, youth, and displaced persons in sub-Saharan Africa. He is also the President of the Affordable Housing Coalition of Ketchum, an advocacy organization for workforce housing in Ketchum, Idaho. 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 of Law and Diplomacy at Tufts University. He has lectured on investing at Brown, Yale, Dartmouth, Columbia, Tufts, Harvard, Cambridge and the University of North Carolina, and delivered testimony to Congress on financial regulation. Mr. Boyle is qualified to serve on the New Dragonfly Board based on his industry leadership and capital markets experience from research to fundraising.

[ ]. Upon consummation of the Business Combination, [Mr./Ms.] [ ] will serve as a member of the New Dragonfly Board. [Bio to come.] [Mr./Ms.] [ ] is qualified to serve on the New Dragonfly Board based on [ ].

[ ]. Upon consummation of the Business Combination, [Mr./Ms.] [ ] will serve as a member of the New Dragonfly Board. [Mr./Ms.] [ ] served as [ ]. [Mr./Ms.] [ ] holds a degree in [ ] from [ ]. [Mr./Ms.] [ ] is qualified to serve on the New Dragonfly Board based on [ ].

198

Table of Contents

Classified Board of Directors

Upon the consummation of the Business Combination, the business and affairs of New Dragonfly will be managed by or under the direction of the New Dragonfly Board. New Dragonfly’s Proposed Articles of Incorporation provide for a staggered, or classified, Board consisting of three classes of directors, each serving a staggered three-year term and with one class being elected at each year’s annual meeting of stockholders, as follows:

●

Class A, which we anticipate will consist of [ ] and [ ], whose terms will expire at the first annual meeting of stockholders to be held after the consummation of the Business Combination;

●

Class B, which we anticipate will consist of [ ] and [ ], whose terms will expire at the second annual meeting of stockholders to be held after the consummation of the Business Combination; and

●

Class C, which we anticipate will consist of [Perry Boyle], [ ] and [ ], whose terms will expire at the third annual meeting of stockholders to be held after the consummation of the Business Combination.

At each annual meeting of stockholders to be held after the initial classification, directors for that class will be elected for a three-year term at the annual meeting of stockholders in the year in which the term expires. Each director’s term is subject to the election and qualification of his or her successor, or his or her earlier death, disqualification, resignation or removal. Subject to any rights applicable to any then outstanding preferred stock, any vacancies on the New Dragonfly Board may be filled only by the affirmative vote of a majority of the directors then in office. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the New Dragonfly Board may have the effect of delaying or preventing changes in New Dragonfly’s control or management. New Dragonfly’s directors may be removed for cause by the affirmative vote of the holders of at least two-thirds of New Dragonfly’s voting securities.

Board Leadership Structure

Dr. Denis Phares will serve as the chairman of the New Dragonfly board of directors and will preside over regularly scheduled meetings, will serve as liaison between the non-independent members of the board of directors and the independent directors, will approve meeting agendas and schedules for the board of directors and will perform such additional duties as the board of directors may determine and delegate. [ ] will also serve as the independent Lead Director of New Dragonfly. We believe that this structure provides an environment in which the independent directors are fully informed, have significant input into the content of board meetings, and are able to provide objective and thoughtful oversight of management.

Director Independence

Upon the consummation of the Business Combination, the New Dragonfly Board is expected to determine that each of the directors on the New Dragonfly Board other than [ ], [ ] and [ ] will qualify as independent directors, as defined under the rules of the Nasdaq, and the New Dragonfly Board will consist of a majority of “independent directors,” as defined under the rules of the SEC and the Nasdaq relating to director independence requirements. In addition, New Dragonfly will be subject to the rules of the SEC and the Nasdaq relating to the membership, qualifications, and operations of the audit committee, as discussed below. [ ] will be the New Dragonfly lead independent director under the Nasdaq rules.

Role of the New Dragonfly Board in Risk Oversight/Risk Committee

Upon the consummation of the Business Combination, one of the key functions of the New Dragonfly Board will be informed oversight of New Dragonfly’s risk management process. The New Dragonfly Board does not anticipate having a standing risk management committee, but rather anticipates administering this oversight function directly through the New Dragonfly Board as a whole, as well as through various standing committees of the New Dragonfly Board that address risks inherent in their respective areas of oversight. In particular, the New Dragonfly Board will be responsible for monitoring and assessing strategic risk exposure and New Dragonfly’s audit committee will have the responsibility to consider and discuss New Dragonfly’s major financial risk exposures and the steps its management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken.

199

Table of Contents

The audit committee will also monitor compliance with legal and regulatory requirements. New Dragonfly’s compensation committee will also assess and monitor whether New Dragonfly’s compensation plans, policies and programs comply with applicable legal and regulatory requirements.

Board Committees

Effective upon the consummation of the Business Combination, the New Dragonfly Board will have three standing committees — an audit committee, a compensation committee, and a nominating and corporate governance committee. Following the consummation of the Business Combination, copies of the charters for each committee will be available on New Dragonfly’s website.

Audit Committee

New Dragonfly’s audit committee will consist of [Luisa Ingargiola], [Brian Nelson], [Perry Boyle] and [ ]. The New Dragonfly Board will determine that each of the members of the audit committee will satisfy the independence requirements of the Nasdaq and Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) and be able to read and understand fundamental financial statements in accordance with the Nasdaq audit committee requirements. In arriving at this determination, the New Dragonfly Board will examine each audit committee member’s scope of experience and the nature of their prior and/or current employment.

[Luisa Ingargiola] will serve as the chair of the audit committee. The New Dragonfly Board will determine that [Luisa Ingargiola] qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the Nasdaq rules. In making this determination, the New Dragonfly Board will consider [Luisa Ingargiola]’s formal education and previous experience in financial roles. Both New Dragonfly’s independent registered public accounting firm and management will periodically meet privately with New Dragonfly’s audit committee.

The functions of this committee are expected to include, among other things:

●

appointing, compensating, oversight, and evaluating the performance, independence and qualifications of New Dragonfly’s independent auditors and determining whether to retain New Dragonfly’s existing independent auditors or engage new independent auditors;

●

reviewing New Dragonfly’s financial reporting processes and disclosure controls;

●

reviewing and approving the engagement of New Dragonfly’s independent auditors to perform audit services and any permissible non-audit services;

●

reviewing the adequacy and effectiveness of New Dragonfly’s internal control policies and procedures;

●

reviewing with the independent auditors the annual audit plan, including the scope of audit activities and all critical accounting policies and practices to be used by New Dragonfly;

●

obtaining and reviewing at least annually a report by New Dragonfly’s independent auditors describing the independent auditors’ internal quality control procedures and any issues raised by the most recent internal quality-control review;

●

monitoring the rotation of the lead auditor of New Dragonfly’s independent auditors and consider regular rotation of the accounting firm serving as New Dragonfly’s independent auditors;

●

at least annually, reviewing relationships or services that may impact the objectivity and independence of the auditors;

●

reviewing New Dragonfly’s annual and financial statements and reports and discussing the statements and reports with New Dragonfly’s independent auditors and management;

200

Table of Contents

●

reviewing with New Dragonfly’s independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy, and effectiveness of New Dragonfly’s financial controls and critical accounting policies;

●

establishing procedures for the receipt, retention and treatment of complaints received by New Dragonfly regarding financial controls, accounting, auditing or other matters;

●

preparing the report that the SEC requires in New Dragonfly’s annual proxy statement;

●

reviewing New Dragonfly’s significant risk exposures; and

●

reviewing and evaluating on an annual basis the performance of the audit committee and the audit committee charter.

The composition and function of the audit committee will comply with all applicable requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and all applicable U.S. Securities Exchange Commission (the “SEC”) rules and regulations. New Dragonfly will comply with future requirements to the extent they become applicable to New Dragonfly.

Compensation Committee

New Dragonfly’s compensation committee will consist of [Luisa Ingargiola], [Brian Nelson], [ ] and [ ]. [Luisa Ingargiola] will serve as the chair of the compensation committee. The New Dragonfly Board will determine that each of the members of the compensation committee will be a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act and will satisfy the independence requirements of the Nasdaq.

The functions of the committee are expected to include, among other things:

●

reviewing and approving the corporate goals and objectives that pertain to the determination of executive compensation;

●

reviewing and approving the compensation and other terms of employment of New Dragonfly’s executive officers;

●

reviewing and approving performance goals and objectives relevant to the compensation of New Dragonfly’s chief executive officer (“CEO”) and assessing the CEO’s performance against these goals and objectives;

●

making recommendations to the New Dragonfly Board regarding the adoption, termination, amendment of equity and cash incentive plans and approving amendments to such plans to the extent authorized by the New Dragonfly Board;

●

reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act;

●

reviewing and approving the terms of any employment agreements, severance arrangements or plans, including any benefits to be provided in connection with a change in control, for the CEO and other executives;

●

reviewing and discussing with management New Dragonfly’s disclosures under the caption “Compensation Discussion and Analysis” in New Dragonfly’s periodic reports or proxy statements to be filed with the SEC, to the extent such caption is included in any such report or proxy statement;

●

preparing an annual report on executive compensation that the SEC requires in New Dragonfly’s annual proxy statement; and

●

reviewing and recommending to the New Dragonfly Board for executive officer development and retention and corporate succession plans.

201

Table of Contents

The composition and function of its compensation committee will comply with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and the Nasdaq rules and regulations. New Dragonfly will comply with future requirements to the extent they become applicable to New Dragonfly.

Nominating Committee

New Dragonfly’s nominating committee will consist of [Luisa Ingargiola], [Brian Nelson], [ ] and [ ]. [Luisa Ingargiola] will serve as the chair of New Dragonfly’s nominating governance committee. The New Dragonfly Board will determine that each of the members of New Dragonfly’s nominating governance committee will satisfy the independence requirements of the Nasdaq.

The functions of this committee are expected to include, among other things:

●

identifying, reviewing and making recommendations of candidates to serve on the New Dragonfly Board;

●

establishing a process for recommendation of director candidates by stockholders and publishing such process annually in the New Dragonfly’s proxy statement;

●

considering nominations by stockholders of candidates for election to the New Dragonfly Board;

●

annually reviewing the composition and organization of the New Dragonfly Board’s committees and making recommendations to the New Dragonfly Board for approvals;

●

developing a set of corporate governance policies and principles and recommending to the New Dragonfly Board any changes to such policies and principles; and

●

reviewing annually the nominating and corporate governance committee charter.

The composition and function of the nominating and corporate governance committee will comply with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC and the Nasdaq rules and regulations. New Dragonfly will comply with future requirements to the extent they become applicable.

Compensation Committee Interlocks and Insider Participation

[None of the intended members of New Dragonfly’s compensation committee has ever been an executive officer or employee of New Dragonfly. None of New Dragonfly’s intended executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers that will serve as a member of the New Dragonfly Board or compensation committee.]

Code of Conduct and Code of Ethics

The New Dragonfly board of directors will adopt a code of conduct (“Code of Conduct”) and a code of ethics (“Code of Ethics”) that applies to all of New Dragonfly’s directors, officers and employees. Following the consummation of the Business Combination, the full text of New Dragonfly’s Code of Conduct and Code of Ethics will be posted on the investor relations page on New Dragonfly’s website at [●]. New Dragonfly will disclose any amendments to New Dragonfly’s Code of Conduct and Code of Ethics, or waivers of its requirements on New Dragonfly’s website identified above, or in filings under the Exchange Act.

Limitation on Liability and Indemnification of Directors and Officers

The Proposed Certificate of Incorporation, which will be effective upon the consummation of the Business Combination (the “Closing”), limits New Dragonfly’s directors’ liability to the fullest extent permitted under the DGCL. The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability:

●

for any transaction from which the director derives an improper personal benefit;

202

Table of Contents

●

for any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

●

for any unlawful payment of dividends or redemption of shares; or

●

for any breach of a director’s duty of loyalty to the corporation or its stockholders.

If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of New Dragonfly’s directors for monetary damages will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Additionally, the Proposed Bylaws provide that New Dragonfly will, in certain situations, indemnify New Dragonfly’s directors and officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain limitations, to advancement, direct payment, or reimbursement of reasonable expenses (including attorneys’ fees and disbursements) in advance of the final disposition of the proceeding.

Further, New Dragonfly will enter into indemnification agreements with each of New Dragonfly’s directors and executive officers that may be broader than the specific indemnification provisions contained in the DGCL. These indemnification agreements will require New Dragonfly, among other things, to indemnify New Dragonfly’s directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements will also require New Dragonfly to advance all expenses reasonably and actually incurred by New Dragonfly’s directors and executive officers in investigating or defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.

New Dragonfly plans to maintain a directors’ and officers’ insurance policy pursuant to which New Dragonfly s directors and officers are insured against liability for actions taken in their capacities as directors and officers. Chardan believes these provisions in the Proposed Certificate of Incorporation and the Proposed Bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

203

Table of Contents

EXECUTIVE AND DIRECTOR COMPENSATION OF DRAGONFLY ENERGY CORP.

Throughout this section, unless otherwise noted, “we,” “us,” “our” and similar terms refer to Dragonfly and its subsidiaries prior to the consummation of the Business Combination, and to New Dragonfly and its subsidiaries after the Business Combination. This discussion may contain forward-looking statements that are based on New Dragonfly’s current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that it adopts following the completion of the Business Combination may differ materially from the currently planned programs summarized in this discussion. All share counts in this section are shown on a pre-Business Combination basis.

This section describes the material components of the executive compensation program for certain of Dragonfly’s executive officers (the “Target NEOs”) and directors. This discussion may contain forward-looking statements that are based on Dragonfly’s current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that Dragonfly adopts following the completion of the Business Combination may differ materially from the existing and currently planned programs summarized or referred to in this discussion.

Post-Combination Company Executive Compensation

In connection with the Business Combination, Dragonfly intends to develop a compensation program that is designed to align executives’ compensation with New Dragonfly’s business objectives and the creation of stockholder value, while helping Dragonfly to continue to attract, motivate and retain individuals who contribute to the long-term success of the company. Dragonfly anticipates that compensation for its executive officers will have three primary components: base salary, an annual cash incentive bonus opportunity, and long-term equity-based incentive compensation. New Dragonfly expects to grant the long-term equity-based incentive compensation to its executive officers under the 2022 Plan if stockholders approve the plan as described above in “Proposal No. 4 — The Incentive Plan Proposal”.

Decisions on the design and implementation of the executive compensation program will be made by the compensation committee, as established at the closing of the Business Combination. The executive compensation program actually adopted will depend on the judgment of the members of the compensation committee. Dragonfly has retained Compensia, Inc., an independent compensation consultant, to assist Dragonfly in evaluating the compensation programs for the executive officers following the closing of the Business Combination.

Summary Compensation Table - Fiscal Year 2021


						Non-Equity	Non-Qualified
						Incentive	Deferred	All
				Stock	Option	Plan	Compensation	Other
		Salary	Bonus	Awards	Awards	Compensation	Earnings	Compensation	Total
Name and Principal Position	Year	($)	($)⁽¹⁾	($)	($)⁽²⁾	($)	($)	($)⁽³⁾	($)
Dr. Denis Phares	2021	579,593	362,137	—	—	—	—	22,234	963,964
Chief Executive Officer
Sean Nichols	2021	579,593	362,137	—	—	—	—	20,244	961,974
Chief Operating Officer
John Marchetti⁽⁴⁾	2021	91,154	82,000	—	682,000	—	—	—	855,154
Chief Financial Officer

(1)

The amounts reported in this column represent discretionary bonuses awarded to each executive for performance during 2021. Pursuant to Mr. Marchetti’s employment agreement with Dragonfly and subject to his continued employment, he is guaranteed to receive at least his target bonus amount of $75,000 per quarter for the first four quarters of his employment.

(2)

The amounts reported in this column reflect the grant date fair value of stock option awards granted to the Target NEOs during 2020 under the Dragonfly stock incentive plans and are accounted for in accordance with FASB ASC Topic 718. Please see the section titled “Stock-Based Compensation” beginning on page 5 of Dragonfly’s Notes to Consolidated Financial Statements included elsewhere in this proxy statement/consent solicitation statement/prospectus for a discussion of the relevant assumptions used in calculating these amounts.

(3)	This amount reflects the Dragonfly’s matching contribution to the executive’s account under the Dragonfly’s 401(k) plan.

204

Table of Contents

(4)	Mr. Marchetti commenced employment as Dragonfly’s Chief Financial Officer on September 6, 2021.

Outstanding Equity Awards as of December 31, 2021

The following table provides information regarding outstanding options to acquire Dragonfly common stock held by each of the Target NEOs as of December 31, 2021, including the vesting dates for the portions of these awards that had not vested as of that date. The Target NEOs did not hold any other outstanding equity awards as of that date.


	Option Awards
					Equity
					Incentive
					Plan Awards:
	Number of		Number of		Number of
	Securities		Securities		Securities
	Underlying		Underlying		Underlying	Option
	Unexercised		Unexercised		Unexercised	Exercise	Option
	Options (#)		Options (#)		Unearned	Price	Expiration
Name	Exercisable		Unexercisable		Options (#)	($)	Date
Dr. Denis Phares	—		250,000	⁽¹⁾	—	0.41	12/4/24
Sean Nichols	—		250,000	⁽¹⁾	—	0.38	12/4/29
John Marchetti	200,000	⁽²⁾	—		—	3.41	9/12/31

(1)	The unvested portion of this option vests in 20 monthly installments from January 12, 2022 and August 12, 2023.

(2)	The unvested portion of this option vests as to 25% of the option on September 10, 2022 and as to 75% of the option in 36 monthly installments from October 10, 2022 through September 10, 2025.

2021 Equity Grants

During 2021, Mr. Marchetti received an option to purchase 200,000 shares of our common stock at a price of $3.41 per share. This option was granted under the Dragonfly’s 2021 Stock Incentive Plan and vests as to 25% of the option on the first anniversary of the vesting start date established by our board of directors for the option and as to the remaining 75% of the option in monthly installments over the three-year period thereafter, subject to Mr. Marchetti’s continued service with Dragonfly through the applicable vesting date.

Description of Stock Incentive Plan

We maintain the Dragonfly Energy Corp. 2019 Stock Incentive Plan and the Dragonfly Energy Corp. 2021 Stock Incentive Plan (together, the “Stock Incentive Plans”). The Stock Incentive Plans provide that if a change in control of Dragonfly occurs, the plan administrator may provide for the assumption or substitution of outstanding equity awards or for such awards to terminate upon the transaction. In connection with the Business Combination, all outstanding options under the Stock Incentive Plans will be converted into options to purchase common stock of New Dragonfly as described in the “The Business Combination Agreement” section above.

In connection with the Business Combination, stockholders will be asked to approve a new equity incentive plan, the 2022 Equity Incentive Plan, which will replace the Stock Incentive Plans with respect to future equity awards. For more information on the new plan, see “Proposal No. 3 — The Incentive Plan Proposal” above.

Executive Employment Agreements.

The Company is party to employment agreements with each of Messrs. Phares and Nichols, each dated January 1, 2022, and amended as of May 15, 2022, pursuant to which Messrs. Phares and Nichols serve as the Company’s Chief Executive Officer and Chief Operating Officer. The employment agreements provide for a one-year initial employment term, with automatic one-year renewal terms thereafter, subject to 90 days’ notice of non-renewal by either party. The employment agreements provide for a base salary of $600,000, and an annual target bonus equal to 100% of their annual base salary. The employment agreements also provide that Messrs. Phares and Nichols will receive annual equity awards, which shall vest over twelve months. Upon a termination of employment by the Company without “cause” or resignation by executive for “good reason” (as defined in the employment agreements), Messrs. Phares and Nichols are entitled to the following severance benefits, contingent on such executive’s execution of an irrevocable release of claims: a base salary continuation equal to four times their base salary (payable in accordance with the Company’s normal payroll practices over a

205

Table of Contents

two year period), a prorated portion of the annual target bonus for the year of termination, as well as reimbursement of monthly COBRA premiums paid by such executive for himself and his dependents until the earliest of (i) the 18 month anniversary of the applicable termination date, (ii) the date the executive is no longer eligible to receive COBRA continuation coverage, and (iii) the date on which the executive receives substantially similar coverage from another employer or other source. Each executive’s right to receive these severance benefits is subject to his providing a release of claims to the Company and his continued compliance with certain restrictive covenants in favor of the Company.

In connection with the signing of the Business Combination Agreement, Messrs. Phares and Nichols each entered into an amendment of their employment agreements with the Company to reduce their annual base salary rate from $800,000 to $600,000, effective May 15, 2022. The amendment did not change any other terms of their employment agreements described above.

The Company is a party to an employment agreement with Mr. Marchetti, dated August 17, 2021, to serve as its Chief Financial Officer. The agreement has a three-year term and provides for Mr. Marchetti to receive an annual base salary of $300,000. His target bonus opportunity under the agreement is $75,000 per quarter. The agreement also provides for Mr. Marchetti to be granted an option to purchase up to 100,000 shares of the Company’s common stock, vesting over four years. If Mr. Marchetti’s employment is terminated by the Company without “cause” or he terminates employment in circumstances constituting a “constructive termination without cause” (as such terms are defined in his employment agreement) and subject to his providing a release of claims to the Company, he will be entitled to receive severance of up to 12 months of his base salary (with six months of such severance subject to his compliance with his non-competition covenant with the Company during the second half of the 12-month period following his termination), accelerated vesting of his then-outstanding stock options granted by the Company, and continued participation for 12 months in the Company’s health plans at active employee rates for up to 12 months. If such termination occurs within seven days of the payment of a quarterly payment under our bonus program, he would be entitled to receive that quarterly payment. The agreement also includes non-competition and non-solicitation covenants that apply for 12 months following his termination of employment, and certain confidentiality and other covenants.

Defined Contribution Plans

As part of its overall compensation program, Dragonfly provides all full-time employees, including each of the Target NEOs, with the opportunity to participate in a defined contribution 401(k) plan. The plan is intended to qualify under Section 401 of the Internal Revenue Code so that employee contributions and income earned on such contributions are not taxable to employees until withdrawn. Employees may elect to defer a percentage of their eligible compensation (not to exceed the statutorily prescribed annual limit) in the form of elective deferral contributions to the plan. The 401(k) plan also has a “catch-up contribution” feature for employees aged 50 or older (including those who qualify as “highly compensated” employees) who can defer amounts over the statutory limit that applies to all other employees. Dragonfly’s current practice is to match 100% of an employee’s contributions to the plan up to 4% of the employee’s compensation.

Director Compensation Table — Fiscal 2021

The current directors of Dragonfly (Messrs. Phares and Nelson and Ms. Ingargiola) will continue to serve on the Board following the closing of the Business Combination. Dragonfly is currently evaluating the compensation to be provided to its non-employee directors following the closing with Compensia Inc.’s assistance and has not yet determined the terms of its director compensation policy.

The following table sets forth certain information concerning compensation paid to Ms. Ingargiola for her services on the Dragonfly Board during 2021. Messrs. Phares and Nichols did not receive any additional compensation for their service on the Dragonfly Board during 2021.


	Fees Earned
	or Paid in	Stock	Option	All Other
	Cash	Awards	Awards	Compensation	Total
Name	($)	($)	($)⁽¹⁾⁽²⁾	($)	($)
Luisa Ingargiola	—	—	281,325	—	281,325

(1)

Ms. Ingargiola was granted an option to purchase 82,500 shares of Dragonfly common stock in August 2021 with an exercise price of $3.41 per share and that was scheduled to vest in monthly installments over a three-year period after the grant date. The option has a five-year term and will fully vest and be exercisable if a change in control of Dragonfly or an initial public offering of

206

Table of Contents

Dragonfly’s stock occurs and Ms. Ingargiola is asked to resign from the Board through no fault of her own. As of December 31, 2021, Ms. Ingargiola did not hold any outstanding equity awards from Dragonfly other than this option to purchase 82,500 shares.

(2)

The amount reported in this column reflects the grant date fair value of the stock option granted to Ms. Ingargiola during 2021 under the Dragonfly Energy Corp. stock incentive plan as described above and is accounted for in accordance with FASB ASC Topic 718. Please see the section titled “Stock-Based Compensation” beginning on page 5 of Dragonfly’s Notes to Consolidated Financial Statements included elsewhere in this proxy statement/prospectus for a discussion of the relevant assumptions used in calculating this amount.

207

Table of Contents

CERTAIN PROJECTED FINANCIAL INFORMATION OF DRAGONFLY

Dragonfly does not, as a matter of course, publicly disclose long-term forecasts or internal projections of its future performance, revenue, earnings, financial condition or other results. However, in connection with Chardan’s due diligence and consideration of the potential Business Combination with Dragonfly, Dragonfly’s management provided Chardan with internally prepared financial forecasts for fiscal years ending December 31, 2022 through 2023 (the “Financial Projections”). The Financial Projections were provided to Chardan only for use as a component in its overall evaluation of Dragonfly and should not be viewed as public guidance. The summary information from the Financial Projections is included in the table below because such information was considered by Chardan for purposes of evaluating the Business Combination and, at the direction of the Chardan Board, was used and relied upon by Duff & Phelps for purposes of its financial analyses and opinion to the Chardan Board. Inclusion of summary information regarding the financial forecasts in this proxy statement/prospectus is not intended to influence your decision whether to vote for the Proposals.

Dragonfly’s management relied on numerous assumptions to derive the Financial Projections described below, including assumptions regarding key customer and supplier relationships, new product offerings, expansion into adjacent markets and/or the ability to implement planned automated manufacturing processes and expand production capacity, among others. The Financial Projections are subject to inherent uncertainty since they are based on assumptions about events that may occur in the future, many of which are beyond Chardan’s and Dragonfly’s control, instead of historical operating results. In addition, long-term financial projections are subject to increased uncertainty and risk that they will not be achieved. None of the Financial Projections should be regarded as a representation by any person that the results contained in the prospective financial information will be achieved.

The Financial Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward complying with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants or GAAP for the preparation and presentation of prospective financial information, but, in the view of Dragonfly’s management, were prepared on a reasonable basis. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this document are cautioned not to place undue reliance on the prospective financial information. The Financial Projections do not take into account any circumstances or events occurring after the date it was prepared. New Dragonfly will not refer back to this unaudited prospective financial information in future periodic reports filed under the Exchange Act.

There can be no assurance that the Financial Projections will be realized or that actual results will not be significantly higher or lower than projected. Since the Financial Projections cover multiple years, such information by its nature becomes less reliable with each successive year. These Financial Projections are subjective in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments.

No independent auditors have audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying Financial Projections and, accordingly, none of Chardan, WithumSmith+Brown, PC, Chardan’s independent registered public accounting firm, and BDO USA, LLP, Dragonfly’s independent registered public accounting firm, express an opinion or any other form of assurance with respect thereto or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. The audit reports included in this proxy statement/prospectus relate to historical financial information. They do not extend to the prospective financial information and should not be read to do so.

EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAWS, NEITHER DRAGONFLY NOR CHARDAN INTENDS TO MAKE PUBLICLY AVAILABLE ANY UPDATE OR OTHER REVISION TO THE FINANCIAL PROJECTIONS. THE FINANCIAL PROJECTIONS DO NOT TAKE INTO ACCOUNT ANY CIRCUMSTANCES OR EVENTS OCCURRING AFTER THE DATE THAT INFORMATION WAS PREPARED. READERS OF THIS PROXY STATEMENT/PROSPECTUS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE UNAUDITED FINANCIAL PROJECTIONS SET FORTH BELOW AND NOT TO RELY ON SUCH FINANCIAL INFORMATION IN MAKING A DECISION REGARDING THE BUSINESS COMBINATION PROPOSAL, AS SUCH FINANCIAL INFORMATION MAY BE MATERIALLY DIFFERENT THAN ACTUAL RESULTS. NONE OF DRAGONFLY, CHARDAN NOR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, ADVISORS OR OTHER REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY DRAGONFLY STOCKHOLDER, CHARDAN STOCKHOLDER OR ANY OTHER PERSON REGARDING ULTIMATE PERFORMANCE COMPARED TO THE INFORMATION CONTAINED IN THE FINANCIAL PROJECTIONS OR THAT FINANCIAL AND OPERATING RESULTS WILL BE ACHIEVED. CHARDAN DOES NOT INTEND TO REFERENCE THESE FINANCIAL PROJECTIONS IN ITS FUTURE PERIODIC REPORTS FILED UNDER THE EXCHANGE ACT.

208

Table of Contents

Certain of the measures included in the projected financial information are non-GAAP financial measures, including EBITDA and Adjusted EBITDA. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Dragonfly are not reported by all of their competitors and may not be comparable to similarly titled amounts used by other companies. Adjusted EBITDA in the Financial Projections is defined as EBITDA adjusted for stock-based compensation, non-recurring debt transaction and business combination expenses.

A summary of the financial forecast information regarding Dragonfly’s anticipated future operations for fiscal years ending December 31, 2022 and 2023, together with corresponding historical information for the years ended December 31, 2020 and 2021, is set forth below.



	Years ended December 31,
	2020A		2021A		2022E		2023E

	(in thousands)
Revenue	$	47,187	$	78,000	$	115,373	$	255,085
Gross profit		20,607		29,625		43,586		102,664
Total Operating Expenses		11,861		23,158		63,240		67,407
Net Income		6,878		4,338		(25,783)		26,169
EBITDA		8,944		7,084		(18,093)		39,144
Adjusted EBITDA		9,370		8,725		12,178		40,968

The Financial Projections included in this proxy statement/prospectus have been prepared by, and is the responsibility of, Dragonfly’s management. The Financial Projections have not been audited. Neither the independent registered public accounting firms of Chardan nor Dragonfly has audited, reviewed, examined, compiled or applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, neither of them have expressed an opinion or any other form of assurance with respect thereto.

The Financial Projections are included in this proxy statement/prospectus solely to provide Chardan stockholders access to information made available in connection with Chardan’s evaluation of the proposed Business Combination. You are encouraged to review the financial statements of Dragonfly included in this proxy statement/prospectus, as well as the financial information in the sections entitled “Dragonfly’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Combined Financial Information” in this proxy statement/prospectus, and to not rely on any single financial measure.

The Financial Projections were prepared in good faith by Dragonfly’s management based on management’s reasonable best estimates and facts, circumstances and information available at the time. While presented with numerical specificity, the Financial Projections reflect numerous estimates and assumptions made by Dragonfly’s management with respect to industry performance, competition, general business, economic, market and financial conditions and matters specific to Dragonfly’s business, all of which are difficult to predict and many of which are beyond Dragonfly’s control. Dragonfly believes that its operating history provides a reasonable basis for the estimates and assumptions underlying the Financial Projections. Changes in these estimates or assumptions, including assumptions regarding key customer and supplier relationships, new product offerings, expansion into adjacent markets and/or the ability to implement planned automated manufacturing processes and expand production capacity could materially affect the Financial Projections. Specifically, the material assumptions and estimates include but are not limited to:

●

Revenue growth:

●

Overall projected increase in revenue and unit sales in both fiscal 2022 and 2023 is based on projected OEM and DTC sales increases (described below), which (i) are generally in line with Dragonfly’s historical operating experience; (ii) incorporate relevant trends, such as the increasing momentum of lead-acid batteries being displaced by lithium-ion batteries and increased adoption of lithium-ion batteries by RV and boat consumers and manufacturers for environmental, performance, safety, total cost of ownership benefits, and other reasons; and (iii) reflect related planned activities to drive Dragonfly’s product sales in existing and new markets (including through efforts described below) where lead-acid batteries remain the primary source of deep cycle storage;

209

Table of Contents

●

OEM revenue is forecasted to grow to approximately $37 million in 2022 and $93 in 2023 representing year-over-year growth of more than 350% in 2022 and 150% in 2023, primarily based on increasing sales to RV OEM customers with whom Dragonfly has existing relationships and reflecting (i) increased OEM purchases in anticipation of increased end customer demand for lithium-ion batteries as original equipment, as customers continue to displace lead-acid battery solutions with lithium-ion battery products; (ii) an increase in the number of RV models where the respective OEMs design in Dragonfly’s batteries as a “standard” rather than an “optional” feature, an emerging trend within the RV industry; and (iii) growth in aftermarket sales through the various OEM dealer networks where Dragonfly’s products are featured (in some cases exclusively) and stocked for after-market RV service and lead-acid replacement, consistent with trends the Company benefitted from in its DTC business;

●

DTC revenue is forecasted to grow to approximately $78 million in 2022 and $162 million in 2023 representing year-over-year growth of more than 11% in 2022 and 100% in 2023 primarily based on (i) increased penetration within existing markets in line with historical performance and the trend of lithium-ion batteries increasingly replacing lead acid batteries; (ii) increased sales and marketing investments, which are forecasted to grow by more than 50% in 2022 and more than 120% in 2023, targeting new adjacent markets where lead acid batteries remain the incumbent technology; and (iii) the introduction of new lithium-ion battery products, such as new form factors, higher voltage batteries and other product features, to address both existing and new market opportunities; and

●

DTC revenue growth is also expected to benefit from increased accessory sales as (i) Dragonfly further develops its full-system design expertise; (ii) Dragonfly expands its accessory and product offerings to include a more comprehensive listing of third-party components; (iii) customers increasingly demand more sophisticated systems, rather than simple drop-in replacement (in each case, enabling Dragonfly to sell the additional components needed for a full storage solution).

●

Gross Margin: expected to remain relatively stable compared to historic periods at approximately 35 - 40% as fixed cost absorption increases with higher revenue, and manufacturing efficiencies (including additional automation efforts) help to lower overall production costs, somewhat offset by an increase in lower margin OEM sales, higher material and logistics costs, and third-party sourced accessory sales.

●

Gross Profit: expected to increase in line with increased sales and benefits from manufacturing efficiencies and platform scale.

●

Adjusted EBITDA and Adjusted EBITDA Margin: each expected to increase in line with increased revenue and scale, somewhat offset by higher operating expenses across the major expense categories as Dragonfly continues to expand its operations to support its revenue growth.

●

Manufacturing efficiencies: to improve production efficiency, Dragonfly intends to continue to introduce additional automation functions into its manufacturing and assembly processes.

●

Manufacturing facility: Dragonfly’s 99,000 square foot production facility (occupied since mid-2021) currently houses two production lines with plans to introduce an additional production line over the next two to three years to meet expected increases in unit demand, with additional capacity available as needed.

●

Cell supply: Dragonfly has opted to purchase its lithium-ion battery cells from two carefully selected cell manufacturers in China. Doing so, to date, has enabled Dragonfly to manage inventory and lead- times in anticipation of future needs and offset potential cell manufacturer cost increases with volume- based purchase discounts. An inability to timely and cost effectively source cell supplies could adversely impact Dragonfly’s revenue and margins.

●

Solid-state technology: over the last decade, Dragonfly has made significant investments to develop its solid-state battery technology and position the Company to manufacture and market its own solid- state lithium-ion battery cells and battery packs. The Financial Projections reflect related investments intended to support (i) continued optimization of Dragonfly’s solid-state chemistry and (ii) construction of an initial pilot production manufacturing line. The Financial Projections do not include any contribution from solid- state cell or battery sales, with these future sales subject to successful related technology development and production process advancement efforts. At this time, it is impracticable to provide a meaningful estimate of potential solid-state battery sales. However, a significant element of the potential transaction consideration consists of up to 25 million Earnout Shares payable only if related trading price targets of $22.50 prior to December 31, 2026 and/or $32.50 prior to December 31, 2028 are met (in addition to 15 million Earnout Shares issuable upon Dragonfly meeting certain revenue or

210

Table of Contents

income thresholds for fiscal year 2023). We believe that meeting these trading price targets is unlikely to occur unless Dragonfly successfully develops its solid-state technology and solid-state battery sales prospects.

The assumptions and estimates underlying the Financial Projections are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective financial information, including, among others, risks and uncertainties set forth under “Risk Factors” and “Cautionary Notes Regarding Forward-Looking Statements” contained elsewhere in this proxy statement/prospectus.

Neither Chardan nor Dragonfly generally publishes its business plans and strategies or makes external disclosures of its anticipated financial condition or results of operations. Chardan and Dragonfly have not updated, and do not intend to update or otherwise revise, the prospective financial information to reflect circumstances existing since its preparation, including any changes in general economic or industry conditions, or to reflect the occurrence of unanticipated events. Neither Chardan, Dragonfly nor any of their respective representatives or advisers makes any representation to any person with regard to the ultimate performance of Chardan, Dragonfly or New Dragonfly.

211

Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Chardan is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information presents the combination of the financial information of Chardan and Dragonfly adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Defined terms included below have the same meaning as terms defined and included elsewhere in this proxy statement/prospectus.

The historical financial information of Chardan was derived from the unaudited financial statements of Chardan as of March 31, 2022 and for the three months ended March 31, 2022 and the audited financial statements of Chardan as of December 31, 2021, included elsewhere in this proxy statement/prospectus. The historical financial information of Dragonfly was derived from the unaudited financial statements of Dragonfly as of March 31, 2022 and for the three months ended March 31, 2022 and the audited financials statements of Dragonfly as of December 31, 2021, included elsewhere in this proxy statement/prospectus. Such unaudited pro forma financial information has been prepared on a basis consistent with the audited financial statements of Chardan and Dragonfly, respectively, and should be read in conjunction with the audited historical financial statements and related notes, each of which is included elsewhere in this proxy statement/prospectus. This information should be read together with Chardan’s and Dragonfly’s financial statements and related notes, the sections titled “Chardan’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Dragonfly’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this proxy statement/prospectus.

The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Chardan is treated as the “acquired” company for financial reporting purposes. Dragonfly has been determined to be the accounting acquirer because Dragonfly, as a group, will retain a majority of the outstanding shares of New Dragonfly as of the closing of the Business Combination, they have nominated five of the seven members of the board of directors as of the closing of the Business Combination, Dragonfly’s management will continue to manage New Dragonfly and Dragonfly’s business will comprise the ongoing operations of New Dragonfly.

The unaudited pro forma condensed combined balance sheet as of March 31, 2022 assumes that the Business Combination and related transactions occurred on March 31, 2022. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 give pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2021. Chardan and Dragonfly have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

These unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have been obtained had the Business Combination and related transactions actually been completed on the assumed date or for the periods presented, or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information

Description of the Business Combination

On May 15, 2022, Chardan entered into an Agreement and Plan of Merger (as amended on July 12, 2022, the “Business Combination Agreement,” and together with the other agreements and transactions contemplated by the Business Combination Agreement, the “Business Combination”) with CNTQ2 Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Chardan (“Merger Sub”), and Dragonfly Energy Corp., a Nevada corporation (“Dragonfly”). Pursuant to the terms of the Business Combination Agreement, a business combination between Chardan and Dragonfly will be effected through the merger of Merger Sub with and into Dragonfly, with Dragonfly surviving the merger as a wholly owned subsidiary of Chardan (the “Merger”).

At the closing of the Business Combination, the total consideration received by Dragonfly Equity Holders (shares and options) from Chardan will have an aggregate deemed value equal to $415,000,000, payable, in the case of Dragonfly Equity Holders, solely in new shares of Common Stock. The new shares of Common Stock will be deliverable to Dragonfly Equity Holders (including to holders of the Dragonfly preferred shares to be converted to common shares) and will be allocated pro rata between the holders of Dragonfly

212

Table of Contents

common stock and options to acquire Dragonfly common stock contingent upon, the Closing. Based on the number of shares of Dragonfly common stock outstanding as of March 31, 2022 (together, solely for the purposes of this calculation, with additional Dragonfly shares issued upon exercise of Dragonfly Convertible Preferred Stock) on a fully-diluted and as-converted basis, taking into account the assumptions further described below, Dragonfly Stockholders will receive an estimated 38,200,000 shares of Common Stock.

Following the closing of the Business Combination, former holders of shares of Dragonfly common stock (including shares received as a result of the Dragonfly Preferred Stock Conversion) will be entitled to receive their pro rata share of up to 40,000,000 additional Earnout Shares of Common Stock. The Earnout Shares will be issuable in three tranches. The first tranche of 15,000,000 shares is issuable if New Dragonfly’s 2023 total audited revenue is equal to or greater than $250 million and New Dragonfly’s 2023 audited operating income is equal to or greater than $35 million. The second tranche of 12,500,000 shares is issuable upon achieving a volume-weighted average trading price threshold of at least $22.50 on or prior to December 31, 2026 and the third tranche of 12,500,000 is issuable upon achieving a volume-weighted average trading price threshold of at least $32.50 on or prior to December 31, 2028. To the extent not previously earned, the second tranche is issuable if the $32.50 price target is achieved by December 31, 2028.

Dragonfly accounts for the Earnout Shares as either equity-classified or liability-classified instruments based on an assessment of the Earnout Shares specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, as defined below. Dragonfly has preliminarily determined that the Earnout Shares are indexed to New Dragonfly’s stock and is therefore not precluded from equity classification. Such accounting determination will be assessed at each financial statement reporting date to determine whether equity classification remains appropriate. The pro forma value of the Earnout Consideration was estimated utilizing a Monte Carlo simulation model. The significant assumptions utilized in estimating the fair value of Earnout Consideration include the following: (1) our Common Stock price of $10.00; (2) risk-free rate of 1.63%; (3) projected revenue and EBITDA of $255,100,000 and $41,000,000 respectively; (4) expected volatility of future annual revenue and future annual EBITDA of 37.0% and 104.0% respectively; (5) discount rates ranging from 1.2%-4.8%; and (6) expected probability of change in control of 15.0%. Estimates are subject to change as additional information becomes available and additional analyses are performed and such changes could be material once the final valuation is determined at the Effective Time. The accounting treatment of the Earnout Shares is expected to be recognized at fair value upon the closing of the Business Combination and classified in stockholders’ equity. The preliminary fair value of the Earnout Shares is $288.8 million.

The accounting treatment of the Earnout Shares is expected to be recognized at fair value upon the closing of the Business Combination and classified in stockholders’ equity. The preliminary fair value of the Earnout Shares is $288.8 million. Because the Business Combination is accounted for as a reverse recapitalization, the issuance of the Earnout Shares will be treated as a deemed dividend and since New Dragonfly will not have retained earnings on a pro forma basis, the issuance will be recorded within additional-paid-in-capital. The unaudited pro forma condensed combined financial information does not reflect pro forma adjustments related to the recognition of these shares because there is no net impact on additional paid-in capital on a pro forma combined basis. We expect to finalize our assessment of the accounting treatment prior to the Closing, if the Earnout Shares are determined to be classified as a liability on the balance sheet then New Dragonfly would recognize subsequent changes in the fair value of such Earnout Shares recognized as a gain or loss at each reporting period during the earnout period, pursuant to the provisions of Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”).

Subscription Agreement

In connection with the execution of the Business Combination Agreement, Chardan entered into the Subscription Agreement with the Sponsor pursuant to which the Sponsor has agreed to purchase, and Chardan has agreed to sell to the Sponsor 500,000 shares of Chardan common stock, for a purchase price of $10.00 per share and an aggregate purchase price of $5 million. Although Chardan Capital Market’s obligation may be reduced by the number of Chardan shares, if any, purchased by the Sponsor on the open market and not redeemed at closing, the pro forma financial information set forth herein assumes no such reduction. The purchase obligations under the Subscription Agreement are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Business Combination Agreement.

The Term Loan

Also in connection with the execution of the Business Combination Agreement, Chardan and Dragonfly entered into the Commitment Letter with the Initial Term Loan Lenders committing to provide $75 million in principal amount of Term Loan. In connection with the Term Loan, the Term Lenders will receive the Penny Warrants (in respect of 3.6% of Dragonfly’s common stock

213

Table of Contents

on a fully diluted basis, calculated as of the Closing Date) and the $10 Warrants (in respect of 1,600,000 shares of Common Stock). The obligations of the Term Loan Lenders to provide such financing under the Debt Commitment Letter are subject to the negotiation of definitive documentation in respect of this financing and a number of specified conditions. Management expects to finalize the anticipated accounting treatment of the Term Loan and associated warrants upon the execution of the definitive documentation.

Equity Facility

Concurrently with the execution of the Business Combination Agreement, Chardan, Dragonfly, and the Equity Facility Investor entered into an equity facility letter agreement (or such other affiliate investor as it may designate, the “Equity Facility Letter Agreement”), pursuant to which Chardan and Dragonfly agreed to enter into definitive documentation (the “Equity Facility Definitive Documentation”) prior to the Closing Date to establish a committed equity facility (the “Equity Facility”). The Equity Facility Definitive Documentation will reflect the terms in the Equity Facility Letter Agreement and customary for documentation of this nature. Pursuant to, on the terms of and subject to the satisfaction of the conditions to be set forth in the Equity Facility Definitive Documentation, including the filing and effectiveness of a registration statement registering the resale by the Equity Facility Investor of the shares of New Dragonfly Common stock issued to it under the Equity Facility Definitive Documentation. New Dragonfly will have the right from time to time at its option to direct the “Equity Facility Investor to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility. The Equity Facility will be structured to allow New Dragonfly, on the terms and subject to the conditions thereof, to raise funds from the issuance of equity on a periodic basis outside the context of a traditional underwritten follow-on offering. As consideration for providing such commitment, New Dragonfly has agreed to issue the Equity Facility Commitment Shares having a value of $1 million based on the volume-weighted average trading price of New Dragonfly common stock for the five-day period immediately preceding the earlier of (a) the thirtieth (30th) trading day following the Closing and (b) the first date of effectiveness of the Registration Statement. The Equity Facility Commitment Shares to be issued after the Closing are not reflected below.

The pro forma adjustments giving effect to the Business Combination and related transactions are summarized below, and are discussed further in the footnotes to these unaudited pro forma condensed combined financial statements:

●

the consummation of the Business Combination and reclassification of cash held in Chardan’s Trust Account to cash and cash equivalents, net of redemptions (see below);

●

the consummation of the Subscription Agreements;

●

the consummation of the Term Loan;

●

the repayment of existing debt; and

●

the accounting for certain offering costs and transaction costs incurred by both Chardan and Dragonfly.

The unaudited pro forma condensed combined financial information has been prepared using the assumptions below with respect to the potential redemption into cash of shares of Chardan ordinary shares:

●

214

Table of Contents

The following summarizes the pro forma ownership of common stock of Chardan following the Business Combination, the PIPE Investment, the Equity Facility and the Term Loan under both the no redemption and maximum redemption scenarios:


	Assuming			Assuming
	Minimum			Maximum
	Redemptions			Redemptions
	(Shares)	%		(Shares)	%
Dragonfly existing shareholders⁽¹⁾⁽²⁾	38,189,691	64.4	%	38,189,691	87.9	%
Chardan existing public stockholders⁽³⁾	12,650,000	22.4	%	—	—	%
Initial Stockholders⁽⁴⁾⁽⁵⁾	3,662,500	6.5	%	3,662,500	8.4	%
Term Loan Lender⁽⁶⁾	2,065,432	3.7	%	1,593,498	3.7	%
Pro forma Common Stock⁽⁷⁾	56,567,623	100.0	%	43,445,689	100.0	%

(1)	Excludes 40,000,000 Earnout Shares of Common Stock as the earnout contingencies have not yet been met.

(2)	Includes shares of Dragonfly common stock issued pursuant to the THOR Investment.

(3)	Excludes 9,487,500 shares of Common Stock underlying the public warrants.

(4)	Excludes 4,627,858 shares of Common Stock underlying the private warrants.

(5)	Includes 500,000 shares of Common Stock purchased by the Sponsor pursuant to the PIPE Subscription Agreement for a purchase price of $10.00 per share and an aggregate purchase price of $5,000,000.

(6)

Includes 2,065,432 and 1,593,498 shares of Common Stock underlying the Penny Warrants under a No Redemption and Maximum Redemption scenario, respectively, due to their nominal exercise price. The Penny Warrants are exercisable for 3.6% of fully-diluted outstanding shares of Common Stock post closing. For purposes of such calculation, ownership of Common Stock “on a fully diluted basis” includes (i) all outstanding Common Stock, (ii) shares of Common Stock issuable upon conversion of outstanding convertible bonds, preferred stock and other securities convertible to Common Stock on an as-converted to Common Stock basis, and (iii) all shares of Common Stock subject to outstanding options. Excludes 1,600,000 shares of Common Stock underlying the $10 Warrants.

(7)	Excludes shares of common stock issuable pursuant to the Equity Facility after Closing.

215

Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF MARCH 31, 2022

(in thousands, except share and per share amounts)


	CNTQ (Historical)		Dragonfly (Historical)		THOR Investment (Note 3)			Transaction Accounting Adjustments (Assuming No Redemptions)			Pro Forma Combined (Assuming No Redemptions)		Transaction Accounting Adjustments (Assuming Maximum Redemptions)			Pro Forma Combined (Assuming Maximum Redemptions)
ASSETS
Current assets:
Cash and cash equivalents	$	648	$	10,063	$	15,000	A	$	128,437	B	$	154,864	$	(128,437)	K	$	30,427
									77,750	C				4,000	L
									(27,078)	D
									(41,956)	E
									(8,000)	I
Restricted cash		—		3,044		—			(3,044)	E		—		—			—
Accounts receivable		—		2,000		—			—			2,000		—			2,000
Inventory		—		33,073		—			—			33,073		—			33,073
Prepaid expenses and other current assets		296		3,222		—			—			3,518		—			3,518
Prepaid inventory		—		5,036		—			—			5,036		—			5,036
Deferred issuance costs		—		—		—			1,000	J		1,000		—			1,000
Total current assets		944		56,438		15,000			127,109			199,491		(124,437)			75,054
Investments held in Trust Account		128,437		—		—			(128,437)	B		—		—			—
Property and equipment, net		—		8,731		—			—			8,731		—			8,731
Deferred tax asset		—		76		—			—			76		—			76
Operating lease right of use asset		—		5,435		—			—			5,435		—			5,435
Total assets	$	129,381	$	70,680	$	15,000		$	(1,328)		$	213,733	$	(124,437)		$	89,296

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	214	$	10,113	$	—		$	—		$	10,327	$	—			10,327
Customer deposits		—		727		—			—			727		—			727
Income tax payable		—		620		—			—			620		—			620
Notes payable, current portion		—		5,173		—			(5,173)	E		—		—			—
Operating lease liability, current portion		—		1,106		—			—			1,106		—			1,106
Obligation to issue common stock		—		—		—			1,000	J		1,000		—			1,000
Total current liabilities		214		17,739		—			(4,173)			13,780		—			13,780
Operating lease liability, net of current portion		—		4,409		—			—			4,409		—			4,409
Notes payable-non current, net of debt discount		—		34,368		—			50,296	C		50,296		—			50,296
									(34,368)	E
Warrant liabilities		602		—		—			—			602		—			602
Total liabilities		816		56,516		—			11,755			69,087		—			69,087

Common stock subject to possible redemption		128,398		—		—			(128,398)	F		—		—			—
Convertible preferred stock		—		2,000		—			(2,000)	G		—		—			—

Stockholders’ equity (deficit)
Common stock		1		4		2	A		3	C		57		(13)	K		44
									13	F
									34	G
Additional paid-in capital		—		2,020		14,998	A		27,451	C		163,086		(128,424)	K		34,662
									(11,900)	D
									128,385	F
									1,966	G
									166	H
Accumulated (deficit) earnings		166		10,140		—			(15,178)	D		(18,497)		4,000	L		(14,497)
									(5,459)	E
									(166)	H
									(8,000)	I
Total stockholders’ equity (deficit)		167		12,164		15,000			117,315			144,646		(124,437)			20,209
Total liabilities, temporary equity and stockholders’ equity (deficit)	$	129,381	$	70,680	$	15,000		$	(1,328)		$	213,733	$	(124,437)		$	89,296

216

Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2022

(in thousands, except share and per share amounts)


	CNTQ (Historical)		Dragonfly (Historical)		Transaction Accounting Adjustments (Assuming No Redemptions)			Pro Forma Combined (Assuming No Redemptions)		Transaction Accounting Adjustments (Assuming Maximum Redemptions)		Pro Forma Combined (Assuming Maximum Redemptions)
Net Sales	$	—	$	18,303	$	—		$	18,303	$	—	$	18,303
Cost of goods sold		—		12,808		—			12,808		—		12,808

Operating expenses:
Formation and operating costs		208		—		—			208		—		208
Franchise tax expense		51		—		—			51		—		51
Research and development		—		339		—			339		—		339
General and administrative		—		3,626		—			3,626		—		3,626
Selling and marketing		—		3,092		—			3,092		—		3,092
Loss from operations		(259)		(1,562)		—			(1,821)		—		(1,821)

Other income (expense):
Interest expense		—		(1,263)		1,263	DD		(3,442)		—		(3,442)
						(3,442)	EE		—		—		—
Net gain on investments held in Trust Account		16		—		(16)	AA		—		—		—
Change in fair value of warrant liability		1,435		—		—			1,435		—		1,435
Total other income (expense)		1,451		(1,263)		(2,195)			(2,007)		—		(2,007)
Income (loss) before income taxes		1,192		(2,825)		(2,195)			(3,828)		—		(3,828)
Income tax benefit		—		(527)		—			(527)		—		(527)
Net income (loss)	$	1,192	$	(2,298)	$	(2,195)		$	(3,301)	$	—	$	(3,301)

Net income (loss) per share (Note 4):
Weighted average shares outstanding - basic		15,812,500		20,914,344
Net income per share - basic	$	0.08	$	(0.11)
Weighted average shares outstanding - diluted		15,812,500		20,914,344
Net income per share - diluted	$	0.08	$	(0.11)
Weighted average shares outstanding - basic and diluted									56,567,623				43,445,689
Net loss per share - basic and diluted								$	(0.06)			$	(0.08)

217

Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

(in thousands, except share and per share amounts)


										Transaction
					Transaction					Accounting			Pro Forma
					Accounting			Pro Forma		Adjustments			Combined
					Adjustments			Combined		(Assuming			(Assuming
	CNTQ		Dragonfly		(Assuming No			(Assuming No		Maximum			Maximum
	(Historical)		(Historical)		Redemptions)			Redemptions)		Redemptions)			Redemptions)
Net Sales	$	—	$	78,000	$	—		$	78,000	$	—		$	78,000
Cost of goods sold		—		48,375		—			48,375		—			48,375
Operating expenses:
Formation and operating costs		292		—		—			292		—			292
Franchise tax expense		66		—		—			66		—			66
Research and development		—		2,689		—			2,689		—			2,689
General and administrative		—		10,621		15,178	BB		33,799		(4,000)	FF		29,799
						8,000	CC
Selling and marketing		—		9,848		—			9,848		—			9,848
(Loss) income from operations		(358)		6,467		(23,178)			(17,069)		4,000			(13,069)
Other income (expense):
Other income		—		1		—			1		—			1
Interest expense		—		(519)		519	DD		(13,093)		—			(13,093)
						(13,093)	EE		—		—			—
Loss on extinguishment of indebtedness		—		—		(5,459)	DD		(5,459)		—			(5,459)
Warrant issuance costs		(19)		—		—			(19)		—			(19)
Loss on sale of private warrants		(1,254)		—		—			(1,254)		—			(1,254)
Net gain on investments held in Trust Account		24		—		(24)	AA		—		—			—
Change in fair value of warrant liability		3,517		—		—			3,517		—			3,517
Total other income (expense)		2,268		(518)		(18,057)			(16,307)		—			(16,307)
Income (loss) before income taxes		1,910		5,949		(41,235)			(33,376)		4,000			(29,376)
Income tax expense		—		1,611		—			1,611		—			1,611
Net income (loss)	$	1,910	$	4,338	$	(41,235)		$	(34,987)	$	4,000		$	(30,987)
Net income (loss) per share (Note 4):
Weighted average shares outstanding – basic		7,732,021		20,101,129
Net income per share – basic	$	0.25	$	0.15
Weighted average shares outstanding – diluted		7,991,952		21,931,108
Net income per share – diluted	$	0.24	$	0.13
Weighted average shares outstanding – basic and diluted									56,567,623					43,445,689
Net loss per share – basic and diluted								$	(0.62)				$	(0.71)

218

Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1. Basis of Presentation

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Chardan will be treated as the “accounting acquiree” and Dragonfly as the “accounting acquirer” for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Dragonfly issuing shares for the net assets of Chardan, followed by a recapitalization. The net assets of Dragonfly will be stated at historical cost. Operations prior to the Business Combination will be those of Dragonfly.

The unaudited pro forma condensed combined balance sheet as of March 31, 2022 gives effect to the Business Combination and related transactions as if they occurred on March 31, 2022. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2022 and for the year ended December 31, 2021 give effect to the Business Combination and related transactions as if they occurred on January 1, 2021. These periods are presented on the basis that Dragonfly is the acquirer for accounting purposes.

The pro forma adjustments reflecting the consummation of the Business Combination and the related transaction are based on certain currently available information and certain assumptions and methodologies that Chardan management believes are reasonable under the circumstances. The unaudited condensed combined pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible that the difference may be material. Chardan management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and the related transactions based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Chardan and Dragonfly.

Note 2. Accounting Policies and Reclassifications

Upon consummation of the Business Combination, management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the post-combination company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.

Preferred Stock Conversion

Immediately prior to the consummation of the Business Combination, each share of Dragonfly’s pre-merger preferred stock will be converted into one share of Dragonfly common stock. Upon the closing of the Business Combination (after giving effect to the conversion of Dragonfly preferred stock into Dragonfly common stock), all shares of Dragonfly common stock outstanding will be converted into shares of New Dragonfly common stock.

Accounting for Stock Option Conversion

The Company accounts for stock-based compensation arrangements with employees and non-employee consultants using a fair value method which requires the recognition of compensation expense for costs related to all stock-based payments, including stock options. As of the Effective Time, each Dragonfly option prior to the business combination that is then outstanding will be converted into an option to purchase shares of New Dragonfly common stock upon substantially the same terms and conditions as are in effect with respect to such option immediately prior to the Effective Time, subject to specific terms and conditions. As the Dragonfly

219

Table of Contents

postmerger options will contain only service-based vesting conditions, management will recognize the incremental fair value related to the portion of the fully vested post-merger option and subject to service-based vesting conditions as consideration transferred. As there is no change in the terms of the options, management does not expect to recognize any incremental fair value.

Note 3. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has been prepared for informational purposes only.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). Chardan has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. Chardan and Dragonfly have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of Dragonfly’s ordinary shares outstanding, assuming the Business Combination and related transactions occurred on January 1, 2021.

THOR Investment

In July 2022, Dragonfly entered into a certain Stock Purchase Agreement with THOR Industries, whereby THOR purchased 1,267,502 shares of Dragonfly common stock for $15,000,000 in cash. The Business Combination Agreement was amended to reflect the increase in consideration to be issued in the business combination as a result of the THOR Investment. The shares issued pursuant to the THOR Investment are expected to convert into 1,500,000 shares of New Dragonfly common stock at the closing of the Business Combination.

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2022 are as follows:

Adjustments related to the THOR Investment

Represents cash proceeds of $15.0 million pursuant to the THOR Investment and related Stock Purchase Agreement to which THOR Industries purchased 1,267,502 shares of Dragonfly common stock at a purchase price of $11.8343 per share. The shares issued pursuant to the THOR Investment will convert into 1,500,000 shares of New Dragonfly Common Stock at the closing of the Business Combination.

Transaction Accounting Adjustments

Reflects the reclassification of $128.4 million held in the Trust Account to cash and cash equivalents that becomes available at closing of the Business Combination, assuming no redemptions.

Represents cash proceeds of $77.8 million pursuant to the PIPE Investment and the Term Loan. Pursuant to the PIPE Investment an aggregate of 500,000 shares of Chardan common stock is issued at a purchase price of $10.00 per share and an aggregate purchase price of $5.0 million and corresponding offset to additional-paid-in-capital. The Term Loan involves issuance of $75.0 million in principal amount of term loans (with an original issue discount of 3%) and the related issuance of the Term Loan Lender Warrants (the Penny Warrants and the $10 Warrants) for net proceeds of $72.8 million. Interest will accrue on all outstanding principal amount of the term loans at approximately 12% per annum, partially payable quarterly and paid-in-kind. The Company determined that the Term Loan Lender Warrants will be equity-classified. For purposes of the unaudited pro forma condensed combined balance sheet, the estimated fair value of the Term Loan Lender Warrants of $32.0 million will be

220

Table of Contents

recorded as a debt discount with an offset to additional-paid-in capital. The fair value of the Term Loan Lender Warrants was based on a Black- Scholes simulation with key inputs and assumptions such as stock price, term, dividend yield, risk-free rate, and volatility.

Represents estimated transaction costs of $27.1 million in relation to the Business Combination. Estimated transaction costs are comprised of equity issuance costs of $11.9 million that are offset to additional-paid-in-capital, primarily consisting of $1.2 million and $2.7 million pursuant to Chardan Capital Markets and Stifel, respectively, pursuant to a financing commitment fee agreement with Chardan Capital Markets and Stifel, and $8.0 million pursuant to a financial advisory agreement with Stifel. Approximately $4.4 million to be incurred by Chardan pursuant to a Business Combination Marketing Agreement with Chardan Capital Markets is expected to be expensed as part of the Business Combination and recorded in accumulated deficit. Approximately $3.0 million and $3.0 million in estimated legal costs are estimated to be incurred by Dragonfly and Chardan, respectively, that directly result from and are to be expensed as part of the Business Combination. Approximately $4.8 million of printing, legal, insurance and accounting services including the Duff & Phelps fairness opinion are estimated to be incurred by Chardan to be expensed as part of the Business Combination and recorded in accumulated deficit. Chardan and Dragonfly continue to evaluate eligible costs that may need to be allocated to the respective instruments issued or assumed pursuant to the Business Combination.

Represents repayment of outstanding principal indebtedness of Dragonfly totaling $45.0 million and the write off of unamortized debt discount totaling $5.5 million.

Reflects the reclassification of approximately $128.4 million of Common Stock subject to possible redemption to permanent equity.

Represents recapitalization of Dragonfly’s outstanding equity as a result of the reverse recapitalization and the issuance of Common Stock to Dragonfly Equity Holders as consideration for the reverse recapitalization.

Reflects the reclassification of Chardan’s historical accumulated deficit into additional paid-in capital as part of the reverse recapitalization.

Represents estimated transaction bonus payments to certain Dragonfly executives. The bonus payments are contingent on the cash remaining after the Business Combination after the payment of transaction expenses and repayment of existing indebtedness of Dragonfly, as well as the amount of public warrants exercised following completion of the Business Combination. The transaction bonuses are estimated to total $8.0 million under the No Redemptions scenario. Transaction bonuses under the Maximum Redemptions scenario are estimated to be $4.0 million.

Represents an obligation to issue shares of New Dragonfly common stock approximately 30 days after Closing and having a value of $1 million as commitment consideration for the Equity Facility.

Reflects a scenario in which 12,650,000 Public Shares are redeemed in connection with the Business Combination, for aggregate payments to redeeming Public Shareholders of $128.4 million (assuming a redemption price of $10.15 per share), allocated to Common Stock and additional paid-in capital using par value $0.001 per share.

Represents adjustment to the estimated transaction bonus payments to certain Dragonfly executives under the Maximum Redemptions scenario. Refer to Adjustment H.

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2022 and the year ended December 31, 2021 are as follows:

AA.

Reflects elimination of investment income on the Trust Account.

221

Table of Contents

BB.

Reflects the estimated transaction costs of approximate $15.2 million as if incurred on January 1, 2021, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statement of operations. This is a non-recurring item.

CC.

Represents estimated transaction bonus payments to certain Dragonfly executives. The bonus payments are contingent on the cash balance after the Business Combination after the payment of transaction expenses and repayment of existing indebtedness of Dragonfly. The transaction bonuses are estimated to total $8.0 million under the No Redemptions scenario. Transaction bonuses under the Maximum Redemptions scenario are estimated to be $4.0 million.

DD.

Represents the elimination of interest expense recognized on existing Dragonfly indebtedness and the recognition of a loss on extinguishment of existing Dragonfly indebtedness as if the Business Combination closed, and the indebtedness was settled, on January 1, 2021 (see adjustment D).

EE.

Represents the recognition of interest expense on the Term Loan as if the facility was executed on January 1, 2021, consisting of $2.3 million and $9.0 million of interest expense for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively, calculated using a SOFR floor of 1.00% plus 11.00% per annum (based on a range of 10.00% - 12.00% as specified in the Term Loan agreement), and $1.2 million and $4.1 million of amortization of debt discount related to the Term Loan for the for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively. The amortization of debt discount was calculated using an effective interest rate of 25.1% based on an estimated initial book value of the Term Loan of $50.3 million after deducting the proceeds allocated the the Term Loan Lender Warrants of $22.5 million and a $2.3 million original issue discount (or 3% of proceeds).

FF.

Represents adjustment to the estimated transaction bonus payments to certain Dragonfly executives under the Maximum Redemptions scenario. Refer to Adjustment CC.

Note 4. Net Loss per Share

Net loss per share was calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination and the related transactions, assuming the shares were outstanding since January 1, 2021. As the Business Combination and the related transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and related have been outstanding for the entirety of all periods presented.

The unaudited pro forma condensed combined financial information has been prepared to present two alternative scenarios with respect to redemption of Common Stock by Chardan Public Stockholders at the time of the Business Combination for the three months ended March 31, 2022 and for the year ended December 31, 2021:


	Three Months Ended				Year Ended
	March 31, 2022 ⁽¹⁾				December 31, 2021 ⁽¹⁾
			Assuming				Assuming
	Assuming No		Maximum		Assuming No		Maximum
	Redemptions		Redemptions		Redemptions		Redemptions
Pro forma net loss	$	(3,301)	$	(3,301)	$	(34,987)	$	(30,987)
Weighted average shares outstanding - basic and diluted⁽²⁾		56,567,623		43,445,689		56,567,623		43,445,689
Pro forma net loss per share - basic and diluted	$	(0.06)	$	(0.08)	$	(0.62)	$	(0.71)
Excluded securities:⁽³⁾
Earnout Shares		40,000,000		40,000,000		40,000,000		40,000,000
Public Warrants		9,487,500		9,487,500		9,487,500		9,487,500
Private Warrants		4,627,858		4,627,858		4,627,858		4,627,858
Dragonfly Options		4,075,348		4,075,348		4,075,348		4,075,348
$10 Warrants		1,600,000		1,600,000		1,600,000		1,600,000

(1)	Pro forma income (loss) per share includes the related pro forma adjustments as referred to within the section “Unaudited Pro Forma Condensed Combined Financial Information.”

222

Table of Contents

(2)

Includes 2,0665,432 and 1,593,498 shares of Common Stock underlying the Penny Warrants under a No Redemption and Maximum Redemption scenario, respectively, due to their nominal exercise price. The Penny Warrants are exercisable for 3.6% of fully-diluted outstanding shares of Common Stock post closing. For purposes of such calculation, ownership of Common Stock “on a fully diluted basis” includes (i) all outstanding Common Stock, (ii) shares of Common Stock issuable upon conversion of outstanding convertible bonds, preferred stock and other securities convertible to Common Stock on an as-converted to Common Stock basis, and (iii) all shares of Common Stock subject to outstanding options. Excludes shares of common stock issuable after Closing pursuant to the Equity Facility.

(3)

The potentially dilutive outstanding securities were excluded from the computation of pro forma net loss per share, basic and diluted, because their effect would have been anti-dilutive or the issuance or vesting of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the periods presented.

223

Table of Contents

DRAGONFLY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the “Dragonfly’s Selected Historical Financial Information” section of this proxy statement/ prospectus and our financial statements and related notes appearing elsewhere in this proxy statement/prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this proxy statement/ prospectus, including information with respect to Dragonfly’s plans and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this proxy statement/prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Unless context otherwise requires, all references in this section to “we,” “us,” or “our” refer to Dragonfly prior to the Business Combination.

Overview

Founded in 2012 and based in Reno, Nevada, we are a manufacturer of non-toxic deep cycle lithium-ion batteries that are designed to displace lead acid batteries in a number of different storage applications and end markets including recreational vehicle (“RV”), marine vessel, and solar and off-grid industries, with disruptive solid-state cell technology currently under development. Our mission is to develop technology to deliver environmentally impactful and affordable solutions for energy storage to everyone globally.

Since 2018, we have sold over 165,000 batteries. For the three months ended March 31, 2021 and 2022, we sold 18,027 and 19,664 batteries, respectively, and had $15.6 million and $18.3 million in net sales, respectively. For the years ended December 31, 2020 and 2021, we sold 51,434 and 74,652 batteries, respectively, and had $47.2 million and $78.0 million in net sales, respectively. We currently offer a line of batteries across our “Battle Born” and “Dragonfly” brands, each differentiated by size, power and capacity, consisting of eight different models, four of which come with a heated option. We primarily sell “Battle Born” branded batteries directly to consumers and “Dragonfly” branded batteries to OEMs.

Our increased total sales reflects a combination of: increasing direct-to-consumer and distributor sales of batteries for RV applications; expanding into the marine vessels and off-grid storage markets with related direct-to- consumer and distributor sales; increasing sales of batteries to RV OEMs; and reselling accessories for battery systems. Our RV OEM customers currently include Keystone,THOR, Airstream, and REV, and we are in ongoing discussions with a number of additional RV OEMs to further increase adoption of our products. Related efforts include seeking to have RV OEMs “design in” our batteries as original equipment and entering into arrangements with members of the various OEM dealer networks to stock our batteries for service and for aftermarket replacement sales.

We currently source the LFP cells incorporated into our batteries from a limited number of carefully selected suppliers that can meet our demanding quality standards and with whom we have developed long-term relationships.

In addition to our conventional LFP batteries, our experienced research and development team, headed by our co-founder and CEO, is currently developing the next generation of LFP solid-state cells. Since our founding, we have been developing proprietary solid-state cell technology and manufacturing processes for which we have issued patents and pending patent applications, where appropriate. Solid-state technology eliminates the use of a liquid electrolyte, which addresses the residual heat and flammability issues arising from traditional lithium-ion batteries. The unique competitive advantage of our solid-state battery cell is highlighted by our dry deposition technology, which completely displaces the need for toxic solvents in the manufacturing process and allows for the rapid and scalable production of solid-state cells having an intercalation anode, like graphite or silicon. Other solid-state technology companies are focused on a denser lithium metal anode, which tends to form icicle-like dendrites inside the cell and lacks the cyclability of an intercalation anode. Our design allows for a much safer, more efficient cell that we believe will be a key differentiator in the energy storage market. Additionally, our internal production of solid-state cells will streamline our supply chain, allowing us to vertically integrate our cells into our batteries, thereby lowering our production costs as a result of our proprietary cost-effective manufacturing processes.

224

Table of Contents

The Business Combination

At Closing of the Business Combination, all (i) shares of Dragonfly common stock (after giving effect to the conversion of Dragonfly preferred stock into Dragonfly common stock pursuant to Dragonfly’s governing documents) and (ii) options to acquire shares of Dragonfly common stock (as defined below and as described further in the immediately succeeding paragraph), in each case outstanding as of immediately prior to the Closing, will be cancelled in exchange for the right to receive shares of New Dragonfly common stock or assumed and converted into options to acquire shares of New Dragonfly common stock totaling 41,500,000 shares (at a deemed value of $10.00 per share).

Further, as a result of the Merger, existing holders of Dragonfly capital stock will have the right to receive, up to an aggregate of 40,000,000 Earnout Shares in three tranches and payable based on the achievement of specified audited financial milestones in 2023 and specified post-Closing volume-weighted average trading price thresholds for New Dragonfly common stock.

In addition to amounts remaining in Chardan’s trust account after giving effect to redemptions, financing to fund the Business Combination will include the PIPE Investment and the Term Loan. Approximately $45 million of such proceeds will be used to repay the $45 million fixed rate senior notes we issued in November 2021. In addition, pursuant to the Equity Facility Letter Agreement, Chardan and Dragonfly have agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date to establish the $150,000,000 Equity Facility.

As consideration for providing the Term Loan, in addition to agreed commitment fees, the Term Loan Lenders will receive the Penny Warrants exercisable to purchase 3.6% of New Dragonfly’s common stock on a fully diluted basis, calculated as of the Closing Date, and the $10 Warrants exercisable for 1,600,000 shares of New Dragonfly common stock. As consideration for its Equity Facility commitment, post-Closing the Equity Facility Investor will be issued the Equity Facility Commitment Shares having a value of $1 million determined based on the applicable trading price at the time of issuance.

The Debt Commitment Letter and Equity Facility Letter Agreement have been agreed in connection with the Term Loan and 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. For further details on the Business Combination, see the section entitled, “Proposal No. 1 — The Business Combination Proposal”.

Accounting Treatment for the Business Combination

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. generally accepted accounting principles. Under this method of accounting, Chardan is treated as the “acquired” company for financial reporting purposes. Dragonfly has been determined to be the accounting acquirer because Dragonfly, as a group, will retain a majority of the outstanding shares of New Dragonfly as of the closing of the Business Combination, they have nominated five of the seven members of the board of directors as of the closing of the Business Combination, Dragonfly’s management will continue to manage New Dragonfly and Dragonfly’s business will comprise the ongoing operations of New Dragonfly.

Key Factors Affecting Dragonfly’s Results of Operations

Our financial position and results of operations depend to a significant extent on the following factors:

End Market Consumers

The demand for our products ultimately depends on demand from consumers in our current end markets. We generate sales through (1) direct sales to consumers (“DTC”) and (2) through OEMs, particularly in the RV market.

An increasing proportion of our sales has been and is expected to continue to be derived from sales to RV OEMs, driven by continued efforts to develop and expand sales to RV OEMs with whom we have longstanding relationships. Our RV OEM sales have been on a purchase order basis, without firm revenue commitments, and we expect that this will likely continue to be the case. Therefore, future RV OEM sales will be subject risks and uncertainties, including the number of RVs these OEMs manufacture and sell, which in turn may be driven by the expectations these OEMs have around end market consumer demand.

225

Table of Contents

Demand from end market consumers is impacted by a number of factors, including travel restrictions (as a result of COVID-19 or otherwise), fuel costs and energy demands (including an increasing trend towards the use of green energy), as well as overall macro-economic conditions. Sales of our batteries have also benefited from the increased adoption of the RV lifestyle and the demand for additional appliances and electronics in RVs during the COVID-19 pandemic. However, we also experienced delays and disruptions in our supply chain, as well as labor shortages and shutdowns, which disrupted the production of our batteries and impacted our ability to keep up with customer demand. In addition, the spreading of the virus may make it more difficult for us to find alternative suppliers due to the high concentration of such suppliers located in China.

Our strategy includes plans to expand into new end markets that we have identified as opportunities for our LFP batteries, including industrial, specialty and work vehicles, material handling, solar integration, and emergency and standby power, in the medium term, and data centers, telecom, rail and distributed on-grid storage in the longer term. We believe that our current LFP batteries and, eventually, our solid-state batteries, will be well-suited to supplant traditional lead-acid batteries as a reliable power source for the variety of low power density uses required in these markets (such as powering the increasing number of on-board tools needed in emergency vehicles). The success of this strategy requires (1) continued growth of these addressable markets in line with our expectations and (2) our ability to successfully enter these markets. We expect to incur significant marketing costs understanding these new markets, and researching and targeting customers in these end markets, which may not result in sales. If we fail to execute on this growth strategy in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end markets.

Supply

We currently rely on two carefully selected cell manufacturers located in China, and a single supplier, also located in China, to manufacture our proprietary battery management system, and we intend to continue to rely on these suppliers going forward. Our close working relationships with our China-based LFP cell suppliers, reflected in our ability to (x) increase our purchase order volumes (qualifying us for related volume- based discounts) and (y) order and receive delivery of cells in anticipation of required demand, has helped us moderate increased supply-related costs associated with inflation, currency fluctuations and U.S. government tariffs imposed on our imported battery cells and to avoid potential shipment delays. To mitigate against potential adverse production events, we opted to build our inventory of key components, such as battery cells. In connection with these stockpiling activities, we experienced a significant increase in prepaid inventory compared to prior periods as suppliers required upfront deposits in response to global supply chain disruptions.

As a result of our battery chemistry and active steps we have taken to manage our inventory levels, we have not been subject to the shortages or price impacts that have been present for manufacturers of nickel manganese cobalt and nickel cobalt aluminum batteries. As we look toward the production of our solid-state cells, we have signed a Memorandum of Understanding with a lithium mining company located in Nevada for the supply of lithium, which we expect will enable us to further manage our cost of goods.

Product and Customer Mix

Our product sales consist of sales of eight different models of LFP batteries, along with accessories for battery systems (individually or bundled). These products are sold to different customer types (e.g., consumers, OEMs and distributors) and at different prices and involve varying levels of costs. In any particular period, changes in the mix and volume of particular products sold and the prices of those products relative to other products will impact our average selling price and our cost of goods sold. The price of our products may also increase as a result of increases in the cost of components due to inflation, currency fluctuations and tariffs. OEM sales typically result in lower average selling prices and related margins, which could result in margin erosion, negatively impact our growth or require us to raise our prices. However, this reduction is typically offset by the benefits of increased sales volumes. Sales of third-party sourced accessories (whether sold individually or as part of a bundle) typically have lower related margin. We expect DTC accessory sales to increase as we further develop full-system design expertise and product offerings and consumers increasingly demand more sophisticated systems, rather than simple drop-in replacement In addition to the impacts attributable to the general sales mix across our products and accessories, our results of operations are impacted by the relative margins of products sold. As we continue to introduce new products at varying price points, our overall gross margin may vary from period to period as a result of changes in product and customer mix.

226

Table of Contents

Production Capacity

All of our battery assembly currently takes place at our 99,000 square foot headquarters and manufacturing facility located in Reno, Nevada. We currently operate two LFP battery production lines. Consistent with our operating history, we plan to continue to automate additional aspects of our battery production lines. Our existing facility has the capacity to add four additional LFP battery production lines and construct and operate a pilot production line for our solid-state cells, all designed to maximize the capacity of our manufacturing facility. Although our automation efforts are expected to reduce our costs of goods, we may not fully recognize the anticipated savings when planned and could experience additional costs or disruptions to our production activities.

Competition

Research and Development

Components of Results of Operations

Net Sales

Net sales is primarily generated from the sale of our LFP batteries to OEMs and consumers, as well as chargers and other accessories, either individually or bundled.

Cost of Goods Sold

Cost of goods sold includes the cost of cells and other components of our LFP batteries, labor and overhead, logistics and freight costs, and depreciation and amortization of manufacturing equipment.

Gross Profit

Gross profit, calculated as net sales less cost of goods sold, may vary between periods and is primarily affected by various factors including average selling prices, product costs, product mix, customer mix and production volumes.

Operating Expenses

Research and development

Research and development costs include personnel-related expenses for scientists, experienced engineers and technicians as well as the material and supplies to support the development of new products and our solid-state technology. As we work towards completing the development of our solid-state lithium-ion cells and the manufacturing of batteries that incorporate this technology, we anticipate

227

Table of Contents

that research and development expenses will increase significantly for the foreseeable future as we continue to invest in product development and optimizing and producing solid-state cells.

General and administrative

General and administrative costs include personnel-related expenses attributable to our executive, finance, human resources, and information technology organizations, certain facility costs, and fees for professional services.

Selling and marketing

Selling and marketing costs include personnel-related expenses, as well as trade show, industry event, marketing, customer support, and other indirect costs. We expect to continue to make the necessary sales and marketing investments to enable the execution of our strategy, which includes expanding into additional end markets.

Total Other Income (Expense)

Other income (expense) consists primarily of interest expense and debt issuance costs.

Results of Operations for the Three Months Ended March 31, 2022 and 2021

The following table sets forth our results of operations for the three months ended March 31, 2022 and 2021. This data should be read together with our unaudited financial statements and related notes included elsewhere in this proxy statement/prospectus, and is qualified in its entirety by reference to such financial statements and related notes.


	Three months ended
	March 31,
			% Net			% Net
	2022		Sales	2021		Sales
	(in thousands)
Net Sales	$	18,303	100.0	$	15,646	100.0
Cost of Goods Sold		12,808	70.0		9,805	62.7
Gross profit		5,495	30.0		5,841	37.3
Operating expenses
Research and development		339	1.9		519	3.3
General and administrative		3,626	19.8		2,096	13.4
Sales and marketing		3,092	16.9		1,884	12.0
Total Operating expenses		7,057	38.6		4,499	28.8
(Loss) Income From Operations		(1,562)	(8.5)		1,342	8.6
Other (Expense) Income
Interest (Expense) Income		(1,263)	(6.9)		—	—
Total Other (Expense) Income		(1,263)	(6.9)		—	—
(Loss) Income Before Taxes		(2,825)	(15.4)		1,342	8.6
(Benefit) Provision for Income Tax		(527)	(0.3)		276	0.2
Net (Loss) Income	$	(2,298)	(12.6)	$	1,066	6.8

228

Table of Contents


	Three months ended March 31,
	2022		2021

	(in thousands)

Retailer		13,035		13,023
Distributor		2,087		1,594
DTC		15,122		14,617
% Net Sales		82.6		93.4
OEM		3,181		1,029
% Net Sales		17.4		6.6
Net Sales	$	18,303	$	15,646

Net Sales

Net sales increased by $2.7 million, or 17.0%, to $18.3 million for the three months ended March 31, 2022, as compared to $15.6 million for the three months ended March 31, 2021. This increase was primarily due to a larger number of battery sales to both OEM and DTC customers. For the three months ended March 31, 2022, OEM revenue increased by $2.2 million as a result of increased adoption by OEM customers of the Company’s battery solutions. DTC revenue increased by $0.5 million as a result of increased battery unit sales to distributors and consumer customers.

Cost of Goods Sold

Cost of revenue increased by $3.0 million, or 30.6%, to $12.8 million for the three months ended March 31, 2022, as compared to $9.8 million for the three months ended March 31, 2021. This increase was primarily due to higher unit volumes and higher headcount associated with increased production, higher material costs and rising logistics expenses, and higher overhead costs following the Company’s relocation into a new 99,000 sq. ft. facility in April 2021.

Gross Profit

Gross profit decreased by $0.3 million, or 5.9%, to $5.5 million for the three months ended March 31, 2022, as compared to $5.8 million for the three months ended March 31, 2021. This decrease was primarily due to the increase in cost of goods sold partially offset by the increase in revenue.

Research and Development Expenses

Research and development expenses decreased by $0.2 million, or 34.7%, to $0.3 million for the three months ended March 31, 2022, as compared to $0.5 million for the three months ended March 31, 2021. This decrease was primarily due to the timing of employee-related expenses and lower product costs.

General and Administrative Expenses

General and administrative expenses increased by $1.5 million, or 73.0%, to $3.6 million for the three months ended March 31, 2022, as compared to $2.1 million for the three months ended March 31, 2021. This increase was primarily due to increased headcount as we continued to expand our finance, legal and support teams, overhead costs associated with our larger manufacturing facility and higher professional services fees arising from the Company’s business combination efforts.

Selling and Marketing Expenses

Sales and marketing expenses increased by $1.2 million, or 64.1%, to $3.1 million for the three months ended March 31, 2022, as compared to $1.9 million for the three months ended March 31, 2021. This increase was primarily due to (i) the addition of sales and marketing personnel to support growth in existing markets and drive growth in new targeted markets; (ii) higher overhead costs associated with our larger manufacturing facility; and (iii) advertising and sponsorship growth.

229

Table of Contents

Total Other (Expense) Income

Other expense totaled $1.3 million for the three months ended March 31, 2022 with no other income or expense for the three months ended March 31, 2021. Other expense in 2022 is comprised primarily of interest expense related to $45 million in senior secured notes issued in late November 2021 and a loss on the disposition of miscellaneous equipment. Following completion of the Business Combination, interest expense will increase significantly as a result of approximately $75 million post-closing indebtedness.

Income Tax (Benefit) Provision

Income tax benefit was $0.5 million for the three months ended March 31, 2022, as compared to a $0.3 million expense for the three months ended March 31, 2021. The income tax benefit reflects the benefit associated with expected use of losses in the three months ended March 31, 2022 against future tax obligations.

Net (Loss) Income

Dragonfly experienced a net loss of $2.3 million for the three months ended March 31, 2022, as compared to net income of $1.1 million for the three months ended March 31, 2021. As described above, this result was driven primarily by (i) a decline in gross profit due to increased cost of sales despite increase sales; (ii) higher general and administrative and sales and marketing expenses as the Company grew its business and expanded into its new, larger facilities in April 2021 and (iii) incurred interest costs related to its senior secured notes issued in November 2021.

Results of Operations for the Years Ended December 31, 2021 and 2020

The following table sets forth our results of operations for the years ended December 31, 2021 and 2020. This data should be read together with our financial statements and related notes included elsewhere in this proxy statement/prospectus, and is qualified in its entirety by reference to such financial statements and related notes.


	Years ended December 31,
			% Net			% Net
	2021		Sales	2020		Sales

	(in thousands)
Net Sales	$	78,000	100.0	$	47,187	100.0
Cost of Goods Sold		48,375	62.0		26,580	56.3
Gross profit		29,625	38.0		20,607	43.7
Operating expenses
Research and development		2,689	3.4		1,239	2.6
General and administrative		10,621	13.6		5,960	12.6
Sales and marketing		9,848	12.6		4,662	9.9
Total Operating expenses		23,158	29.7		11,861	25.1
Income From Operations		6,467	8.3		8,746	18.5
Other Income (Expense)
Other Income		1	0.0		15	0.0
Interest Income (Expense)		(519)	(0.7)		3	0.0
Gain on disposition of assets		—	—		—	—
Total Other Income (Expense)		(518)	(0.7)		18	0.0
Income Before Taxes		5,949	7.6		8,764	18.6
Income Tax Expense		1,611	2.1		1,886	4.0
Net Income	$	4,338	5.6	$	6,878	14.6

230

Table of Contents


	Years ended December 31,
	2021		2020

	(in thousands)
Retailer		59,042		33,314
Distributor		10,733		10,381
DTC		69,775		43,695
% Net Sales		89.4		92.6
OEM		8,225		3,492
% Net Sales		10.6		7.4
Net Sales	$	78,000	$	47,187

Net Sales

Net sales increased by $30.8 million, or 63.9%, to $78.0 million for the years ended December 31, 2021, as compared to $47.2 million for the year ended December 31, 2020. This increase was primarily due to increased DTC sales and OEMs. For the year ended December 31, 2021, OEM revenue increased by $4.7 million as a result of increased adoption our products by existing customers, several of whom have begun to “design in” our batteries in various RV models as original equipment or have increased purchases in response to end- customer demand for safer, more efficient batteries and as a replacement for traditional lead-acid batteries. DTC revenue increased by $26.1 million as a result of increased customer demand for existing products and the introduction of new products.

Cost of Goods Sold

Cost of revenue increased by $21.8 million, or 82.0%, to $48.4 million for the year ended December 31, 2021, as compared to $26.6 million for the year ended December 31, 2020. This increase was primarily due to higher unit volumes and higher headcount associated with increased production, and higher overhead costs which increased due to the Company’s relocation into a new 99,000 sq. ft. facility in April 2021.

Gross Profit

Gross profit increased by $9.0 million, or 43.8%, to $29.6 million for the year ended December 31, 2021, as compared to $20.6 million for the year ended December 31, 2020. This increase was primarily due to the increase in revenue, partially offset by the increase in cost of goods sold.

Research and Development Expenses

Research and development expenses increased by $1.5 million, or 117.0%, to $2.7 million for the year ended December 31, 2021, as compared to $1.2 million for the year ended December 31, 2020. This increase was primarily due to increased headcount as we continued to build our research and development staff associated with our solid-state technology development efforts and increased patent expenses.

General and Administrative Expenses

General and administrative expenses increased by $6.1 million, or 130.6%, to $10.6 million for the year ended December 31, 2021, as compared to $4.7 million for the year ended December 31, 2020. This increase was primarily due to increased headcount as we continued to expand our finance, legal and support teams, overhead costs associated with our large manufacturing facility and higher professional services fees arising from the Company’s business combination efforts.

Selling and Marketing Expenses

Sales and marketing expenses increased by $3.9 million, or 65.2%, to $9.8 million for the year ended December 31, 2021, as compared to $6.0 million for the year ended December 31, 2020. This increase was primarily due to the addition of sales and marketing personnel to support growth in our existing end markets, as well as to drive growth in the new, adjacent, end markets we are targeting, overhead costs associated with our large manufacturing facility, increased shipping expenses due to higher volumes and price increases, and advertising and sponsorship growth.

231

Table of Contents

Total Other Income

Other income (expense) decreased to other expense of $0.6 million for the year ended December 31, 2021, as compared to other income of $0.02 million for the year ended December 31, 2020. This decrease was primarily due to interest expense related to the senior secured debt facility and a loss on the disposition of certain assets.

Income Tax Expense

Income tax expense decreased by $0.3 million, or 14.6%, to $1.6 million for the year ended December 31, 2021, as compared to $1.9 million for the year ended December 31, 2020. This decrease was primarily due to lower income for the period.

Net Income

Net income decreased by $2.5 million, or 37.0%, to $4.3 million for the year ended December 31, 2021, as compared to $6.9 million for the year ended December 31, 2020. This decrease was primarily due to higher costs which more than offset the increase in revenue for the period.

Non-GAAP Financial Measures

This proxy statement/prospectus includes a non-GAAP measure that we use to supplement our results presented in accordance with U.S. GAAP. EBITDA is defined as earnings before interest and other income, tax and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA adjusted for stock-based compensation, ERP implementation, non-recurring debt transaction and business combination expenses. Adjusted EBITDA is a performance measure that we believe is useful to investors and analysts because it illustrates the underlying financial and business trends relating to our core, recurring results of operations and enhances comparability between periods.

Adjusted EBITDA is not a recognized measure under U.S. GAAP and is not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Investors should exercise caution in comparing our non-GAAP measure to any similarly titled measure used by other companies. This non-GAAP measure excludes certain items required by U.S. GAAP and should not be considered as an alternative to information reported in accordance with U.S. GAAP.

The table below presents our adjusted EBITDA, reconciled to net income for the periods indicated.


	Three months ended
	March 31,
	2022		2021
	(in thousands)
Net income	$	(2,298)	$	1,066
Interest and Other Income		(1,263)		—
Taxes		(527)		276
Depreciation and Amortization		192		103
EBITDA		(3,896)		1,445
Adjusted for:
Stock-Based Compensation⁽¹⁾		288		95
ERP Implementation⁽²⁾		198		41
Debt Transaction⁽³⁾		808		—
Business Combination Expenses⁽⁴⁾		745		—
Adjusted EBITDA	$	(1,857)	$	1,581

(1)	Stock-Based Compensation is comprised of costs associated with option grants made to our employees and consultants.

(2)	ERP Implementation is comprised of costs and expenses associated with our implementation of an ERP system in anticipation of the Business Combination and becoming a public company.

232

Table of Contents

(3)	Debt Transaction is comprised of costs and expenses associated with our issuance of $45 million fixed rate senior notes.

(4)	Business Combination Expenses is comprised of fees and expense, including legal, accounting and other others, associated with the Business Combination.


	Years ended December 31,
	2021		2020

	(in thousands)
Net income	$	4,338	$	6,878
Interest and Other Income		518		(18)
Taxes		1,611		1,886
Depreciation and Amortization		617		198
EBITDA		7,084		8,944
Adjusted for:
Stock-Based Compensation⁽¹⁾		734		351
ERP Implementation⁽²⁾		233		26
Debt Transaction⁽³⁾		258		—
Loss on Disposal of Assets⁽⁴⁾		121		—
Business Combination Expenses⁽⁴⁾		295		49
Adjusted EBITDA	$	8,725	$	9,370

(1)	Stock-Based Compensation is comprised of costs associated with option grants made to our employees and consultants.

(2)	ERP Implementation is comprised of costs and expenses associated with our implementation of an ERP system in anticipation of the Business Combination and becoming a public company.

(3)	Debt Transaction is comprised of costs and expenses associated with our issuance of $45 million fixed rate senior notes in November 2021.

(4)	Loss on Disposal of Assets is comprised of amounts in relation to leasehold improvements that were written off in April 2021 as part of the transfer of Dragonfly’s operations to its new manufacturing facility.

(5)	Business Combination Expenses is comprised of fees and expense, including legal, accounting and other others, associated with the Business Combination.

Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities. As of March 31, 2022, our principal source of liquidity was cash totaling $10.1 million.

In connection with the growth of our business and in anticipation of future needs and to protect against supply-chain and logistics related shortages, during the first quarter of 2022, we continued to increase our inventory purchasing activities. As a result, our inventory balance at March 31, 2022 increased by $5.9 million to $33.1 million, compared to $27.1 million at December 31, 2021.

We expect our capital expenditures and working capital requirements to increase materially in the near future, as we accelerate our research and development efforts (particularly those related to solid-state lithium- ion battery development), expand our production lines, scale up production operations and look to enter into adjacent markets for our batteries (with operating expenses expected to increase across all major expense categories). We expect to deploy a significant amount of capital to continue our optimization and commercialization efforts dedicated to our solid-state technology development, as well as continued investment to automate and increase the production capacity of our existing assembly operation. We believe that our cash on hand following the Closing will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this proxy statement/prospectus and longer term. We may, however, need additional cash if there are material changes to our business conditions

233

Table of Contents

or other developments, including unanticipated delays in production, supply chain challenges, disruptions due to the COVID-19 pandemic, competitive pressures and regulatory developments. To the extent that our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, including by not seeking potential acquisition opportunities, eliminating redundancies, or reducing or delaying our production facility expansions, which may adversely affect our business, operating results, financial condition and prospects. For more information about risks related to our business, please see the sections entitled “Risk Factors — Risks Related to Dragonfly’s Existing Lithium-Ion Battery Operations” and “— Risks Related to Dragonfly’s Solid-State Technology Development”.

In addition to the foregoing, based on our current assessment, we do not expect any material adverse effect on our long-term liquidity due to the COVID-19 pandemic. However, we will continue to assess the effect of the pandemic to our operations. The pandemic has in recent periods moderated in the United States following the availability of vaccines (although vaccination rates often vary by geography, age and other factors) and increased immunity (including natural immunity from infection). However, the extent to which the COVID-19 pandemic will affect our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence. These uncertainties include the ultimate geographic spread of the disease (including emergence of new variants against which existing vaccinations or treatments may be ineffective), the duration of the pandemic and the perceived effectiveness of actions taken in the United States and other countries to contain and treat the disease. While the potential economic impact of COVID-19 may be difficult to assess or predict, a widespread pandemic alone or in combination with other events, such as the Russia/Ukraine conflict, could result in significant disruption of global financial markets and supply chains, reducing our ability to access capital in the future or access required raw materials and components, which could result in price increases. In addition, a recession or long-term market correction resulting from the spread of COVID-19 or other events could materially affect our business and the value of our common stock.

Historically, we funded development of our solid-state and cell manufacturing technologies internally through operationally generated cash and, in recent periods, with proceeds from our secured borrowings in November 2021. To date, our focus has been on seeking to prove the fundamental soundness of our manufacturing techniques and our solid-state chemistry. Moving forward, our solid-state related investments will focus on chemistry optimization and establishing a pilot line for pouch cell production. Over the next two to three years, we expect to spend in excess of $50 million on solid-state development and cell manufacturing technologies.

Financing Obligations and Requirements

As of March 31, 2022, we had cash totaling $10.1 million. Since inception and until recently, we funded ourselves from internally generated cash and $2 million in equity raised in 2017. On November 24, 2021, we issued $45 million of fixed rate senior notes, secured by among other things, a security interest in our intellectual property.

As part of the Business Combination, we intend to enter into a series of transactions that is expected to provide us additional cash to fund our capital and liquidity requirements in the short and long-term.

The Term Loan proceeds may be used (i) to support the Business Combination, (ii) to prepay the fixed rate senior notes at closing of the Business Combination, (iii) to pay fees and expenses in connection with the foregoing, (iv) to provide additional growth capital and (v) for other general/corporate purposes. The Term Loan will mature four years from the Closing Date and will be subject to quarterly amortization of 5% per annum beginning 24 months after the Closing Date. The definitive documents for the Term Loan will incorporate certain mandatory prepayment events and affirmative and negative covenants and exceptions to be mutually agreed. Such covenants are expected to include a maximum senior leverage ratio covenant, a minimum liquidity covenant and a springing fixed charge coverage ratio covenant. For 24 months following the Closing Date, the Term Loan will accrue interest at a rate comprised of (i) adjusted SOFR plus 6.5% per annum payable quarterly in cash and (ii) paid-in-kind interest at a rate of between 3.5% and 5.5% per annum, such rate to be determined based on New Dragonfly’s senior leverage ratio. After 24 months following the Closing Date, interest will be payable in cash, and the interest rate will be comprised of adjusted SOFR plus an applicable margin of between 10% and 12% per annum, such rate to be determined based on New Dragonfly’s senior leverage ratio. At Closing, we will issue to the Term Loan Lenders (i) the Penny Warrants and (ii) the $10 Warrants

Under this Equity Facility, upon the satisfaction of the conditions to the Equity Facility Investor’s purchase obligation to be set forth in the Equity Facility Definitive Documentation, New Dragonfly will have the right from time to time at its option to direct the Equity Facility Investor, an affiliate of Chardan Capital Markets, to purchase up to a specified maximum amount of shares of New Dragonfly common stock, up to a maximum aggregate purchase price of $150,000,000 over the 36-month term of the Equity Facility.

234

Table of Contents

For further details on the arrangements with the Term Loan Lenders and the Equity Investor, see the section entitled, “Proposal No. 1 — The Business Combination Proposal”.

Cash Flow — Three months ended March 31, 2022 and 2021


	Three months ended
	March 31,
	2022		2021
	(in thousands)
Net cash provided by/(used in) operating activities	$	(11,110)	$	1,745
Net cash provided by/(used in) investing activities	$	(4,524)	$	(1,318)
Net cash provided by/(used in) financing activities	$	111	$	10

Operating Activities

Net cash used in operating activities was $11.1 million for the three months ended March 31, 2022 primarily due to a net loss in the period and higher working capital expenses.

Net cash provided by operating activities was $1.7 million for the three months ended March 31, 2021 primarily due to an increase in working capital as a result of growth in Dragonfly’s operations and to support expected future growth.

Investing Activities

Net cash used in investing activities was $4.5 million for the three months ended March 31, 2022, as compared to net cash used in investing activities of $1.3 million for the three months ended March 31, 2021. The increase in cash used in investing activities was primarily due to an increase in capital expenditures to support our ongoing efforts to develop solid-state battery technology and manufacturing processes.

Financing Activities

Net cash provided by financing activities was $0.1 million for the three months ended March 31, 2022, as compared to net cash provided by financing activities of $0.0 million for the three months ended March 31, 2021, and was primarily due to payment of notes receivable partially offset by proceeds from the exercise of employee options.

Cash Flow — Years ended December 31, 2021 and 2020


	Years ended December 31,
	2021		2020

	(in thousands)
Net cash provided by/(used in) operating activities	$	(13,573)	$	6,640
Net cash provided by/(used in) investing activities		(2,909)		(1,410)
Net cash provided by/(used in) financing activities		38,906		12

Operating Activities

Net cash used in operating activities was $13.6 million for the year ended December 31, 2021, as compared to net cash provided by operating activities of $6.7 million for the year ended December 31, 2020. The increase in cash used by operations was primarily due to an increase in working capital as a result of growth in Dragonfly’s operations.

Investing Activities

Net cash used in investing activities was $2.9 million for the year ended December 31, 2021, as compared to $1.4 million for the year ended December 31, 2020. The increase in net cash used in investing activities was primarily due to an increase in capital expenditures to support our ongoing efforts to develop solid-state battery technology and manufacturing processes.

235

Table of Contents

Financing Activities

Net cash provided by financing activities was $38.9 million for the year ended December 31, 2021 and was primarily due to cash received from the issuance of fixed rate senior notes.

Net cash provided by financing activities was $0.01 million for the year ended December 31, 2020 and was primarily due to cash utilized from the Company’s line of credit.

Contractual Obligations

Our estimated future obligations consist of short-term and long-term operating lease liabilities. As of March 31, 2022, we had $1.4 million in short-term operating lease liabilities and $4.4 million in long-term operating lease liabilities.

Quantitative and Qualitative Disclosures about Market Risk

We have not experienced any significant losses in such accounts, nor does management believe it is exposed to any significant credit risk. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. We use an assumed dividend yield of zero as we have never paid dividends and have no current plans to pay any dividends on our common stock. We account for forfeitures as they occur.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, revenue, costs and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.

Revenue Recognition

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. We exclude from the transaction price all taxes that are assessed by a governmental authority and imposed on and concurrent with our revenue transactions, and therefore present these taxes (such as sales tax) on a net basis in operating revenues on the Statement of Income.

Revenue is recognized when control of the promised goods is transferred to the customer or distributor, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services. Revenue associated with products holding rights of return are recognized when we conclude there is no risk of significant revenue reversal in the future periods for the expected consideration in the transaction. There are no material instances including discounts and refunds where variable consideration is constrained and not recorded at the initial time of sale. Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment when title and risk of loss pass to the customer.

We may receive payments at the onset of the contract and before delivery of goods for customers in the retail channel. In such instances, we record a customer deposit liability. Payment terms for distributors and OEMs are due within 30-60 days after shipment. We recognize these contract liabilities as sales after the revenue criteria are met. As of March 31, 2022, the contract liability related to our customer deposits approximated $727 compared to approximately $434 as of December 31, 2021.

236

Table of Contents

Inventory

Inventories, which consist of raw materials, work in process and finished goods, are stated at the lower of cost (weighted average) or net realizable value, net of reserves for obsolete inventory. We continually analyze our slow moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we established reserves. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. As of December 31, 2021 and 2020, no such reserves were necessary.

Property and Equipment

Property and equipment are stated at cost, including the cost of significant improvements and renovations. Costs of routine repairs and maintenance are charged to expense as incurred. All our facilities are leased and none are owned. Depreciation and amortization are calculated by the straight-line method over the estimated useful lives for owned property, or, for leasehold improvements, over the shorter of the asset’s useful life or term of the lease. Depreciation expense for the three months ended March 31, 2022 and 2021 was $192 and $103, respectively. Depreciation expense for the years ended December 31, 2021 and 2020 was $617 and $198, respectively. The various classes of property and equipment and estimated useful lives are as follows:


Office furniture and equipment	3 to 7 years
Machinery and equipment	3 to 7 years
Leasehold improvements	Remaining Term of Lease

As we add to our production capabilities and make related capital expenditures (including with respect to our solid-state battery capabilities) we expect our depreciation expenses to increase.

Research and Development

We expense research and development costs as incurred. Research and development expenses include salaries, contractor and consultant fees, supplies and materials, as well as costs related to other overhead such as depreciation, facilities, utilities, and other departmental expenses. The costs we incur with respect to internally developed technology and engineering services are included in research and development expenses as incurred as they do not directly relate to acquisition or construction of materials, property or intangible assets that have alternative future uses. We expect our research and development costs to increase as we continue to develop our proprietary solid-state cell technology and manufacturing processes.

Recent Accounting Pronouncements

For information regarding recently issued accounting pronouncements and recently adopted accounting pronouncements, please see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere in this proxy statement/prospectus.

JOBS Act Accounting Election

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, New Dragonfly can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. New Dragonfly has elected to avail itself of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. New Dragonfly intends to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. As a result, New Dragonfly’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

New Dragonfly will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of Chardan’s initial public offering, (ii) the last day of the fiscal year in which New Dragonfly has total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which New Dragonfly is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of New Dragonfly’s common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which New Dragonfly has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

237

Table of Contents

COMPARISON OF STOCKHOLDERS’ RIGHTS

General

Chardan is incorporated under the laws of the State of Delaware and currently governed by the laws of the State of Delaware, and following the Merger, the rights of Chardan shareholders will be governed by the laws of the State of Delaware. After the Business Combination, Chardan shareholders will become New Dragonfly stockholders.

If the Merger is completed, Chardan intends to change its name to Dragonfly Energy Holdings Corp. and will adopt the second amended and restated certificate of incorporation and amended and restated bylaws in connection with the consummation of the Merger. The rights of New Dragonfly stockholders will be governed by the laws of the State of Delaware, the Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of New Dragonfly.

Comparison of Stockholders’ Rights

The table below summarizes the material differences between the current rights of Chardan stockholders under its existing charter and bylaws and the rights of New Dragonfly stockholders, post-Closing, under the Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of New Dragonfly.

The summary set forth below is not intended to be complete or to provide a comprehensive discussion of the company’s governing documents or applicable law. This summary is qualified in its entirety by reference to the full text of Chardan’s charter and bylaws and forms of the Second Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of New Dragonfly, which are attached to this proxy statement/prospectus, as well as the relevant provisions of the DGCL.


Chardan		New Dragonfly

Authorized Capital Stock
Chardan is currently authorized to issue 51,000,000 shares of which 50,000,000 shares of common stock and 1,000,000 shares of preferred stock, each with $0.0001 par value. As of March 25, 2022 there were 15,812,500 shares of common stock outstanding. Chardan’s certificate provides that, promptly after the consummation of the Business Combination, the shares sold pursuant to the Chardan IPO will be converted into cash at a per share price equal to the quotient determined by dividing (i) the amount then held inf the trust fund less any income taxes owed on such funds but not yet paid, calculated as of two business days prior to the consummation of the Business Combination or the filing of the amendment, as applicable, by (ii) the total number of the shares sold pursuant to the Chardan IPO then outstanding.		The total number of shares of capital stock that New Dragonfly is authorized to issue is 175,000,000 shares, consisting of 170,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Immediately following consummation of the Business Combination, Dragonfly common stock will be cancelled in exchange for the right to receive, or the reservation of, an aggregate of 41,500,000 shares of New Dragonfly common stock, or, as applicable, shares underlying awards based on Dragonfly common stock, representing the Aggregate Merger Consideration. New Dragonfly is expected to have approximately 56,567,623 shares of New Dragonfly common stock outstanding, assuming no redemptions and no exercise of dissenter’s rights.

Rights of Preferred Stock
The board is expressly granted authority to issue shares of the preferred stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the board providing for the issue of such series and as may be permitted by the General Corporation Law of the State of Delaware.		The New Dragonfly board is authorized to issue the shares of preferred stock in such series and to fix from time to time before issuance the number of shares to be included in any such series and the designation, powers, preferences and relative participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof.

238

Table of Contents


Chardan		New Dragonfly

Number and Qualification of Directors
The board shall initially consist of one (1) member; provided, that such number may be increased or decreased from time to time by resolution of the stockholders.		The board shall consist of one or more members, the exact number of which shall be fixed from time to time by resolution of the Board. The directors of New Dragonfly shall be and are divided into three (3) classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third (1/3) of the total number of directors constituting the entire board. The board may assign members of the board already in office upon the effectiveness of the filing of the certificate with the Secretary of State of the State of Delaware (the “Effective Time”) to such classes. Subject to the rights of holders of any series or class of preferred stock to elect directors, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class A shall serve for a term expiring at New Dragonfly’s first annual meeting of stockholders held after the Effective Time; each director initially assigned to Class B shall serve for a term expiring at New Dragonfly’s second annual meeting of stockholders held after the Effective Time; and each director initially assigned to Class C shall serve for a term expiring at New Dragonfly’s third annual meeting of stockholders held after the Effective Time.

Election of Directors
The election of directors shall be decided by a plurality of the votes cast at a meeting of the stockholders by the holders of stock entitled to vote in the election. Directors shall be elected at the annual meeting of stockholders during the year in which their terms expire.		Directors elected at meetings of stockholders will be elected by a plurality of the votes cast. Subject to the rights, if any, of the holders of any series of preferred stock to elect additional directors under circumstances specified in a Preferred Stock, newly created directorships resulting from any increase in the number of directors and any vacancies on the board resulting from death, resignation, disqualification, removal, or other cause will be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the board, or by a sole remaining director.

Removal of Directors
Each director shall hold office until a successor is duly elected and qualified or until the director’s earlier death, resignation, disqualification or removal.		Except any preferred stock director, any director may be removed from office with cause at any time, by the affirmative vote of the holders of at least sixty-six and two-thirds percent (662∕3%) of the total voting power of all then outstanding shares of New Dragonfly entitled to vote for the election of directors.

Voting

239

Table of Contents


Chardan		New Dragonfly

Holders of the common stock shall exclusively possess all voting power and each share of common stock shall have one vote.		Except as otherwise required by law, holders of common stock are entitled to one vote for each share of common stock held of record by such holder on all matters on which stockholders are generally entitled to vote; provided, that, except as otherwise required by law, holders of common stock shall not be entitled to vote on any amendment to the charter of New Dragonfly that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series of preferred stock are entitled, either separately or together with the holders of one or more other such series of preferred stock, to vote thereon pursuant to the Second Amended and Restated Certificate of Incorporation or the DGCL.

Cumulative Voting
Chardan’s certificate does not authorize cumulative voting.		Delaware law allows for cumulative voting only if provided for in the current charter of New Dragonfly; however, the current charter of New Dragonfly does not authorize cumulative voting.

Vacancies on the Board of Directors
Any vacancies occurring in the board may be filled by the affirmative votes of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director. A director so elected shall be elected to hold office until the earlier of the expiration of the term of office of the director whom he or she has replaced, a successor is duly elected and qualified or the earlier of such director’s death, resignation or removal.		Any newly created directorship on the New Dragonfly Board that results from an increase in the number of directors and any vacancies on the board are filled exclusively pursuant to a resolution adopted by a majority of the New Dragonfly Board then in office, even if less than a quorum, or by a sole remaining director.

240

Table of Contents


Chardan		New Dragonfly
Special Meeting of the Board of Directors
Special meetings of stockholders for any purpose or purposes shall be called pursuant to a resolution approved by the board and may not be called by any other person or persons. The only business which may be conducted at a special meeting shall be the matter or matters set forth in the notice of such meeting.		Special meetings of the New Dragonfly Board may be called by the Chairman of the New Dragonfly Board, the Chief Executive Officer, the President or any two directors then in office.

Stockholder Action by Written Consent
Any action to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action to be so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand or by certified or registered mail, return receipt requested) to Chardan by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.		Subject to the rights of the holders of any series of preferred stock, any action required or permitted to be taken by the stockholders of New Dragonfly may be taken only at a duly called annual meeting or special meeting of stockholders of the company and may not be taken without a meeting by means of written consent.

Amendment to Charter
The holder of more than fifty percent (50%) of the issued and outstanding stock is authorized to make, repeal, alter, amend, restate and/or rescind any or all of the articles.		Under Delaware law, an amendment to a charter generally requires the approval of the New Dragonfly Board and a majority of the combined voting power of the then-outstanding shares of voting stock, voting together as a single class. The affirmative vote of the holders of at least sixty-six and two-third percent (662∕3%) of the voting power of New Dragonfly’s outstanding shares of capital stock entitled to vote in the election of directors, shall be required to amend the Second Amended and Restated Certificate of Incorporation inconsistent with any provision inconsistent with Articles V, VI, VIII, VIII, IX or X of the Second Amended and Restated Certificate of Incorporation.

Amendment of Bylaws
The board is expressly authorized to make, repeal, alter, amend and rescind any or all of Chardan’s bylaws.		The New Dragonfly Board will be expressly authorized to make, repeal, alter, amend and rescind any or all of the bylaws of New Dragonfly by an affirmative vote of the majority of the entire board of directors. The bylaws may also be amended, repealed or added to by the New Dragonfly stockholders representing at least sixty-six and two-thirds percent (662∕3%) of the voting power of all of the then-outstanding shares of capital stock of New Dragonfly entitled to vote generally in the election of directors, voting together as a single class.

241

Table of Contents


Chardan		New Dragonfly

Quorum
Board of Directors. A majority of the board of directors shall be necessary and sufficient to constitute a quorum for the transaction of business at any meetings of the board. Shareholders. A majority in voting power of the shares of Chardan entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum.		Board of Directors. At all meetings of the New Dragonfly board, a majority of the directors then in office will constitute a quorum for the transaction of business. Stockholders. The holders of a majority of the shares of New Dragonfly common stock issued and outstanding and entitled to vote, present in person (or by means of remote communication) or represented by proxy, constitute a quorum at all meetings of New Dragonfly stockholders for the transaction of business.

Special Stockholder Meetings
Special meetings of stockholders for any purpose or purposes shall be called pursuant to a resolution approved by the board and may not be called by any other person or persons. The only business which may be conducted at a special meeting shall be the matter or matters set forth in the notice of such meeting.		Subject to the rights of the holders of any series of preferred stock, (a) any action required or permitted to be taken by the New Dragonfly stockholders may be taken only at a duly called annual or special meeting of New Dragonfly stockholders and may not be taken without a meeting by means of any consent in writing of such stockholders and (b) special meetings of New Dragonfly stockholders (i) may be called only by the Chairman or by the Chief Executive Officer, and (ii) by the Secretary acting at the request of the Chairman, the Chief Executive Officer or any three directors of New Dragonfly. At any annual meeting or special meeting of New Dragonfly stockholders, only such business will be conducted or considered as has been brought before such meeting in the manner provided in the bylaws.

Notice of Stockholder Meetings
Notice of any meeting of stockholders will be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting.		Notice of any meeting of stockholders will be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting.

Stockholder Proposals (Other than Nomination of Persons for Election as Directors)
Special meetings of stockholders for any purpose or purposes shall be called pursuant to a resolution approved by the board and may not be called by any other person or persons.		No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in New Dragonfly’s notice of meeting (or any supplement thereto) delivered pursuant to the bylaws, (ii) properly brought before the annual meeting by or at the direction of the board or (iii) otherwise properly brought before the annual meeting by any stockholder of New Dragonfly who is entitled to vote at the meeting, who complies with the notice procedures set forth in the bylaws and who is a stockholder of record at the time such notice is delivered to the Secretary.

242

Table of Contents


Chardan		New Dragonfly
		A stockholder is not entitled to have its proposal for business or nominees included in New Dragonfly’s proxy statement and form of proxy solely as a result of such stockholder’s compliance with the provisions of the bylaws.

Stockholder Nominations of Persons for Election as Directors
No specific provision exists as to nominations by a stockholder.		Nominations of persons for election to the New Dragonfly board may be made at an annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors only (i) pursuant to the New Dragonfly notice of meeting, (ii) by or at the direction of the board or any committee thereof or (iii) by any stockholder who was a holder of record at the time the notice provided for in the bylaws is delivered to the Secretary, who is entitled to vote at the meeting and who complies with the notice procedures set forth in the bylaws. For a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary. To be timely, a stockholder’s notice to the Secretary must be received by the Secretary at the principal executive offices of New Dragonfly not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one-hundred-twentieth (120th) day, prior to the first anniversary of the preceding year’s annual meeting of shareholders.

Limitation of Liability of Directors and Officers
To the full extent permitted under Delaware law, a director of Chardan will not be personally liable to Chardan or its stockholders for monetary damages for any breach of fiduciary duty.		The DGCL permits limiting or eliminating the monetary liability of a director to a corporation or its stockholders, except with regard to breaches of the duty of loyalty, intentional misconduct, unlawful repurchases or dividends, or improper personal benefit. The Second Amended and Restated Certificate of Incorporation will provide that, to the fullest extent provided by law, no director will be personally liable to New Dragonfly or its stockholders for monetary damages for breach of fiduciary duty as a director.

Indemnification of Directors, Officers, Employees and Agents
To the fullest extent permitted by law, Chardan is authorized to indemnify all persons whom it may indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by Chardan in advance of the		The DGCL generally permits a corporation to indemnify its directors and officers acting in good faith. Under the DGCL, the corporation through its stockholders, directors or independent legal counsel, will determine that the conduct of the person seeking indemnity conformed with the statutory provisions governing indemnity.

243

Table of Contents


Chardan		New Dragonfly
final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by Chardan as authorized hereby.		The charter of New Dragonfly will provide that New Dragonfly will indemnify each director and officer to the fullest extent permitted by applicable law.

Dividends, Distributions and Stock Repurchases
Dividends upon the shares of capital stock of Chardan may be declared by the board at any regular or special meeting of the board. Dividends may be paid in cash, in property or in shares of Chardan’s capital stock, unless otherwise provided by applicable law or the certificate of incorporation.		Subject to the rights of the holders of any series of preferred stock, holders of shares of New Dragonfly common stock will be entitled to receive such dividends and distributions and other distributions in cash, stock or property of New Dragonfly when, as and if declared thereon by the New Dragonfly board from time to time out of assets or funds of New Dragonfly legally available therefor.

Liquidation
In the event that Chardan does not consummate a Business Combination by 15 months from the initial public offering, 100% of the shares sold pursuant to the initial public offering will be redeemed for a redemption price per the articles of incorporation.		Subject to the rights of the holders of any series of preferred stock, shares of New Dragonfly common stock will be entitled to receive the assets and funds of New Dragonfly available for distribution in the event of any liquidation, dissolution or winding up of the affairs of New Dragonfly, whether voluntary or involuntary. A liquidation, dissolution or winding up of the affairs of New Dragonfly will not be deemed to be occasioned by or to include any consolidation or merger of New Dragonfly with or into any other person or a sale, lease, exchange or conveyance of all or a part of its assets.

Anti-Takeover Provisions and Other Stockholder Protections
No specific provision exists as to anti-takeover provisions and other stockholder protections.		No specific provision exists as to anti-takeover provisions and other stockholder protections.

Duties of Directors
Under statutory and decisional law, directors of Delaware corporations owe fiduciary duties to the corporation, including duty of care and duty of loyalty.		Under statutory and decisional law, directors of Delaware corporations owe fiduciary duties to the corporation, including duty of care and duty of loyalty.

Inspection of Books and Records; Stockholder Lists
Inspection. Any records maintained by Chardan in the regular course of its business, including its stock ledger, books of account and minute books, may be maintained on any information storage device or method; provided that the records so kept can be converted into clearly legible paper form within a reasonable time. Chardan shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to applicable law. Stockholder List. Stockholder list shall be open to the examination of any stockholder, for any purpose		Under the DGCL, any stockholder or beneficial owner has the right, upon written demand under oath stating the proper purpose thereof, either in person or by attorney or other agent, to inspect and make copies and extracts from the corporation’s stock ledger, list of stockholders and its other books and records for a proper purpose during the usual hours for business. New Dragonfly shall at its principal executive office or other place designated by the board of directors, keep a record of its stockholders, the number and class of shares held, a copy of the

244

Table of Contents


Chardan		New Dragonfly
germane to the meeting, on a reasonably accessible electronic network		bylaws as amended to date, accounting books and other records.
Choice of Forum
Chardan’s certificate provides that, unless Chardan consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the forum for (a) any derivative action or proceeding brought in our name on behalf of the Corporation, (b) any action asserting a claim for breach of a fiduciary duty owed by any current or former director, officer, employee, agent or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the GCL, the Certificate of Incorporation, or the bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine. Notwithstanding the foregoing, such provisions will not apply to suits brought to enforce any duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.		The Second Amended and Restated Certificate of Incorporation generally designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for any stockholder (including a beneficial owner) to: (i) any derivative action or proceeding brought on behalf of New Dragonfly, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of New Dragonfly to New Dragonfly or New Dragonfly’s stockholders, (iii) any action asserting a claim against New Dragonfly, its directors, officers, or employees arising pursuant to any provision of the DGCL or the Second Amended and Restated Certificate of Incorporation or the Bylaws, (iv) any action asserting a claim against New Dragonfly, its directors, officers, or employees governed by the internal affairs doctrine, subject to certain exceptions. The exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. The federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

245

Table of Contents

DESCRIPTION OF SECURITIES

The following summary of the material terms of New Dragonfly’s securities following the Business Combination is not intended to be a complete summary of the rights and preferences of such securities. The full text of the second amended and restated certificate of incorporation referenced herein is attached as Annex B to this proxy statement. We urge you to read such documents in their entirety for a complete description of the rights and preferences of New Dragonfly’s securities following the Business Combination.

General

The second amended and restated certificate of incorporation authorizes 170,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share.

Common Stock

The second amended and restated certificate of incorporation authorizes a total of 170,000,000 shares of New Dragonfly common stock, par value $0.0001 per share.

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of New Dragonfly common stock are entitled to receive proportionately any dividends as may be declared by the New Dragonfly Board, subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.

In the event of our liquidation or dissolution, the holders of New Dragonfly common stock are entitled to receive proportionately our net assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock.

Holders of New Dragonfly common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of New Dragonfly common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Redeemable Warrants

Public Warrants

Each whole redeemable warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of our initial business combination. Pursuant to the amended and restated warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of common stock. The warrants will expire five years after the completion of our initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

We will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the offer and sale of the shares of common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of common stock upon exercise of a warrant unless common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of common stock underlying such unit.

Under the terms of the amended and restated warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the offer and sale of the shares of common stock issuable upon exercise of the

246

Table of Contents

warrants and thereafter will use our best efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the amended and restated warrant agreement. If we do not maintain in effect a registration statement covering the offer and sale of the issuance of shares of common stock upon exercise of the warrants, we will be required to permit registered holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to registered holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising registered holder, or an exemption from registration or qualification is available. Notwithstanding the above, if our common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require registered holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

Once the warrants become exercisable, we may call the warrants for redemption (except as described herein with respect to the private placement warrants):

●

in whole and not in part;

●

at a price of $0.01 per warrant;

●

upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

●

if, and only if, the last sales price of our common stock equals or exceeds $16.00 per share for any 10 trading days within a 30-trading day period ending three business days before we send the notice of redemption; and

●

if, and only if, there is a current registration statement in effect with respect to the offer and sale of the shares of common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in the Chardan IPO. However, there may be instances in which registered holders of our public warrants may be unable to exercise such public warrants but registered holders of our private warrants may be able to exercise such private warrants.

In the event that we elect to redeem all of the public warrants, we will fix a date for the redemption, and a notice of redemption will then be mailed by first class mail, postage prepaid, not less than 30 days prior to the date fixed for redemption to the registered holders of the warrants to be redeemed at their last addresses as they appear on the registration books. Any notice mailed in the foregoing manner will be conclusively presumed to have been duly given whether or not the registered holder received such notice. Additionally, while we are required to provide such notice of redemption, we are not separately required to, and do not currently intend to, notify any holders of when the warrants become eligible for redemption.

If we call the public warrants for redemption, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering their warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” is the volume weighted average last reported sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the warrants after our initial business combination. If

247

Table of Contents

we call our warrants for redemption and our management does not take advantage of this option, our sponsor and its permitted transferees would still be entitled to exercise their private warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.

A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may specify) of the shares of common stock outstanding immediately after giving effect to such exercise.

The warrants have certain anti-dilution and adjustment rights upon certain events.

The warrants are issued in registered form under the amended and restated warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The amended and restated warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least a majority of the then issued and outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.

In addition, if (x) we issue additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per share of common stock (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) (with such issue price or effective issue price to be determined in good faith by our board of directors, and in the case of any such issuance to the Sponsor, initial stockholders or their affiliates, without taking into account any founder shares held by them prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and the volume weighted average trading price of our shares during the 10 trading day period starting on the trading day prior to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.20 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), then the exercise price of each warrant will be adjusted (to the nearest cent) such that the effective exercise price per full share will be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $16.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 160% of the higher of the Market Value and the Newly Issued Price. The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

Warrants may be exercised only for a whole number of shares of common stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of common stock to be issued to the warrant holder.

Private Warrants

The private warrants (including the common stock issuable upon exercise of the private warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination (except, among other limited exceptions, to our officers and directors and other persons or entities affiliated with our sponsor) and they will not be redeemable by us so long as they are held by our sponsor or its permitted transferees. Our sponsor, or its permitted transferees, have the option to exercise the private warrants on a cashless basis. Except as described below, the private warrants have terms and provisions that are identical to those of the public warrants, including as to exercise price, exercisability and exercise period. If the private warrants are held by holders other than our sponsor or its permitted transferees, the private warrants will be redeemable by us and exercisable by the holders on the same basis as the public warrants.

If holders of the private warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares

248

Table of Contents

of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the volume weighted average last reported sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by our sponsor or its permitted transferees is because at the time of the sale it was not known whether they would be affiliated with us following an initial business combination. If they remain affiliated with us, their ability to sell our securities in the open market will be significantly limited. We have policies in place that prohibit insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in our securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could sell the shares of common stock issuable upon exercise of the warrants freely in the open market, the insiders could be significantly restricted from doing so. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate.

In addition, holders of our private warrants are entitled to certain registration rights and any private warrants purchased by Chardan NexTech 2 Warrant Holdings LLC will not be exercisable more than five years from August 10, 2021, the effective date of the registration statement, in accordance with FINRA Rule 5110(g), as long as Chardan or any of its related persons beneficially own these private warrants.

Pursuant to letter agreements that we have entered into with our sponsor, officers and directors, the private warrants (including the common stock issuable upon exercise of any of the private warrants) are not transferable or salable until 30 days after the completion of our initial business combination, except (a) to our officers or directors, any affiliates or family members of any of our officers or directors, any members of Chardan NexTech 2 Warrant Holdings LLC, our sponsor, or any of their respective affiliates; (b) in the case of an individual, by gift to a member of the individual’s immediate family or to a trust, the beneficiary of which is a member of the individual’s immediate family, an affiliate of such person or to a charitable organization; (c) in the case of an individual, by virtue of laws of descent and distribution upon death of the individual; (d) in the case of an individual, pursuant to a qualified domestic relations order; (e) by private sales or transfers made in connection with the consummation of an initial business combination at prices no greater than the price at which the shares or warrants were originally purchased; (f) in the event of our liquidation prior to the completion of our initial business combination; or (g) by virtue of the laws of Delaware or the applicable limited liability company agreement upon dissolution of Chardan NexTech 2 Warrant Holdings LLC, provided, however, that in the case of clauses (a) through (e) or (g), these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions and the other restrictions contained in the letter agreements and by the same agreements entered into by Chardan NexTech 2 Warrant Holdings LLC, our sponsor, officers, and directors of the Company, as the case may be, with respect to such securities (including provisions relating to voting, the trust account and liquidation distributions described in the prospectus relating to the Chardan IPO).

Dividends

We have not paid any cash dividends on our shares of common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.

Our Transfer Agent and Warrant Agent

The transfer agent for our shares of common stock and warrant agent for our warrants is Continental Stock Transfer & Trust Company.

Preferred Stock

The second amended and restated certificate of incorporation authorizes a total of 5,000,000 shares of preferred stock, par value $0.0001 per share.

Under the terms of the second amended and restated certificate of incorporation, the New Dragonfly board of directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. The New Dragonfly board of directors has the

249

Table of Contents

discretion to determine the terms, rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.

The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. We have no present plans to issue any shares of preferred stock.

Choice of Forum Provisions

The second amended and restated certificate of incorporation and the amended and restated bylaws provide that, unless New Dragonfly consents in writing to the selection of an alternative forum, (A) (i) any derivative action or proceeding brought on behalf of New Dragonfly, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of New Dragonfly to New Dragonfly or New Dragonfly’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the second amended and restated certificate of incorporation or the amended and restated bylaws (as either may be amended or restated) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States of America shall, to the fullest extent permitted by applicable law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, these provisions may have the effect of discouraging lawsuits against our directors and officers.

Anti-Takeover Effects of the Second Amended and Restated Certificate of Incorporation, the Amended and Restated Bylaws and Delaware Law

We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:

●

a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);

●

an affiliate of an interested stockholder; or

●

an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.

A “business combination” includes a merger or a sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:

●

our board of directors approves either the business combination or transaction that made the stockholder an “interested stockholder,” prior to the date of such business combination;

●

upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or

●

at or subsequent to the date of such business combination, the business combination is approved by our board of directors and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.

Stockholder Action by Written Consent

Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is

250

Table of Contents

signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless the second amended and restated certificate of incorporation provides otherwise. The second amended and restated certificate of incorporation precludes stockholder action by written consent.

Approval for Amendment of Certificate of Incorporation and Bylaws

The second amended and restated certificate of incorporation further provides that the affirmative vote of holders of at least 662∕3% of the voting power of all of the then outstanding shares of voting stock, voting as a single class, is required to amend certain provisions of our amended and restated certificate of incorporation, including provisions relating to the size of the board, removal of directors, special meetings and actions by written consent. The affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of voting stock, voting as a single class, is required to adopt, amend, alter or repeal our proposed bylaws, although our proposed bylaws may be amended by a majority vote of the board of directors.

Stock Exchange

The Chardan units, Chardan common stock and public warrants are currently listed on the Nasdaq under the symbols “CNTQU,” “CNTQ” and “CNTQW,” respectively. As a result, our publicly traded units will separate into component securities upon consummation of the Business Combination and will no longer trade as a separate entity. We intend to apply to list the New Dragonfly common stock and warrants on the Nasdaq after the Business Combination under the symbols “DFLI” and “DFLIW”.

251

Table of Contents

PRICE RANGE OF SECURITIES AND DIVIDENDS

Price Range of Chardan’s Securities

Chardan’s units, each of which consists of one share of Chardan common stock, par value $0.0001 per share, and three quarters of one public warrant, each whole warrant entitling the holder thereof to purchase one share of Chardan common stock, began trading on the Nasdaq under the symbol “CNTQU” on August 11, 2021. On August 24, 2021, the Chardan common stock and public warrants began trading on the Nasdaq under the symbols “CNTQ” and “CNTQW,” respectively. Each warrant entitles the holder to purchase one share of Chardan common stock at a price of $11.50 per share, subject to adjustments as described in the prospectus for the Chardan IPO dated August 5, 2021, which was filed with the SEC. Warrants may only be exercised for a whole number of shares of Chardan common stock and will become exercisable 30 days after the completion of the Business Combination. The warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation as described in the prospectus for the Chardan IPO.

The following table sets forth, for the calendar quarter indicated, the high and low intra-day sales prices per unit, Chardan common stock and warrants as reported on the Nasdaq for the periods presented.


	Common Stock⁽²⁾				Warrants⁽²⁾				Units⁽¹⁾
Period	High		Low		High		Low		High		Low
2021:
Fourth Quarter	$	10.02	$	9.93	$	.8099	$	.44	$	11.50	$	10.21
Third Quarter	$	10.10	$	9.78	$	.5003	$	.40	$	10.26	$	10.02
2022
First Quarter	$	10.15	$	9.93	$	.61	$	.19	$	10.46	$	10.04

(1)	Chardan’s units began trading on the Nasdaq on August 11, 2021.

(2)	Chardan common stock and warrants began trading separately on the Nasdaq on August 24, 2021.

On May 13, 2022, the last Trading Day before the public announcement of the Business Combination, Chardan’s units, Chardan common stock and public warrants closed at $10.16, $10.09 and $0.17, respectively.

Dividend Policy

Chardan has not paid any cash dividends on Chardan common stock to date and New Dragonfly does not intend to pay cash dividends prior to the completion of the Business Combination. The payment of cash dividends in the future is dependent upon New Dragonfly’s revenues and earnings, if any, capital requirements, the terms of any indebtedness or preferred securities and general financial condition subsequent to the Closing. The payment of any cash dividends subsequent to the Closing will be within the discretion of New Dragonfly’s board of directors at such time. In addition, Chardan’s board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future.

252

Table of Contents

BENEFICIAL OWNERSHIP OF SECURITIES

The following table sets forth information regarding (i) the actual beneficial ownership of Chardan common stock as of July 20, 2022 (pre-Business Combination) and (ii) the expected beneficial ownership of New Dragonfly common stock immediately following the consummation of the Business Combination, assuming that no public shares are redeemed, and alternatively that all public shares are redeemed, by:

●

each person who is, or is expected to be, the beneficial owner of more than 5% of outstanding shares of Chardan common stock or of New Dragonfly common stock;

●

each of our current executive officers and directors;

●

each person who will become an executive officer or director of New Dragonfly following the consummation of the Business Combination; and

●

all executive officers and directors of Chardan as a group pre-Business Combination and all executive officers and directors of New Dragonfly as a group following the consummation of the Business Combination.

Beneficial ownership is determined according to the rules of the SEC. A person is a “beneficial owner” of a security if that person has or shares “voting power”, which includes the power to vote or to direct the voting of the security, or “investment power”, which includes the power to dispose of or to direct the disposition of the security or has the right to acquire such powers within 60 days. We did not deem such shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to the table, each of the stockholders listed below has sole voting and investment power with respect to the shares of Chardan common stock owned by such stockholders.

The following table does not reflect record of beneficial ownership of any shares of New Dragonfly common stock issuable upon exercise of public warrants or private placement warrants, as such securities are not exercisable or convertible within 60 days of July 20, 2022.

Unless otherwise noted in the footnotes to the following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment power with respect to their beneficially owned Chardan common stock and other equity securities.

The beneficial ownership of shares of Chardan common stock pre-Business Combination is based on 15,812,500 shares of Chardan common stock outstanding as of July 20, 2022.

The expected beneficial ownership of shares of New Dragonfly common stock immediately following the consummation of the Business Combination, assuming none of the Public Shares is redeemed, is based on an aggregate of 56,567,623 shares of New Dragonfly common stock to be issued and outstanding immediately following the consummation of the Business Combination, which assumes the following: (A) none of the investors set forth in the table below has purchased or purchases shares of Chardan common stock (pre- Business Combination) or New Dragonfly common stock (post-Business Combination), (B) 500,000 shares of New Dragonfly common stock are issued to the PIPE Investment investors, (C) 38,189,691 shares of New Dragonfly common stock are issued to the holders of Dragonfly securityholders but none of the 40,000,000 Earnout Shares have been issued as the earnout contingencies have not been met, (D) there are no future exercises of the Chardan Warrants and (E) 2,065,432 Penny Warrants are issued to the Term Loan Lenders but none of the 1,600,000 $10 Warrants are issued.

253

Table of Contents

The expected beneficial ownership of shares of New Dragonfly common stock immediately following the consummation of the Business Combination, assuming the maximum of the Public Shares are redeemed, is based on an aggregate of 43,917,623 shares of New Dragonfly common stock to be issued and outstanding immediately following the consummation of the Business Combination, which assumes the following: (A) none of the investors set forth in the table below has purchased or purchases shares of Chardan common stock (pre-Business Combination) or New Dragonfly common stock (post-Business Combination), (B) 500,000 shares of New Dragonfly common stock are issued to the PIPE Investment investors, (C) 38,189,691 shares of New Dragonfly common stock are issued to the holders of Dragonfly securityholders, but none of the 40,000,000 Earnout Shares have been issued as the earnout contingencies have not been met, (D) there are no future exercises of the Chardan Warrants and (E) 1,536,367 Penny Warrants are issued to the Term Loan Lenders but none of the 2,065,432 $10 Warrants are issued.

Immediately following the consummation of the Business Combination, assuming no Chardan public stockholder exercises redemption rights with respect to its shares for a pro rata portion of the funds in Chardan’s trust account, and assuming exercise and conversion of all securities including the earnout, the Penny Warrants, the $10 Warrants, the Chardan public warrants and the private warrants, the Sponsor and its affiliates will own 8,290,000 shares of Chardan common stock, which equates to 6.8% of New Dragonfly. This level of ownership does not include shares issuable under the Equity Facility, including the Commitment Shares which will be issued to an affiliate of Sponsor, were assumed to be issued based upon an assumed VWAP of $10.15 (the redemption price), that could result in up to an additional 14,926,109 shares being issuable, which includes the Commitment Shares, subject to the terms, conditions and limitations set forth in the Equity Facility, and result in additional dilution to Chardan’s public stockholders. This number is subject to increase or decrease if the stock price decreases or increases from the assumed price of $10.15.

254

Table of Contents


				After the Business Combination
	Before the Business			Assuming No			Assuming Maximum
	Combination			Redemption			Redemption
				Number of			Number of
	Number of			shares of			shares of
	shares of			New			New
	Chardan			Dragonfly			Dragonfly
	common			Common			Common
Name and Address of Beneficial Owner	stock	%		Stock	%		Stock	%
All Directors and Executive Officers of Chardan as a Group (Nine Individuals)⁽¹⁾⁽²⁾	3,162,500	20.00	%	3,662,500	6.47	%	3,662,500	8.34	%
Keny Propper	—	—			—		—	—
Jonas Grossman⁽¹⁾⁽²⁾	3,030,500	19.20	%	3,530,500	6.24	%	3,530,500	8.04	%
Alex Weil	22,000	*		22,000	*		22,000	*
Jonathan Biele	22,000	*		22,000	*		22,000	*
Perry Boyle	22,000	*		22,000	*		22,000	*
Roderick Hardamon	22,000	*		22,000	*		22,000	*
Jory Des Jardins	22,000	*		22,000	*		22,000	*
Hitesh Thakrar	22,000	*		22,000	*		22,000	*
Todd Thomson	22,000	*		22,000	*		22,000	*
Five Percent Holders of Chardan:
Chardan NexTech Investments 2 LLC⁽²⁾	3,030,500	19.20	%	3,530,500	6.24	%	3,530,500	8.04	%
HGC Investment Management Inc.⁽³⁾	925,000	5.85	%	925,000	1.64	%	925,000	2.11	%
MMCAP International Inc. SPC⁽⁴⁾	900,000	5.69	%	900,000	1.59	%	900,000	2.05	%
Polar Asset Management Partners Inc.⁽⁵⁾	834,996	5.28	%	834,996	1.48	%	834,996	1.90	%
Weiss Asset Management LP⁽⁶⁾	900,000	5.69	%	900,000	1.59	%	900,000	2.05	%
Directors and Executive Officers of New Dragonfly After Consummation of the Business Combination:
Dr. Denis Phares⁽⁷⁾⁽⁸⁾	—	—		15,887,548	28.04	%	15,887,548	36.10	%
Sean Nichols⁽⁷⁾⁽⁹⁾	—	—		3,546,740	6.27	%	3,546,740	8.07	%
John Marchetti	—	—		—	—		—	—
Nicole Harvey	—	—		31,952	*		31,952	*
Luisa Ingargiola	—	—		27,119	*		27,119	*
Brian Nelson	—	—		—	—		—	—
Perry Boyle	22,000	*		22,000	*		22,000	*
All Directors and Executive Officers of New Dragonfly as a Group ([Ten] Individuals)	[ ]	[ ]		[ ]	[ ]		[ ]	[ ]
Five Percent Holders of New Dragonfly After Consummation of the Business Combination:
Dynavolt Technology (HK) Ltd.	—	—		11,834,300	20.92	%	11,834,300	26.95	%
David Gong	—	—		2,869,817	5.03	%	2,869,817	6.46	%

* Less than one percent.

(1)	Includes the 3,030,500 shares held by Sponsor, which may be deemed to be beneficially owned by Jonas Grossman as the sole member of the Sponsor.

(2)

Includes 500,000 shares of PIPE securities that the Sponsor subscribed to purchase pursuant to the Subscription Agreement (or which the Sponsor may purchase in the open market as set forth in the Subscription Agreement). The Sponsor is or will be the record holder of such shares. Jonas Grossman is the sole member of the Sponsor. As such, Mr. Grossman may be deemed to have beneficial ownership of the Company Common Stock held directly by the Sponsor. Mr. Grossman disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. Certain other employees of Chardan or its affiliates, including each of our executive officers, have direct or indirect membership interests in the Sponsor, and thus have pecuniary interests in certain of the reported shares.

255

Table of Contents

(3)

Based solely on a Schedule 13G filed on February 14, 2022 — HGC Investment Management Inc., a company incorporated under the laws of Canada (“HGC”), is the investment manager to The HGC Fund LP, an Ontario limited partnership, and holds the shares of common stock on behalf of The HGC Fund LP. The principal address of HGC is 1073 Yonge Street, 2nd Floor, Toronto, Ontario M4W 2L2, Canada. HGC disclaims beneficial ownership of any shares of common stock other than to the extent it may have a pecuniary interest therein, directly or indirectly.

(4)

Based solely on a Schedule 13G filed on February 7, 2022 — Consists of 900,000 shares of common stock held by a group with shared dispositive power consisting of MMCAP International Inc. SPC, a Cayman Islands exempted company (“MMCAP”), and MM Asset Management Inc., company incorporated under the laws of Canada (“MM”). The principal address for MMCAP is MCCAP International Inc. SPC, c/o Mourant Governance Services (Cayman) Limited, 94 Solaris Avenue, Camana Bay, P.O. Box 1348, Grand Cayman, KY1-1108, Cayman Islands. The principal address for MM is 161 Bay Street, TD Canada Trust Tower, Suite 2240, Toronto, Ontario M5J 2S1 Canada.

(5)

Based solely on a Schedule 13G filed on February 7, 2022 — Polar Asset Management Partners Inc., a company incorporated under the laws of Ontario, Canada (“Polar”), is the investment manager of, and has voting and investment control with respect to the shares of common stock held by one or more investment accounts. The principal address for Polar is 16 York Street, Suite 2900, Toronto, Ontario, Canada M5J 0E6.

(6)

Based solely on a Schedule 13G filed on February 7, 2022 — Consists of 900,000 shares of common stock held by Weiss Asset Management LP, a Delaware limited partnership (“Weiss Asset Management”), WAM GP LLC, a Delaware limited liability company (“WAM GP”), and Andrew Weiss, an individual. Weiss Asset Management is the sole investment manager to a private investment partnership and one or more private investment funds. WAM GP is the sole general partner of Weiss Asset Management, and Andrew Weiss is the managing member of WAM GP. Shares reported for Weiss Asset Management, WAM GP, and Andrew Weiss include shares beneficially owned by the partnership and the private investment funds. The principal address for Weiss Asset Management, WAM GP, and Andrew Weiss is 222 Berkeley St., 16th Floor, Boston, Massachusetts 02116. Each of Weiss Asset Management, WAM GP, and Andrew Weiss disclaims beneficial ownership of the shares reported other than to the extent they may have a pecuniary interest therein, directly or indirectly.

(7)	Excludes 40,000,000 Earnout Shares of Common Stock as the earnout contingencies have not yet been met.

(8)	Includes 1,541,995 shares held on behalf of the Phares 2021 GRAT dated July 9, 2021, of which Dr. Phares is trustee.

(9)	Includes 71,169 shares held on behalf of the Nichols GRAT I dated June 14, 2021 and 3,394,761 held on behalf of the Nichols Living Trust 2015, of which Mr. Nichols is trustee.

256

Table of Contents

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Chardan Related Party Transactions

On July 23, 2020, the Sponsor agreed to loan Chardan an aggregate of $250,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Promissory Note”). The Promissory Note was non-interest bearing, unsecured and was repaid at August 19, 2021. Chardan cannot make any additional draws under this promissory note.

In connection with the Chardan IPO, Holdings, an affiliate of the Sponsor, purchased from Chardan an aggregate of 4,627,858 private warrants (including 266,402 in connection with the underwriters’ full exercise of their over-allotment option), at a price of approximately $0.93 per private warrant (an aggregate of $4,303,907.94), with each private warrant exercisable for one share of common stock at an exercise price of $11.50 per share.

If we do not complete our initial business combination by August 13, 2022 (or February 13, 2023, if we extend the period of time to consummate a business combination by the maximum amount as described in more detail in the Registration Statement), the proceeds from the sale of the private warrants will be included in the liquidating distribution to the holders of Chardan’s public shares. The private warrants are identical to the warrants sold as part of the public units in this offering except that, so long as they are held by the initial purchasers or their respective permitted transferees, the private warrants (i) will not be redeemable by Chardan, (ii) may not, subject to certain limited exceptions, be transferred, assigned or sold by the initial purchaser until 30 days after the completion of the Business Combination, and (iii) may be exercised by the holders on a cashless basis. The private warrants purchased by Holdings will not be exercisable after August 13, 2026, in accordance with Financial Industry Regulatory Authority, or FINRA, Rule 5110(g), as long as Chardan or any of its related persons beneficially own the private warrants.

To meet our working capital needs, if the funds not held in the trust account are insufficient, Chardan’s initial stockholders, officers and directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would be paid upon consummation of the Business Combination, without interest. Loans made by Chardan or any of its related persons will not be convertible into any of Chardan’s securities and Chardan and its related persons will have no recourse with respect to their ability to convert their loans into any of Chardan’s securities.

Chardan’s initial stockholders, holders of the private warrants (and all underlying securities) and holders of the warrants (and all underlying securities) issuable in payment of working capital loans made to Chardan, are entitled to registration rights pursuant to a registration rights agreement dated as of August 10, 2021, by and between Chardan, the Sponsor, Holdings, and the other parties thereto. The holders of a majority of these securities are entitled to make up to two demands that Chardan register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the private warrants or warrants issued in payment of working capital loans made to Chardan can elect to exercise these registration rights at any time after Chardan consummates a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. Chardan will bear the expenses incurred in connection with the filing of any such registration statements. Chardan and its related persons may not, with respect to the private warrants purchased by Holdings, (i) have more than one demand registration right at Chardan’s expense, (ii) exercise their demand registration rights after August 13, 2026, and (iii) exercise their “piggy-back” registration rights after August 13, 2028, as long as Chardan or any of its related persons are beneficial owners of private warrants.

257

Table of Contents

Chardan has until August 13, 2022, to consummate the Business Combination. However, if Chardan anticipates that it may not be able to consummate the Business Combination by August 13, 2022, Chardan’s insiders or their affiliates may, but are not obligated to, extend the period of time to consummate a business combination up to two times by an additional three months each time (until February 13, 2023, for a total of up to 18 months to complete a business combination); provided that, pursuant to the terms of Chardan’s amended and restated certificate of incorporation and the Investment Management Trust Agreement, the only way to extend the time available for Chardan to consummate the Business Combination is for Chardan’s insiders or their affiliates or designees, upon five days’ advance notice prior to the applicable deadline, to deposit into the trust account $1,150,000 ($0.10 per share in either case, or an aggregate of $2,300,000), on or prior to the date of the applicable deadline. In the event that Chardan’s insiders elected to extend the time to complete a business combination and deposited the applicable amount of money into trust, the insiders would receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that Chardan is unable to close a business combination unless there are funds available outside the trust account to do so. In the event that Chardan receives notice from its insiders five days prior to the applicable deadline of their intent to effect an extension, Chardan intends to issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, Chardan intends to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely deposited. Chardan’s insiders and their affiliates or designees are not obligated to fund the trust account to extend the time for Chardan to complete the Business Combination. To the extent that some, but not all, of Chardan’s insiders, decide to extend the period of time to consummate the Business Combination, such insiders (or their affiliates or designees) may deposit the entire amount required. If Chardan is unable to consummate the Business Combination within such time period, Chardan will, as promptly as possible but not more than 10 business days thereafter, redeem 100% of Chardan’s outstanding public shares for a pro rata portion of the funds held in the trust account, including a pro rata portion of any interest earned on the funds held in the trust account and not previously released to Chardan to pay its taxes, and then seek to dissolve and liquidate. However, Chardan may not be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of Chardan’s public stockholders. In the event of Chardan’s dissolution and liquidation, the private units will expire and will be worthless.

Chardan is not prohibited from pursuing an initial business combination with a business that is affiliated with the Sponsor, its affiliates, or our officers or directors, including a business combination jointly with Chardan or one or more entities affiliated with Chardan (a “Joint Affiliated Acquisition”). In the event we seek to complete our initial business combination with a business that is affiliated with the Sponsor, its affiliates or our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent firm that commonly renders valuation opinions that our initial business combination is fair to our stockholders from a financial point of view. Any such Affiliated Joint Acquisition or specified future issuance would be in addition to, and would not include, the forward purchase securities issued pursuant to the forward purchase contract.

Chardan will reimburse its officers and directors for any reasonable out-of-pocket business expenses incurred by them in connection with certain activities on Chardan’s behalf such as identifying and investigating possible target businesses and business combinations. There is no limit on the amount of out-of-pocket expenses reimbursable by Chardan; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the trust account and the interest income earned on the amounts held in the trust account, such expenses would not be reimbursed by Chardan unless Chardan consummates the Business Combination. Chardan’s audit committee will review and approve all reimbursements and payments made to any initial stockholder or member of Chardan’s management team, or Chardan’s or their respective affiliates, and any reimbursements and payments made to members of Chardan’s audit committee will be reviewed and approved by Chardan’s Board of Directors, with any interested director abstaining from such review and approval.

No compensation or fees of any kind, including finder’s fees, consulting fees or other similar compensation, will be paid to any of Chardan’s initial stockholders, officers or directors who owned shares of Chardan common stock prior to the Chardan IPO, or to any of their respective affiliates, prior to or with respect to the business combination (regardless of the type of transaction that it is).

All ongoing and future transactions between Chardan and any of Chardan’s officers and directors or their respective affiliates will be on terms believed by Chardan to be no less favorable to Chardan than are available from unaffiliated third parties. Such transactions, including the payment of any compensation, will require prior approval by a majority of Chardan’s uninterested “independent” directors or the members of Chardan’s board who do not have an interest in the transaction, in either case who had access, at Chardan’s expense, to Chardan’s attorneys or independent legal counsel. Chardan will not enter into any such transaction unless Chardan’s disinterested “independent” directors determine that the terms of such transaction are no less favorable to Chardan than those that would be available to Chardan with respect to such a transaction from unaffiliated third parties.

On August 11, 2021, we began to pay $10,000 per month to the Sponsor for office space, administrative and shared personnel support services. Upon completion of the Business Combination or our liquidation, we will cease paying these monthly fees. Accordingly, in the event the consummation of the Business Combination takes until August 13, 2022, the Sponsor will be paid a total of $120,000 ($10,000 per month) and will be entitled to be reimbursed for any out-of-pocket expenses.

258

Table of Contents

We may acquire a target company that has engaged Chardan, or another affiliate of the Sponsor, as a financial advisor, and such target company may pay such affiliate a financial advisory fee in connection with the Business Combination.

We have engaged Chardan Capital Markets as an advisor in connection with the Business Combination, pursuant to the Business Combination Marketing Agreement. Pursuant to that agreement, we will pay Chardan Capital Markets a cash fee for such services upon the consummation of the Business Combination in an amount equal to, in the aggregate, $4,427,500, being 3.5% of the gross proceeds of the Chardan IPO. As a result, Chardan Capital Markets will not be entitled to such fee unless we consummate the Business Combination. Chardan Capital Markets also acted as Chardan’s placement agent with respect to potential PIPE investments. Chardan Capital Markets will also receive a cash fee of $1,170,000 for other financial advisory services, including for advisory services provided with respect to placement of potential PIPE investments, and identifying and negotiating lender financing. Mr. Grossman is the Chief Executive Officer of, and Mr. Weil is Managing Director and Co-Head of Fintech Investment Banking of, Chardan Capital Markets. Mr. Grossman and Mr. Propper are also members of the board of directors of Chardan Capital Markets.

Related Party Financing

Concurrently with the execution of the Business Combination Agreement, Chardan entered into the Subscription Agreement with the Sponsor, an affiliate of Chardan Capital Markets. Pursuant to the Subscription Agreement, the Sponsor agreed to subscribe for and purchase, and Chardan agreed to issue and sell to the Sponsor, on the Closing Date, an aggregate of 500,000 shares of PIPE Securities in exchange for an aggregate purchase price of $5,000,000. The number of PIPE Securities that the Sponsor is obligated to purchase under the Subscription Agreement shall be reduced by the number of shares of common stock of Chardan that the Sponsor may purchase in the open market. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Subscription Agreement” for additional information.

Concurrently with the execution of the Business Combination Agreement, Chardan and Dragonfly entered into a commitment letter (the “Debt Commitment Letter”) with CCM Investments 5 LLC, an affiliate of Chardan Capital Markets (“CCM 5” and in connection with the Term Loan, the “Chardan Lender”), and EICF Agent LLC (“EIP” and, collectively with the Chardan Lender, the “Initial Term Loan Lenders”), pursuant to which the Initial Term Loan Lenders have agreed to provide Dragonfly with a senior secured term loan facility in an aggregate principal amount of $75 million (the “Term Loan”) on the Closing Date subject to the satisfaction of a number of specified conditions set forth in the Debt Commitment Letter. The obligations of the Initial Term Loan Lenders to provide the Term Loan will terminate on October 31, 2022 (or such later date reasonably acceptable to the Initial Term Loan Lenders) if the Closing Date has not occurred by such date. The Chardan Lender has backstopped its commitment under the Debt Commitment Letter by entering into a backstop commitment letter, dated as of May 20, 2022 (the “Backstop Commitment Letter”), with a certain third-party financing source (the “Backstop Lender”), pursuant to which the Backstop Lender has committed to purchase from the Chardan Lender the aggregate amount of the Term Loan held by the Chardan Lender (the “Backstopped Loans”) immediately following the issuance of the Term Loan on the Closing Date subject only to final documentation that is consistent in all material respects with the Debt Commitment Letter and the Summary of Terms and Conditions attached thereto. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Debt Commitment Letter” for additional information.

In addition, pursuant to the Equity Facility Letter Agreement, Chardan and Dragonfly agreed to enter into the Equity Facility Definitive Documentation prior to the Closing Date reflecting the terms in the Equity Facility Letter Agreement. Pursuant to and on the terms of the Equity Facility Definitive Documentation, the Equity Facility Investor will commit to purchase up to an aggregate of $150,000,000 in shares of New Dragonfly’s common stock from time to time at the request of the New Dragonfly, subject to certain limitations and the satisfaction of certain conditions. Further, New Dragonfly will agree to issue Equity Facility Commitment Shares having a value of $1 million determined based on the applicable trading price at the time of issuance to the Equity Facility Investor as consideration for its irrevocable commitment to purchase the shares of New Dragonfly common stock upon the terms and subject to the satisfaction of the conditions set forth in the Equity Facility Definitive Documentation. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Related Agreements — Equity Facility Letter Agreement” for additional information.

Dragonfly Related Party Transactions

259

Table of Contents

SECURITIES ACT RESTRICTIONS ON RESALE OF CHARDAN’S SECURITIES

In general, Rule 144 of the Securities Act (“Rule 144”) permits the resale of restricted securities without registration under the Securities Act if certain conditions are met. Rule 144 is not available for the resale of restricted securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company, including us. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met at the time of such resale:

●

the issuer of the securities that was formerly a shell company has ceased to be a shell company;

●

the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;

●

the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and

●

at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.

We anticipate that following the consummation of the Business Combination, we will no longer be a shell company, and as long as the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for the resale of our restricted securities.

If the above conditions have been met and Rule 144 is available, a person who has beneficially owned restricted shares of common stock or warrants for at least one year would be entitled to sell their securities pursuant to Rule 144, provided that such person is not deemed to be one of our affiliates at the time of, or at any time during the three months preceding, a sale. If such persons are deemed to be our affiliates at the time of, or at any time during the three months preceding, a sale, such persons would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:

●

1% of the total number of shares of common stock or warrants, as applicable, then outstanding; or

●

the average weekly reported trading volume of the common stock or warrants, as applicable, during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales by affiliates under Rule 144, when available, will also limited by manner of sale provisions and notice requirements.

As of the date of this proxy statement, Chardan had 15,812,500 shares of common stock outstanding. Of these shares, 12,650,000 shares sold in the Chardan IPO are freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act. All of the shares of Chardan common stock owned by the Sponsor are restricted securities under Rule 144, in that they were issued in private transactions not involving a public offering. If the Business Combination is approved, the PIPE Securities to be issued pursuant to the Subscription Agreement will be restricted securities for purposes of Rule 144. Pursuant to the terms of the Registration Rights Agreement, we will be obligated to submit to or file with the SEC, within 30 calendar days after the Closing, a registration statement registering for resale, pursuant to Rule 415 under the Securities Act, the PIPE Securities and to use commercially reasonable efforts to have such shelf registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) 90 calendar days after the filing thereof if the SEC notifies us that it will “review” the shelf registration statement and (ii) the 10th business day after the date we are notified (orally or in writing, whichever is earlier) by the SEC that the shelf registration statement will not be “reviewed” or will not be subject to further review.

As of the date of this proxy statement, there are 14,115,358 warrants of Chardan outstanding, consisting of 9,487,500 public warrants originally sold as part of the units issued in the Chardan IPO and 4,627,858 private warrants that were sold by Chardan to the Sponsor in a private sale prior to the Chardan IPO. Each warrant is exercisable for one share of Chardan common stock, in accordance with the terms of the Warrant Agreement governing the warrants. The public warrants are freely tradable, except for any warrants purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act. In addition, we will be obligated to file no later than 60 days after the Closing a registration statement under the Securities Act covering the 14,115,358 shares of Chardan common

260

Table of Contents

stock that may be issued upon the exercise of the public warrants, and cause such registration statement to become effective and maintain the effectiveness of such registration statement until the expiration of the warrants.

We expect Rule 144 to be available for the resale of the above noted restricted securities as long as the conditions set forth in the exceptions listed above are satisfied following the Business Combination.

261

Table of Contents

APPRAISAL RIGHTS AND DISSENTER’S RIGHTS

Chardan

Neither Chardan stockholders nor Chardan unit or warrant holders have appraisal rights under the DGCL in connection with the Business Combination.

Dissenter’s Rights for Holders of Dragonfly Shares

If the Business Combination is approved and the Merger is consummated, Dragonfly will comply with the applicable provisions of the Nevada Dissenter’s Rights Statutes, including by providing the notification required by NRS 92A.410(2) and the dissenter’s notice described in NRS 92A.430.

262

Table of Contents

LEGAL MATTERS

The legality of the securities offered by this proxy statement/prospectus will be passed upon for Dragonfly by O’Melveny & Myers LLP, San Francisco, California. Certain legal matters will be passed upon for Chardan by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.

EXPERTS

The financial statements of Dragonfly and its subsidiaries as of December 31, 2021 and December 31, 2020, and for the years ended December 31, 2021 and 2020, appearing in this proxy statement/prospectus, have been so included in reliance on the reports of BDO USA, LLP, an independent registered public accounting firm, given on the authority of said firms as experts in auditing and accounting.

The financial statements of Chardan as of December 31, 2021 and 2020, and for the year ended December 31, 2021 and for the period from June 23, 2020 (inception) through December 31, 2020 included in this proxy statement/prospectus have been audited by WithumSmith+Brown, PC, an independent registered public accounting firm, as set forth in their report thereon, appearing elsewhere in this proxy statement/ prospectus, and are included in reliance on such report given upon such firm as experts in auditing and accounting.

SUBMISSION OF STOCKHOLDER PROPOSALS

The Chardan Board is aware of no other matter that may be brought before the special meeting. Under Delaware law, only business that is specified in the notice of special meeting to stockholders may be transacted at the special meeting.

FUTURE STOCKHOLDER PROPOSALS

If the Business Combination is completed, you will be entitled to attend and participate in New Dragonfly’s annual meetings of stockholders. For any proposal to be considered for inclusion in New Dragonfly’s proxy statement and form of proxy for submission to the stockholders at its 2022 annual meeting of stockholders, it must be submitted in writing and comply with the requirements of Rule 14a-8 of the Exchange Act and the amended and restated bylaws. Such proposals must be received by New Dragonfly at its executive offices a reasonable time before New Dragonfly begins to print and mail its 2022 annual meeting proxy materials in order to be considered for inclusion in New Dragonfly’s proxy materials for the 2022 annual meeting.

OTHER STOCKHOLDER COMMUNICATIONS

Stockholders and interested parties may communicate with the Chardan Board, any committee chairperson or the non-management directors as a group by writing to the Chardan Board or committee chairperson in care of Chardan NexTech Acquisition 2 Corp., 17 State Street, 21^st Floor, New York, New York 10004.

DELIVERY OF DOCUMENTS TO STOCKHOLDERS

Pursuant to the rules of the SEC, Chardan and services that it employs to deliver communications to its stockholders are permitted to deliver to two or more stockholders sharing the same address a single copy of each of Chardan’s annual report to stockholders and Chardan’s proxy statement. Upon written or oral request, Chardan will deliver a separate copy of the annual report and/or proxy statement to any stockholder at a shared address to which a single copy of each document was delivered and who wishes to receive separate copies of such documents. Stockholders receiving multiple copies of such documents may likewise request that Chardan deliver single copies of such documents in the future. Stockholders may notify Chardan of their requests by calling or writing Chardan at its principal executive offices at 17 State Street, 21^stFloor, New York, New York 10004.

263

Table of Contents

WHERE YOU CAN FIND MORE INFORMATION

Chardan files reports, proxy statements and other information with the SEC as required by the Exchange Act. You may access information on Chardan at the SEC web site containing reports, proxy statements and other information at: http://www.sec.gov.

Information and statements contained in this proxy statement or any annex to this proxy statement are qualified in all respects by reference to the copy of the relevant contract or other annex filed as an exhibit to this proxy statement.

All information contained in this document relating to Chardan has been supplied by Chardan, and all such information relating to Dragonfly has been supplied by Dragonfly. Information provided by one another does not constitute any representation, estimate or projection of the other.

If you would like additional copies of this document or if you have questions about the Business Combination, you should contact via phone or in writing:

Chardan NexTech Acquisition 2 Corp.

17 State Street, 21^st Floor,

New York, NY 10004

Tel.: (646) 465-9001

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower

Stamford, CT 06902

Individuals call toll-free: 800-662-5200

Banks and brokers call: 203-658-9400

Email: CNTQ.info@investor.morrowsodali.com

If you are a stockholder of Chardan and would like to request documents, please do so by August 25, 2022, in order to receive them before the special meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt means.

This document is a proxy statement of Chardan for the special meeting. We have not authorized anyone to give any information or make any representation about the Business Combination, Dragonfly or Chardan that is different from, or in addition to, that contained in this proxy statement. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement speaks only as of the date of this proxy statement, unless the information specifically indicates that another date applies.

264

Table of Contents

INDEX TO FINANCIAL STATEMENTS

CHARDAN NEXTECH ACQUISITION 2 CORP.

FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-3

Balance Sheets as of December 31, 2021 and December 31, 2020	F-4

Statements of Operations for the year ended December 31, 2021 and for the period from June 23,2020 (inception) through December 31, 2020	F-5

Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2021 and for the period from June 23, 2020 (inception) through December 31, 2020	F-6

Statements of Cash Flows for the year ended December 31, 2021 and for the period from June 23, 2020 (inception) through December 31, 2020	F-7

Notes to Financial Statements	F-8

Condensed Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	F-23

Unaudited Condensed Statements of Operations for the three months ended March 31, 2022 and 2021	F-24

Unaudited Condensed Statements of Changes in Stockholders’ (Deficit) Equity for the three months ended March 31, 2022 and 2021	F-25

Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2022 and 2021	F-26

Notes to Unaudited Condensed Financial Statements	F-27

F-1

Table of Contents

DRAGONFLY ENERGY CORP.

FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-42

Balance Sheets as of December 31, 2021 and December 31, 2020	F-43

Statements of Operations for the years ended December 31, 2021 and December 31, 2020	F-44

Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and December 31, 2020	F-45

Statements of Cash Flows for the years ended December 31, 2021 and December 31, 2020	F-46

Notes to Financial Statements	F-46

Condensed Balance Sheets at March 31, 2022 and December 31, 2021 (unaudited)	F-65

Condensed Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (unaudited)	F-66

Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited)	F-67

Condensed Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)	F-68

Notes to Financial Statements (Unaudited)	F-69

F-2

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Chardan NexTech Acquisition 2 Corp.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Chardan NexTech Acquisition 2 Corp. (the “Company”) as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2021 and for the period from June 23, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the year ended December 31, 2021 and for the period from June 23, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and complete a business combination by August 23, 2022 then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ WithumSmith+Brown, PC

We have served as the Company’s auditor since 2021.

New York, New York

March 28, 2022

PCAOB ID Number 100

F-3

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

BALANCE SHEETS


	December 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash	$	799,808	$	25,000
Prepaid expenses		302,590		—
Total current assets		1,102,398		25,000
Investments held in Trust Account		128,421,215		—
Total Assets	$	129,523,613	$	25,000

LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	16,862	$	—
Accrued expenses		31,749		1,000
Franchise tax payable		65,600		—
Total current liabilities		114,211		1,000
Warrant liabilities		2,036,258		—
Total Liabilities		2,150,469		1,000

Commitments and Contingencies

Common stock, $0.0001 par value; 12,650,000 shares at redemption value of $10.15 at December 31, 2021 and December 31, 2020, respectively		128,397,500		—

Stockholders’ Equity (Deficit)
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at December 31, 2021 and December 31, 2020, respectively		—		—
Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,162,500 shares issued and outstanding (excluding 12,650,000 shares subject to possible redemption) at December 31, 2021 and December 31, 2020, respectively		317		317
Additional paid-in capital		—		24,683
Accumulated deficit		(1,024,673)		(1,000)
Total Stockholders’ Equity (Deficit)		(1,024,356)		24,000
Total Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ (Deficit) Equity	$	129,523,613	$	25,000

The accompanying notes are an integral part of these financial statements.

F-4

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

STATEMENTS OF OPERATIONS


			For the period from
			June 23, 2020
	For the year ended		(inception) through
	December 31, 2021		December 31, 2020
Operating and formation costs	$	292,074	$	1,000
Franchise tax expense		65,600		—
Loss from operations		(357,674)		(1,000)
Warrant issuance costs		(18,797)		—
Loss on sale of private warrants		(1,253,928)		—
Net gain on investments held in Trust Account		23,715		—
Change in fair value of warrant liabilities		3,517,171		—
Net income (loss)	$	1,910,487	$	(1,000)
Basic weighted average shares outstanding		7,732,021		2,750,000
Basic net income (loss) per common share	$	0.25	$	(0.00)
Diluted weighted average shares outstanding		7,991,952		2,750,000
Diluted net income (loss) per common share	$	0.24	$	(0.00)

The accompanying notes are an integral part of these financial statements.

F-5

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE YEAR ENDED DECEMBER 31, 2021 AND THE PERIOD FROM JUNE 23, 2020 (INCEPTION)

THROUGH DECEMBER 31, 2020


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity (Deficit)
Balance at June 23, 2020 (inception)	—	$	—	$	—	$	—	$	—
Issuance of common stock to Sponsor⁽¹⁾⁽²⁾	3,162,500		317		24,683		—		25,000
Net loss	—		—		—		(1,000)		(1,000)
Balance at December 31, 2020	3,162,500		317		24,683		(1,000)		24,000
Proceeds from Initial Public Offering Costs allocated to Public Warrants (net of offering costs)	—		—		15,052,646		—		15,052,646
Accretion of common stock to redemption amount	—		—		(15,077,329)		(2,934,160)		(18,011,489)
Net income	—		—		—		1,910,487		1,910,487
Balance at December 31, 2021	3,162,500	$	317	$	—	$	(1,024,673)	$	(1,024,356)

(1)

Includes up to 412,500 shares of common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriter. On August 18, 2021, the underwriters’ exercised the over-allotment option in full, thus these shares are no longer subject to forfeiture (see Note 6).

(2)

On March 4, 2021, the Company effected a 2.875-for-1 stock split, resulting in 2,875,000 shares of common stock outstanding (see Note 5). On August 10, 2021, the Company effectuated a 1.1-for-1 stock split, resulting in an aggregate of 3,162,500 shares of common stock outstanding (see Note 5). All share and per-share amounts have been retroactively restated to reflect the two stock splits.

The accompanying notes are an integral part of these financial statements.

F-6

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

STATEMENTS OF CASH FLOWS


			For the Period from
			June 23, 2020
	For the year ended		(inception) Through
	December 31, 2021		December 31, 2020
Cash Flows from Operating Activities:
Net income (loss)	$	1,910,487	$	(1,000)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Warrant issuance costs		18,797		—
Net gain on investments held in Trust Account		(23,715)		—
Loss on sale of private warrants		1,253,928		—
Change in fair value of warrant liabilities		(3,517,171)		—
Changes in operating assets and liabilities:
Accounts payable		16,863
Accrued expenses		30,749	$	1,000
Prepaid expenses		(302,590)		—
Franchise tax payable		65,600		—
Net cash used in operating activities		(547,052)		—

Cash Flows from Investing Activities:
Cash deposited in Trust Account		(128,397,500)		—
Net cash used in investing activities		(128,397,500)		—

Cash Flows from Financing Activities:
Proceeds from initial public offering, net of underwriter’s discount paid		126,000,000		—
Proceeds from promissory note – related party		155,000		—
Repayment of promissory note – related party		(155,000)		—
Proceeds from issuance of Founder Shares to Sponsor		—		25,000
Proceeds from sale of private warrants		4,299,500		—
Payment of offering costs		(580,140)		—
Net cash provided by financing activities		129,719,360		25,000

Net Change in Cash		774,808		25,000
Cash – beginning of period		25,000		—
Cash – end of period	$	799,808	$	25,000

The accompanying notes are an integral part of these financial statements.

F-7

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Chardan NexTech Acquisition 2 Corp (the “Company”) is a blank check company incorporated in Delaware on June 23, 2020. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of December 31, 2021, the Company had not commenced any operations. All activity for the year ended December 31, 2021 and for the period from June 23, 2020 (inception) through December 31, 2020 relates to the Company’s formation and initial public offering (“Initial Public Offering”) described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.

The registration statement on Form S-1 (the “Registration Statement”) for the Company’s Initial Public Offering was declared effective on August 10, 2021. On August 13, 2021, the Company consummated the Initial Public Offering of 11,000,000 units (the “Units” and, with respect to the common stock, par value $0.0001 per share, of the Company included in the Units sold, the “Public Shares”, and with respect to the warrants of the Company included in the Units sold, the “Public Warrants”), at $10.00 per Unit, generating gross proceeds of $110,000,000, which is discussed in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,361,456 warrants (the “Private Warrants”, together with the Public Warrants, the “Warrants”) at a price of $0.93 per Private Warrant in a private placement to Chardan NexTech 2 Warrant Holdings LLC, a Delaware limited liability company (“Holdings”), an affiliate of Chardan NexTech Investments 2 LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $4,052,000, which is described in Note 4.

The Company had granted the underwriters in the Initial Public Offering a 45-day option to purchase up to 1,650,000 Units to cover over-allotments, if any (see Note 6). On August 16, 2021, the underwriters fully exercised the over-allotment option and, on August 18, 2021, purchased an additional 1,650,000 Units (the “Over-Allotment Units”) at a purchase price of $10.00 per Over-Allotment Unit, generating gross proceeds of $16,500,000.

Simultaneously with the closing of the exercise of the over-allotment option, the Company consummated the sale of 266,402 warrants (the “Over-Allotment Private Warrants”) at a purchase price of $0.93 per Over-Allotment Private Warrant in a private placement to the Holdings, generating gross proceeds of $247,500.

Following the closing of the Initial Public Offering and underwriters’ over-allotment option, an amount of $128,397,500 from the net proceeds of the sale of the Units and Over-Allotment Units and a portion of the proceeds from the sale of the Private Warrants and Over-Allotment Private Warrants was placed in a trust account (the “Trust Account”) and was invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.

Transaction costs related to the issuances described above amounted to $1,080,140, consisting of $500,000 of cash underwriting fees and $580,140 of other offering costs.

F-8

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.15 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The Public Shares subject to redemption was recorded at redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”).

The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

The Company will have 12 months, or August 13, 2022, from the closing of the Initial Public Offering to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate an initial Business Combination within 12 months, the Company’s insiders or their affiliates may, but are not obligated to, extend the period of time to consummate a Business Combination up to two times by an additional three months each time (for a total of up to 18 months, or February 13, 2023, to complete a Business Combination). If the Company is unable to consummate an initial Business Combination within the above time period, the Company will distribute the aggregate amount then on deposit in the Trust Account, pro rata to the Company’s public stockholders, by way of the redemption of their shares and thereafter cease all operations except for the purposes of winding up of the Company’s affairs. In such event, the warrants will expire and be worthless.

The initial stockholders have agreed to waive their redemption rights with respect to any shares they own in connection with the consummation of the initial Business Combination, including their Founder Shares and Public Shares that they purchase during or after the offering, if any. In addition, the initial stockholders have agreed to waive their rights to liquidating distributions with respect to their Founder Shares if the Company fails to consummate an initial Business Combination within 18 months (assuming both of the three-month extensions were executed) from the closing of this offering. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to receive liquidating distributions with respect to such Public Shares if the Company fails to consummate an initial Business Combination within the required time period.

F-9

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.15 per Public Share or (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay the Company’s taxes, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Going Concern Consideration

As of December 31, 2021, the Company had $799,808 in cash held outside of the Trust Account and working capital of $988,186. The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. In connection with our assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements — Going Concern,” the Company has until February 13, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about its ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 13, 2023.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.

F-10

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act Registration Statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2021 and 2020.

Investments Held in Trust Account

The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in Net income (loss) from investments held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

F-11

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

Common Stock Subject to Possible Redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as liability instruments and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2021, 12,650,000 shares of common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from the initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Increases or decreases in the carrying amount of redeemable common stock is affected by charges against additional paid in capital and accumulated deficit.

As of December 31, 2021, the common stock reflected in the balance sheet is reconciled in the following table:


Gross proceeds	$	126,500,000
Less:
Proceeds allocated to Public Warrants		(15,180,000)
Issuance costs allocated to common stock		(933,989)
Plus:
Accretion of carrying value to redemption value		18,011,489
Common stock subject to possible redemption	$	128,397,500

Offering Costs associated with the Initial Public Offering

The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $1,080,140, consisting of $500,000 of cash underwriting fees and $580,140 of other offering costs. The Company recorded $933,989 of offering costs as a reduction of temporary equity in connection with the redeemable common stock included in the Units. The Company recorded $127,354 as a reduction of permanent equity in connection with the Public Warrants included in the Units and immediately expensed $18,797 of offering costs in connection with the Private Warrants that were classified as liabilities.

Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

F-12

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

The Company accounts for the Private Warrants issued concurrently in connection with the Initial Public Offering in accordance with ASC 815-40, under which the Private Warrants will not meet the criteria for equity classification and must be recorded as liabilities. As the Private Warrants meet the definition of a derivative as contemplated in ASC 815, the Private Warrants will be measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement (“ASC 820”), with changes in fair value recognized in the statements of operations in the period of change.

The Public Warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and each balance sheet date thereafter.

Income Taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740 — Income Taxes (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The effective tax rate is less than the U.S. statutory corporate tax rate of 21% because of the unrealized change in fair value of warrant liabilities, which was the biggest factor in net income and is not taxable. The Company had a loss from operations during the year ended December 31, 2021. The Company is subject to income tax examinations by major taxing authorities since inception.

Net Income (Loss) Per Share of Common Stock

Net income (loss) per common share is computed by dividing net earnings by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the effect of the Warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 14,115,358 shares in the calculation of diluted income per share, since the exercise of the Warrants are contingent upon the occurrence of future events.

F-13

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):


			For the period
			from June 23,
			2020 (inception)
	For the year		through
	ended December 31,		December 31,
	2021		2020
Basic and diluted net income (loss) per share:
Numerator:
Net income (loss)	$	1,910,487	$	(1,000)
Denominator:
Basic weighted average shares outstanding		7,732,021		2,750,000
Basic net income (loss) per common share	$	0.25	$	(0.00)
Diluted weighted average shares outstanding		7,991,952		2,750,000
Diluted net income (loss) per common share	$	0.24	$	(0.00)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair Value of Financial Instruments

The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

The carrying amounts reflected in the balance sheet for current assets and current liabilities approximate fair value due to their short-term nature.

Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

See Note 10 for additional information on assets and liabilities measured at fair value.

F-14

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

Recent Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if converted method for all convertible instruments. ASU 2020-06 is effective for the Company on January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted ASU 2020-06 effective January 1, 2021 using the full retrospective method of transition. The adoption of ASU 2020-06 did not have a material impact on the financial statements for the fiscal year ended December 31, 2021.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

NOTE 3. INITIAL PUBLIC OFFERING

The Registration Statement for the Company’s Initial Public Offering was declared effective on August 10, 2021. On August 13, 2021, the Company completed its Initial Public Offering of 11,000,000 Units, at $10.00 per Unit, generating gross proceeds of $110,000,000. Each Unit consisted of one Public Share, and three-quarters of one Public Warrant. Each Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per whole share (see Note 7).

The Company had granted the underwriters in the Initial Public Offering a 45-day option to purchase up to 1,650,000 additional Units to cover over-allotments, if any (see Note 6). On August 18, 2021, the underwriters fully exercised the over-allotment option and purchased an additional 1,650,000 Over-Allotment Units, generating gross proceeds of $16,500,000.

NOTE 4. PRIVATE PLACEMENT

Simultaneously with the closing of the Initial Public Offering, Holdings purchased an aggregate of 4,361,456 private warrants at a price of $0.93 per Private Warrant ($4,052,000 in the aggregate). Each Private Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share (see Note 7).

The proceeds from the Private Warrants were added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination within 12 months (or up to 18 months if the Company’s time to complete a Business Combination is extended), the proceeds of the sale of the Private Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will expire worthless. The Company classifies the outstanding Private Warrants as warrant liabilities on the balance sheet in accordance with the guidance contained in ASC 815-40.

Simultaneously with the closing of the exercise of the over-allotment option (see Note 6), the Company consummated the sale of 266,402 Over-Allotment Private Warrants at a purchase price of $0.93 per Over-Allotment Private Warrant in a private placement to Holdings, generating gross proceeds of $247,500.

F-15

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

NOTE 5. RELATED PARTY TRANSACTIONS

Founder Shares

On June 23, 2020, the Company issued 1,000,000 shares of common stock for an aggregate price of $25,000 (the “Founder Shares”). On March 4, 2021, the Company effected a 2.875-for-1 stock split of its issued and outstanding shares of common stock, resulting in an aggregate of 2,875,000 shares of common stock issued and outstanding. On August 10, 2021, the Company effectuated a 1.1-for-1 stock split, resulting in an aggregate of 3,162,500 shares of common stock outstanding. Shares and the associated amounts have been retroactively restated in these financial statements to reflect the two stock splits. The Founder Shares include an aggregated of up to 412,500 shares of common stock subject to forfeiture by the initial stockholders to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the initial stockholders would collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering.

On August 18, 2021, the underwriters’ exercised the over-allotment option in full, thus these shares are no longer subject to forfeiture (see Note 6).

With certain limited exceptions, of the Founder Shares will not be transferred, assigned, sold or released from escrow until the earlier of (i) six months after the date of the consummation of a Business Combination (the “Escrow Period”) or (ii) the date on which the closing price of the Company’s shares of common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any ten trading days within any 30-trading day period commencing after the consummation of a Business Combination. The remaining 50% of the Founder Shares will not be transferred, assigned, sold or released from escrow until the expiration of the Escrow Period. In either case, if, subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property, and either (1) before the expiration of the Escrow Period, then the Founder Shares will be canceled, or (2) after the expiration of the Escrow Period, release the Founder Shares to the initial stockholders.

Promissory Note — Related Party

On July 23, 2020, the Sponsor agreed to loan the Company an aggregate of up to $250,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Promissory Note”). The promissory note was non-interest bearing, unsecured and was repaid at August 19, 2021. As of December 31, 2021 and December 31, 2020, there was no outstanding balance under the note. The Company cannot make any additional draws under this promissory note.

Administrative Support Agreement

The Company entered into an agreement, commencing on the effective date of the Initial Public Offering, to pay an affiliate of the Sponsor a total of $10,000 per month for office space, administrative and support services. Upon completion of a Business Combination or liquidation, the Company will cease paying these monthly fees. To date, the Company has not exercised its option to use such services.

Related Party Loans

In order to finance transaction costs in connection with an intended initial Business Combination, the Company’s initial stockholders, officers and directors or any of their respective affiliates may, but are not obligated to, loan the Company funds as may be required from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would be paid upon consummation of an initial Business Combination, without interest. Loans made by Chardan Capital Markets, LLC or any of its related persons will not be convertible into any of the Company’s securities and Chardan Capital Markets, LLC and its related persons will have no recourse with respect to their ability to convert their loans into any of the Company’s securities. As of December 31, 2021 and December 31, 2020, the Company had no working capital loans outstanding.

F-16

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

NOTE 6. COMMITMENTS AND CONTINGENCIES

Registration and Stockholder Rights Agreement

The holders of the Founder Shares and Private Warrants (and any shares of common stock issuable upon the exercise of the Private Warrants) will be entitled to registration rights pursuant to an agreement to be signed prior to or on the effective date of the Initial Public Offering. The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Private Warrants (and underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to Registration Statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such Registration Statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option to purchase up to 1,650,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. On August 18, 2021, the underwriters fully exercised the over-allotment option to purchase an additional 1,650,000 Units at an offering price of $10.00 per Unit for an aggregate purchase price of $16,500,000. In addition, the underwriters were paid a cash underwriting discount of $500,000 upon the closing of the Initial Public Offering.

Business Combination Marketing Agreement

The Company has engaged Chardan Capital Markets, LLC as an advisor in connection with the Company’s Business Combination to assist the Company in holding meetings with the stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with press releases and public filings in connection with the Business Combination. The Company will pay Chardan Capital Markets, LLC a cash fee for such services upon the consummation of the Company’s initial Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the Initial Public Offering. As a result, Chardan Capital Markets, LLC will not be entitled to such fee unless the Company consummates the initial Business Combination.

Related Party Extension Loans

As discussed in Note 1, the Company may extend the period of time to consummate an initial Business Combination two times, for an additional three months each time (for a total of up to 18 months to complete a Business Combination). In order to extend the time available for the Company to consummate a Business Combination, the initial stockholders or their affiliates or designees must deposit into the Trust Account $1,265,000 ($0.10 per share, or an aggregate of $2,530,000) if extended for each of the full three months), on or prior to the date of the applicable deadline. Any such payments would be made in the form of a loan. The terms of the promissory note to be issued in connection with any such loans have not yet been negotiated. If the Company completes an initial Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. If the Company does not complete an initial Business Combination, the Company will not repay such loans. The initial stockholders and their affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to complete an initial Business Combination.

F-17

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

NOTE 7. WARRANTS

As of December 31, 2021 and December 31, 2020 there was 9,487,500 and no Public Warrants and 4,627,858 and no Private Warrants outstanding, respectively. Each whole Public Warrant will entitle the holder to purchase one share of common stock at an exercise price of $11.50 per whole share. Each of the Private Warrants is exercisable to purchase one share of common stock at a price of $11.50 per share, subject to adjustment. The proceeds from the sale of the Private Warrants were added to the net proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Warrants will be used to fund the redemption of the Public Shares (and the Private Warrants will expire worthless). The Warrants provide for a cashless exercise which the Company’s management determined to be a net settlement feature with no obligation to settle in cash. The net shares issued in a cashless exercise are based on the fair value of the Company’s common stock at the time the Warrants are exercised.

Each Warrant shall, when countersigned by the Warrant Agent, entitle the Registered Holder to purchase from the Company the number of shares of common stock at $11.50 per share. The Public Warrants may only be exercised for a whole number of Warrant Shares by a Registered Holder. No fractional shares will be issued.

A Warrant may be exercised only during the period (“Exercise Period”) commencing 30 days after the completion of the Company’s initial business combination and terminating at 5:00 p.m., New York City time, on the earlier to occur of (i) (A) five years following the completion of the Company’s initial business combination with respect to the Public Warrants, and (B) five years from the effective date of the Registration Statement with respect to the Private Warrants purchased by Chardan NexTech 2 Warrant Holdings LLC, provided that once the Private Warrants are not beneficially owned, directly or indirectly, by Chardan Capital Markets, LLC or any of its related persons anymore, the Private Warrants may not be exercised five years following the completion of the Company’s initial business combination, and (ii) the date fixed for redemption of the Warrants as provided in Section 6 of this Warrant Agreement (“Expiration Date”). Except with respect to the right to receive the Redemption Price, each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights shall cease at the close of business on the Expiration Date. The Company may extend the duration of the Warrants by delaying the Expiration Date; provided, however, that the Company (i) may not extend the duration of the Private Warrants by delaying the Expiration Date and (ii) will provide written notice of not less than 10 days to Registered Holders of such extension and that such extension shall be identical in duration among all of the then outstanding Warrants.

The Company is not required to issue any fraction of a Warrant Share in connection with the exercise of Warrants, and in any case where the Registered Holder would be entitled under the terms of the Warrants to receive a fraction of a Warrant Share upon the exercise of such Registered Holder’s Warrants, issue or cause to be issued only the largest whole number of Warrant Shares issuable on such exercise (and such fraction of a Warrant Share will be disregarded); provided, that if more than one Warrant certificate is presented for exercise at the same time by the same Registered Holder, the number of whole Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares issuable on exercise of all such Warrants.

The Private Warrants: (i) will be exercisable either for cash or on a cashless basis at the holders option and (ii) will not be redeemable by the Company, in either case as long as the Private Warrants are held by the initial purchasers or any of their permitted transferees (as prescribed in the Subscription Agreement). The Private Warrants may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of, the Private Warrants (or any securities underlying the Private Warrants) for a period of one hundred eighty (180) days following the effective date of the Registration Statement to anyone other than any member participating in the Public Offering and the officers or partners thereof, if all securities so transferred remain subject to the lock-up restriction for the remainder of the time period.

F-18

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

All (and not less than all) of the outstanding Warrants may be redeemed, in whole and not in part, at the option of the Company, at any time from and after the Warrants become exercisable, and prior to their expiration, at the office of the Warrant Agent, at the price of $.01 per Warrant (“Redemption Price”); provided that the last sales price of the common stock has been equal to or greater than $16.00 per share (subject to adjustment for splits, dividends, recapitalizations and other similar events) (the “Redemption Trigger Price”), for any ten (10) trading days within a thirty (30) trading day period ending on the third business day prior to the date on which notice of redemption is given and provided further that there is a current Registration Statement in effect with respect to the shares of common stock underlying the Warrants for each day in the aforementioned 30-day trading period and continuing each day thereafter until the Redemption Date. For avoidance of doubt, if and when the warrants become redeemable by the Company, the Company may exercise its redemption right, even if it is unable to register or qualify the Warrant Shares for sale under all applicable state securities laws.

The Company accounts for the 4,627,858 Private Warrants issued in connection with the Initial Public Offering in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the private warrants do not meet the criteria for equity treatment thereunder, each private warrant must be recorded as a liability. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities will be adjusted to its current fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.

The Public Warrants are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.

NOTE 8. STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2021 and December 31, 2020, the Company had no issued or outstanding shares of preferred stock.

Common stock —The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. On December 31, 2021 and December 31, 2020, there were 15,812,500 shares of common stock issued and outstanding, including 12,650,000 shares of common stock subject to possible redemption. Of the 15,812,500 shares of common stock outstanding, up to 412,500 shares were subject to forfeiture to the Company by the initial stockholders for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial stockholders would collectively own 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On August 16, 2021, the underwriters’ exercised the over-allotment option in full (see Note 6), thus these shares are no longer subject to forfeiture.

Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Unless specified in the Amended and Restated Certificate of Incorporation or bylaws, or as required by applicable law or stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by the Company’s stockholders (other than the election of directors).

F-19

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

NOTE 9. INCOME TAX

The Company’s net deferred tax assets (liabilities) as of December 31, 2021 is as follows:


Deferred tax assets:
Start-up costs	$	61,335
Net operating loss carryforwards		298,437
Total deferred tax assets		359,772
Valuation allowance		(354,792)
Deferred tax liabilities:
Unrealized gain on investments		(4,980)
Total deferred tax liabilities		(4,980)
Deferred tax assets, net of allowance	$	—

The income tax provision for the year ended December 31, 2021 consists of the following:


Federal
Current	$	—
Deferred		(354,792)

State
Current		—
Deferred		—
Change in valuation allowance		354,792
Income tax provision	$	—

As of December 31, 2021, the Company has available U.S. federal operating loss carry forwards of approximately $357,674 that may be carried forward indefinitely.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2021, the valuation allowance was $354,792.

A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2021 is as follows:


Statutory federal income tax rate	21.0	%
State taxes, net of federal tax benefit	0.0	%
Change in fair value of derivative warrant liabilities	(40.8)	%
Non-deductible transaction costs	0.2	%
Change in valuation allowance	19.6	%
Income tax provision	0.0	%

F-20

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

Deferred tax assets were deemed to be de minimis as of December 31, 2020.

NOTE 10. FAIR VALUE MEASUREMENTS

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:


	Amount at
Description	Fair Value		Level 1		Level 2		Level 3
December 31, 2021
Assets
Investments held in Trust Account:
Money Market investments	$	128,421,215	$	128,421,215	$	—	$	—
Liabilities
Warrant liabilities – Private warrants	$	2,036,258	$	—	$	—	$	2,036,258

The Company did not have any assets or liabilities measured at fair value as of December 31, 2020.

The Company utilizes a Black-Scholes method to value the Private Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liabilities is determined using Level 3 inputs. Inherent in a Black-Scholes model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the Private Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

The following table provides the significant inputs to the Black-Scholes method for the fair value of the Private Warrants:


	Initial			As of December 31,
	Measurement			2021
Stock price	$	10.00		$	9.97
Strike price	$	11.50		$	11.50
Dividend yield		—	%		—	%
Remaining term (in years)		5.00			4.61
Volatility		19.0	%		9.1	%
Risk-free rate		0.81	%		1.20	%
Fair value of warrants	$	1.20		$	0.44

The following table provides a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis:


	Warrant
	Liabilities
Fair value as of June 23, 2020 (inception)		—
Initial measurement		5,553,429
Change in valuation inputs or other assumptions		(3,517,171)
Fair value as of December 31, 2021		2,036,258

F-21

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

Transfers to/from Levels 1, 2, and 3 are recognized the beginning of the reporting period in which a change in valuation technique or methodology occurs. There were no transfers in or out of Level 3 from other levels in the fair value hierarchy for the period from June 23, 2020 (inception) through December 31, 2021.

The Company recognized gains in connection with changes in the fair value of warrant liabilities of $3,517,171 within change in fair value of warrant liabilities in the Statements of Operations for the year ended December 31, 2021 and $0 for the period from June 23, 2020 (inception) through December 31, 2020.

NOTE 11. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

F-22

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

CONDENSED BALANCE SHEETS


	March 31,		December 31,
	2022		2021
	(Unaudited)
ASSETS
Cash	$	647,178	$	799,808
Prepaid expenses		296,082		302,590
Total Current Assets		943,260		1,102,398
Investments held in Trust Account		128,437,281		128,421,215
Total Assets	$	129,380,541	$	129,523,613

LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	42,351	$	16,862
Accrued expenses		121,584		31,749
Franchise tax payable		50,000		65,600
Total Current Liabilities		213,935		114,211
Warrant liabilities		601,622		2,036,258
Total Liabilities		815,557		2,150,469

Commitments and Contingencies
Common stock, $0.0001 par value; 12,650,000 and 0 shares at redemption value of $10.15 at March 31, 2022 and December 31, 2021		128,397,500		128,397,500.00

Stockholders’ Equity (Deficit)
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at March 31, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,162,500 shares issued and outstanding (excluding 12,650,000 and 0 shares subject to possible redemption) at March 31, 2022 and December 31, 2021		317		317
Additional paid-in capital		—		—
Retained earnings (accumulated deficit)		167,167		(1,024,673)
Total Stockholders’ Equity (Deficit)		167,484		(1,024,356)
Total Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)	$	129,380,541	$	129,523,613

The accompanying notes are an integral part of the unaudited condensed financial statements.

F-23

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS


	Three Months Ended March 31,
	2022		2021
Operating costs	$	208,206	$	—
Franchise tax expense		50,656		—
Loss from operations		(258,862)	$	—
Net gain on investments held in Trust Account		16,066		—
Change in fair value of warrant liabilities		1,434,636		—
Net income	$	1,191,840	$	—

Basic weighted average shares outstanding		15,812,500		2,750,000
Basic net income per common share	$	0.08	$	0.00
Diluted weighted average shares outstanding		15,812,500		2,750,000
Diluted net income per common share	$	0.08	$	0.00

The accompanying notes are an integral part of the unaudited condensed financial statements.

F-24

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

Retained Earnings

Total

Common Stock

Additional Paid-in

(Accumulated

Stockholder’s

Shares

Amount

Capital

Deficit)

Equity (Deficit)

Balance at December 31, 2021

3,162,500

317

—

(1,024,673)

(1,024,356)

Net income

—

1,191,840

Balance at March 31, 2022 (unaudited)

3,162,500

317

—

167,167

167,484

Total

Common Stock

Additional Paid-in

Accumulated

Stockholders’

Shares

Amount

Capital

Deficit

Equity (Deficit)

Balance at December 31, 2020

3,162,500

317

24,683

(1,000)

24,000

Net income

—

Balance at March 31, 2021 (unaudited)

3,162,500

317

24,683

(1,000)

24,000

The accompanying notes are an integral part of the unaudited condensed financial statements.

F-25

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS


	Three Months Ended March 31,
	2022		2021
Cash Flows from Operating Activities:
Net income	$	1,191,840	$	—
Adjustments to reconcile net income to net cash used in operations:
Net gain on investments held in Trust Account		(16,066)		—
Change in fair value of warrant liability		(1,434,636)		—
Changes in operating assets and liabilities:
Accounts payable		25,489
Accrued expenses		89,835		—
Prepaid expenses		6,508		—
Deferred offering costs		—		(77,118)
Franchise tax payable		(15,600)		—
Net cash used in operating activities		(152,630)		(77,118)

Cash Flows from Financing Activities:
Proceeds from promissory note		—		125,000
Net cash provided by financing activities	$	—	$	125,000

Net Change in Cash		(152,630)		47,882
Cash – Beginning of Period		799,808		25,000
Cash – End of Period	$	647,178	$	72,882

The accompanying notes are an integral part of the unaudited condensed financial statements.

F-26

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

As of March 31, 2022, the Company had not yet commenced any operations. All activity for the period from June 23, 2020 (Inception) through March 31, 2022 relates to the Company’s formation and initial public offering (“Initial Public Offering”) described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,361,456 warrants (the “Private Warrants”, together with the Public Warrants, the “Warrants”) at a price of $0.93 per Private Warrant in a private placement to Chardan NexTech 2 Warrant Holdings LLC, a Delaware limited liability company (“Warrant Holdings” or “Holdings”), an affiliate of Chardan NexTech Investments 2 LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $4,052,000, which is described in Note 4.

Following the closing of the Initial Public Offering and underwriters’ over-allotment option, an amount of $128,397,500 from the net proceeds of the sale of the Units and Over-Allotment Units and a portion of the proceeds from the sale of the Private Warrants and Over-Allotment Private Warrants was placed in a trust account (the “Trust Account”) and was invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.

Transaction costs related to the issuances described above amounted to $1,080,140, consisting of $500,000 of cash underwriting fees and $580,140 of other offering costs.

F-27

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company will have 12 months, or August 13, 2022, from the closing of the Initial Public Offering to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate an initial Business Combination within 12 months, the Company’s insiders or their affiliates may, but are not obligated to, extend the period of time to consummate a Business Combination up to two times by an additional three months each time (for a total of up to 18 months, or February 13, 2023, to complete a Business Combination), subject to the Sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, depositing $1,265,000 (or $0.10 per share) into the Trust Account for each of the available three months extensions (totaling $2,530,000 in aggregate) If the Company is unable to consummate an initial Business Combination within the above time period, the Company will distribute the aggregate amount then on deposit in the Trust Account, pro rata to the Company’s public stockholders, by way of the redemption of their shares and thereafter cease all operations except for the purposes of winding up of the Company’s affairs. In such event, the warrants will expire and be worthless.

F-28

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Going Concern Consideration

As of March 31, 2022, the Company had $647,178 in cash held outside of the Trust Account and working capital surplus of $729,325. The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through February 13, 2021, the date at which the Company must consummate a business combination after taking into the effect of both extensions being filed, as described below. Management plans to address the uncertainty through a Business Combination, which is not guaranteed.

In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements — Going Concern,” the Company will have 12 months, or August 13, 2022, from the closing of the Initial Public Offering to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate an initial Business Combination within 12 months, the Company’s Sponsor or their affiliates or designees may, but are not obligated to, extend the period of time to consummate a Business Combination up to two times by an additional three months each time (for a total of up to 18 months, or February 13, 2023, to complete a Business Combination), by depositing into the Trust Account $1,265,000 for each extension ($0.10 per share or $2,530,000 in aggregate), on or prior to date of applicable deadline. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Although the Company plans to complete a Business Combination before the date of liquidation, the Company has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about its ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 13, 2023.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these condensed financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these condensed financial statements.

F-29

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying condensed financial statements should be read in conjunction with the Company’s annual report on Form 10-K as filed with the SEC on March 29, 2022. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.

Emerging Growth Company

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act Registration Statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

F-30

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Investments Held in Trust Account

The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in Net income from investments held in Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. At March 31, 2022 and December 31, 2021, the assets held in the Trust Account were $128,437,281 and $128,421,215, respectively.

Common Stock Subject to Possible Redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as liability instruments and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, 12,650,000 shares of common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from the initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and retained earnings (accumulated deficit).

As of March 31, 2022 and December 31, 2021, the common stock reflected in the condensed balance sheets are reconciled in the following table:


Gross proceeds	$	126,500,000
Less:
Proceeds allocated to Public Warrants		(15,180,000)
Issuance costs allocated to common stock		(933,989)
Plus:
Accretion of carrying value to redemption value		18,011,489
Common stock subject to possible redemption	$	128,397,500

F-31

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Offering Costs associated with the Initial Public Offering

The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly attributable to the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $1,080,140, consisting of $500,000 of cash underwriting fees and $580,140 of other offering costs. The Company recorded $933,989 of offering costs as a reduction of temporary equity in connection with the redeemable common stock included in the Units. The Company recorded $127,354 as a reduction of permanent equity in connection with the Public Warrants included in the Units and immediately expensed $18,797 of offering costs in connection with the Private Warrants that were classified as liabilities.

Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

The Company accounts for the Private Warrants issued concurrently in connection with the Initial Public Offering in accordance with ASC 815-40, under which the Private Warrants will not meet the criteria for equity classification and must be recorded as liabilities. As the Private Warrants meet the definition of a derivative as contemplated in ASC 815, the Private Warrants will be measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement (“ASC 820”), with changes in fair value recognized in the condensed statements of operations in the period of change.

The Public Warrants are not precluded from equity classification, and are accounted for as such on the date of issuance, and each balance sheet date thereafter.

Income Taxes

The Company complies with the accounting and reporting requirements of ASC 740, Income Taxes (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the condensed financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

F-32

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

ASC 740 prescribes a recognition threshold and a measurement attribute for the condensed financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

The provision for income taxes was deemed to be de minimis for the three months ended March 31, 2022 and 2021.

Net Income Per Share of Common Stock

Net income per common share is computed by dividing net earnings by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the effect of the Warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 14,115,358 shares in the calculation of diluted income per share, since the exercise of the Warrants are contingent upon the occurrence of future events.

The following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):


	Three Months Ended March 31,
	2022		2021
Basic and diluted net income per share:
Numerator:
Net income	$	1,191,840	$	—
Denominator:
Basic weighted average shares outstanding		15,812,500		2,750,000
Basic net income per common share	$	0.08	$	0.00
Diluted weighted average shares outstanding		15,812,500		2,750,000
Diluted net income per common share	$	0.08	$	0.00

Concentration of Credit Risk

Fair Value of Financial Instruments

The carrying amounts reflected in the condensed balance sheet for current assets and current liabilities approximate fair value due to their short-term nature.

F-33

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

See Note 9 for additional information on assets and liabilities measured at fair value.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.

NOTE 3. INITIAL PUBLIC OFFERING

NOTE 4. PRIVATE PLACEMENT

The proceeds from the Private Warrants were added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination within 12 months (or up to 18 months if the Company’s time to complete a Business Combination is extended), the proceeds of the sale of the Private Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will expire worthless. The Company classifies the outstanding Private Warrants as warrant liabilities on the condensed balance sheet in accordance with the guidance contained in ASC 815-40.

NOTE 5. RELATED PARTY TRANSACTIONS

Founder Shares

F-34

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

aggregate of 2,875,000 shares of common stock issued and outstanding. On August 10, 2021, the Company effectuated a 1.1-for-1 stock split, resulting in an aggregate of 3,162,500 shares of common stock outstanding. Shares and the associated amounts have been retroactively restated in these condensed financial statements to reflect the two stock splits. The Founder Shares include an aggregated of up to 412,500 shares of common stock subject to forfeiture by the initial stockholders to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the initial stockholders would collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering.

On August 18, 2021, the underwriters’ exercised the over-allotment option in full, thus these shares are no longer subject to forfeiture (see Note 6). With certain limited exceptions, 50% of the Founder Shares will not be transferred, assigned, sold or released from escrow until the earlier of (i) six months after the date of the consummation of a Business Combination (the “Escrow Period”) or (ii) the date on which the closing price of the Company’s shares of common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any ten trading days within any 30-trading day period commencing after the consummation of a Business Combination. The remaining 50% of the Founder Shares will not be transferred, assigned, sold or released from escrow until the expiration of the Escrow Period. In either case, if, subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property, and either (1) before the expiration of the Escrow Period, then the Founder Shares will be canceled, or (2) after the expiration of the Escrow Period, release the Founder Shares to the initial stockholders.

Promissory Note — Related Party

On July 23, 2020, the Sponsor agreed to loan the Company an aggregate of up to $250,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Promissory Note”). The promissory note was non-interest bearing, unsecured and was repaid at August 19, 2021. As of March 31, 2022 and December 31, 2021, there was no outstanding balance under the note. The Company cannot make any additional draws under this promissory note.

Administrative Support Agreement

The Company entered into an agreement, commencing on the effective date of the Initial Public Offering, to pay an affiliate of the Sponsor a total of $10,000 per month for office space, administrative and support services. Upon completion of a Business Combination or liquidation, the Company will cease paying these monthly fees. As of March 31, 2022, the Company has not exercised its option to use such services.

Related Party Loans

In order to finance transaction costs in connection with an intended initial Business Combination, the Company’s initial stockholders, officers and directors or any of their respective affiliates may, but are not obligated to, loan the Company funds as may be required from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would be paid upon consummation of an initial Business Combination, without interest. Loans made by Chardan Capital Markets, LLC or any of its related persons will not be convertible into any of the Company’s securities and Chardan Capital Markets, LLC and its related persons will have no recourse with respect to their ability to convert their loans into any of the Company’s securities. As of March 31, 2022 and December 31, 2021, the Company had no working capital loans outstanding.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Registration and Stockholder Rights Agreement

F-35

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Private Warrants (and underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to Registration Statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such Registration Statements.

Underwriting Agreement

Business Combination Marketing Agreement

Related Party Extension Loans

NOTE 7. WARRANTS

As of March 31, 2022 and December 31, 2021 there was 9,847,500 Public Warrants and 4,627,858 Private Warrants outstanding, respectively. Each whole Public Warrant will entitle the holder to purchase one share of common stock at an exercise price of $11.50 per whole share. Each of the Private Warrants is exercisable to purchase one share of common stock at a price of $11.50 per share, subject to adjustment. The proceeds from the sale of the Private Warrants were added to the net proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Warrants will be used to fund the redemption of the Public Shares (and the Private Warrants will expire worthless). The Warrants provide for a cashless exercise which the Company’s management determined to be a net settlement feature with no obligation to settle in cash. The net shares issued in a cashless exercise are based on the fair value of the Company’s common stock at the time the Warrants are exercised.

F-36

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

All (and not less than all) of the outstanding Warrants may be redeemed, in whole and not in part, at the option of the Company, at any time from and after the Warrants become exercisable, and prior to their expiration, at the office of the Warrant Agent, at the price of $.01 per Warrant (“Redemption Price”); provided that the last sales price of the common stock has been equal to or greater than $16.00 per share (subject to adjustment for splits, dividends, recapitalizations and other similar events) (the “Redemption Trigger Price”), for any ten (10) trading days within a thirty (30) trading day period ending on the third business day prior to the date on which notice of redemption is given and provided further that there is a current Registration Statement in effect with respect to the shares of common stock underlying the Warrants for each day in the aforementioned 30- day trading period and continuing each day thereafter until the Redemption Date. For avoidance of doubt, if and when the warrants become redeemable by the Company, the Company may exercise its redemption right, even if it is unable to register or qualify the Warrant Shares for sale under all applicable state securities laws.

The Company accounts for the 4,627,858 Private Warrants issued in connection with the Initial Public Offering in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the Private Warrants do not meet the criteria for equity treatment thereunder, each Private Warrant must be recorded as a liability. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities will be adjusted to its current fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.

F-37

Table of Contents

CHARDAN NEXTECH ACQUISITION 2 CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 8. STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock— The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2022 and December 31, 2021, the Company had no issued or outstanding shares of preferred stock.

Common stock —The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. On March 31, 2022 and December 31, 2022, there were 15,812,500 shares of common stock issued and outstanding, including 12,650,000 shares of common stock subject to possible redemption. Of the 15,812,500 shares of common stock outstanding, up to 412,500 shares were subject to forfeiture to the Company by the initial stockholders for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial stockholders would collectively own 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On August 16, 202