UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File Number
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(Address of principal executive offices and zip code) |
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(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an 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 ☐ |
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 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 10, 2021, there were
CHARDAN NEXTECH ACQUISITION 2 CORP.
TABLE OF CONTENTS
| Page | ||
Condensed Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 | 1 | ||
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3 | |||
4 | |||
5 | |||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 20 | ||
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25 | |||
26 | |||
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28 | |||
i
PART 1 – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
CHARDAN NEXTECH ACQUISITION 2 CORP.
CONDENSED BALANCE SHEETS
| September 30, | December 31, | ||||
2021 | 2020 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Cash | $ | | $ | | ||
Prepaid expenses |
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| — | ||
Total current assets | | | ||||
Investments held in Trust Account | | — | ||||
Total Assets | $ | | $ | | ||
LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ (DEFICIT) EQUITY |
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Current liabilities: | ||||||
Accrued expenses | $ | | $ | | ||
Franchise tax payable | | — | ||||
Total current liabilities | | | ||||
Warrant liabilities |
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Total Liabilities |
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Commitments and Contingencies |
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Common stock, $ | | — | ||||
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Stockholders’ (Deficit) Equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
| ( |
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Total Stockholders’ (Deficit) Equity |
| ( |
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Total Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ (Deficit) Equity | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
CHARDAN NEXTECH ACQUISITION 2 CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the | ||||||||||||
Period from | ||||||||||||
June 23, | ||||||||||||
Three | 2020 | |||||||||||
Months | (Inception) | |||||||||||
Three Months Ended | Nine Months Ended | Ended | through | |||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
| 2021 |
| 2021 |
| 2020 |
| 2020 | |||||
Operating and formation costs | $ | | $ | | $ | | $ | | ||||
Franchise tax expense | | | — | — | ||||||||
Loss from operations | ( | ( | ( | ( | ||||||||
Warrant issuance costs | ( | ( | — | — | ||||||||
Loss on sale of private warrants | ( | ( | — | — | ||||||||
Net gain on investments held in Trust Account | | | — | — | ||||||||
Change in fair value of warrant liability | | | — | — | ||||||||
Net income (loss) | $ | | $ | | $ | ( | $ | ( | ||||
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Basic weighted average shares outstanding | | | — | — | ||||||||
Basic net income (loss) per common share | $ | | $ | | $ | | $ | | ||||
Diluted weighted average shares outstanding | | | — | — | ||||||||
Diluted net income (loss) per common share | $ | | $ | | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
CHARDAN NEXTECH ACQUISITION 2 CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND FOR THE PERIOD FROM JUNE 23, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020
(UNAUDITED)
Total | ||||||||||||||
Common Stock | Additional Paid-in | Accumulated | Stockholder’s | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balance at June 23, 2020 (inception) | — | $ | — | $ | | $ | | $ | — | |||||
Issuance of common stock to Sponsor | | | | | ||||||||||
Net loss | — | — |
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Balance at June 30, 2020 (unaudited) | | | | ( | | |||||||||
Net loss | — | — |
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Balance at September 30, 2020 (unaudited) | | $ | | $ | | $ | ( | $ | | |||||
Total | ||||||||||||||
Common Stock | Additional Paid-in | Accumulated | Stockholders’ | |||||||||||
Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||
Balance at December 31, 2020 | | $ | | $ | | $ | ( | $ | | |||||
Net loss | — | — | | | — | |||||||||
Balance at March 31, 2021 (unaudited) | | | | ( | | |||||||||
Net loss | — | — |
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| ( |
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Balance at June 30, 2021 (unaudited) | | | | ( | | |||||||||
Proceeds from Initial Public Offering Costs allocated to Public Warrants (net of offering costs) | — | — | ||||||||||||
Accretion of common stock to redemption amount | — | — | ( | ( | ( | |||||||||
Net income | — | — | | |||||||||||
Balance at September 30, 2021 (unaudited) | | $ | $ | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
CHARDAN NEXTECH ACQUISITION 2 CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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| For the Period | |||
from June 23, | ||||||
Nine Months | 2020 (Inception) | |||||
Ended | Through | |||||
September 30, | September 30, | |||||
| 2021 |
| 2020 | |||
Cash Flows from Operating Activities: | ||||||
Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash used in operations: | ||||||
Warrant issuance costs | | — | ||||
Net gain on investments held in Trust Account | ( | — | ||||
Loss on sale of private warrants | | — | ||||
Change in fair value of warrant liability | ( | — | ||||
Changes in operating assets and liabilities: |
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Accrued expenses | — | | ||||
Prepaid expenses | ( | — | ||||
Franchise tax payable | | — | ||||
Net cash used in operating activities | ( | — | ||||
Cash Flows from Investing Activities: | ||||||
Cash deposited into Trust Account | ( | — | ||||
Net cash used in investing activities | ( | — | ||||
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Cash Flows from Financing Activities: |
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Proceeds from initial public offering, net of underwriter’s discount paid | | — | ||||
Proceeds from promissory note - related party |
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Repayment of promissory note - related party |
| ( |
| — | ||
Proceeds from issuance of Founder Shares to Sponsor | — | | ||||
Proceeds from sale of private warrants | | — | ||||
Payment of offering costs | ( | — | ||||
Net cash provided by financing activities | | | ||||
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Net Change in Cash |
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Cash - beginning of period |
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Cash - end of period | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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
As of September 30, 2021, the Company had not yet commenced any operations. All activity through September 30, 2021 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
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
The Company had granted the underwriters in the Initial Public Offering a 45-day option to purchase up to
Simultaneously with the closing of the exercise of the over-allotment option, the Company consummated the sale of
Following the closing of the Initial Public Offering and underwriters’ over-allotment option, an amount of $
Transaction costs related to the issuances described above amounted to $
5
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 (initially anticipated to be $
The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
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
The Company will have
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.
6
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 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) $
Going Concern Consideration
As of September 30, 2021, the Company had $
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 prospective partner 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.
7
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed 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. 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 unaudited 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 unaudited condensed financial statements should be read in conjunction with the Company’s final prospectus for its Initial Public Offering as filed with the SEC on August 12, 2021, as well as the Company’s Current Reports on Form 8-K, as filed with the SEC on August 13, 2021, August 19, 2021 and August 23, 2021. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Revision of Previously Issued Financial Statements
The Company revised its previously issued financial statements to classify redeemable common stock in temporary equity. In accordance with Securities and Exchange Commission ("SEC") and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the redeemable common stock in permanent equity. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $
The reclassification of amounts from permanent equity to temporary equity result in non-cash financial statement corrections and will have no impact on the Company’s current or previously reported cash position, operating expenses or total operating, investing or financing cash flows.
8
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
The following tables summarize the effect of the revision on each financial statement line item as of the dates, and for the periods, indicated:
August 13, 2021 | |||||||||
As Previously | |||||||||
| Reported | Adjustments | As Revised | ||||||
Balance Sheet (audited) |
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Common stock subject to possible redemption | $ | | $ | ( | $ | | |||
Allocation of underwriter’s discounts, offering costs and deferred fees to common shares |
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Immediate accretion to redemption value |
| — |
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Total common stock subject to possible redemption | | | | ||||||
Common stock | | ( | | ||||||
Additional paid-in capital | | ( | — | ||||||
Accumulated deficit | ( | ( | ( | ||||||
Total stockholders’ equity (deficit) | $ | | $ | ( | $ | ( | |||
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.
9
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 September 30, 2021 and December 31, 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 unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Common Stock Subject to Possible Redemption
The Company accounts for its Class common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon occurrence of uncertain events not solely within the Company's control) are classified as temporary equity. At all other times, Class A common stock are classified as shareholders' equity. The Company's Class A common stock feature certain redemption rights that are considered to be outside of the Company's control and subject to the occurrence of uncertain future events. Accordingly, as of September 31, 2021,
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. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit.
As of September 30, 2021, the common stock reflected in the condensed balance sheet are reconciled in the following table:
Gross proceeds |
| $ | |
Less: |
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Proceeds allocated to Public Warrants |
| ( | |
Issuance costs allocated to common stock |
| ( | |
Plus: |
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Accretion of carrying value to redemption value |
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Common stock subject to possible redemption | $ | |
10
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 $
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.
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.
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 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. Deferred tax assets were deemed to be de minimis as of September 30, 2021 and December 31, 2020.
11
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
ASC 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 as income tax expense. There were
The provision for income taxes was deemed to be de minimis for the three and nine months ended September 30, 2021, the three months ended September 30, 2020 and for the period June 23, 2020 (inception) through September 30, 2020.
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
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 | ||||||||||||
| Three Months |
| Nine Months |
| Three Months |
| (Inception) | |||||
Ended | Ended |
| Ended | Through | ||||||||
September 30, | September 30, |
| September 30, | September 30, | ||||||||
2021 | 2021 |
| 2020 | 2020 | ||||||||
Basic and diluted net income per share: |
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Numerator: |
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Net income | $ | | $ | | $ | ( | $ | ( | ||||
Denominator: |
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Basic weighted average shares outstanding |
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Basic net income (loss) per common share | $ | | $ | | $ | $ | ||||||
Diluted weighted average shares outstanding | | | — | — | ||||||||
Diluted net income (loss) per common share | $ | | $ | | $ | $ | ||||||
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.
12
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 9 for additional information on assets and liabilities measured at fair value.
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 January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.
13
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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
The Company had granted the underwriters in the Initial Public Offering a 45-day option to purchase up to
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, Holdings purchased an aggregate of
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
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On June 23, 2020, the Company issued
On August 18, 2021, the underwriters’ exercised the over-allotment option in full, thus the Founder Shares are no longer subject to forfeiture (see Note 6).
14
CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 or (ii) the date on which the closing price of the Company’s shares of common stock equals or exceeds $
Promissory Note — Related Party
On July 23, 2020, the Sponsor agreed to loan the Company an aggregate of up to $
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 $
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
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.
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CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
Underwriting Agreement
The Company granted the underwriters a
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,
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 $
NOTE 7. WARRANTS
As of September 30, 2021 and December 31, 2020 there was
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CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 $
A Warrant may be exercised only during the period (“Exercise Period”) commencing
The Company is not required to issue any fraction of a share of common stock 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 share of common stock upon the exercise of such registered holder’s Warrants, issue or cause to be issued only the largest whole number of shares of common stock issuable on such exercise (and such fraction of a share of common stock 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 shares of common stock which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of shares of common stock 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
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 Redemption Price; provided that the last sales price of the common stock has been equal to or greater than $
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CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
The Company accounts for the
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
Common stock —The Company is authorized to issue
Common stockholders of record are entitled to
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, 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 | ||||
September 30, 2021 | ||||||||||||
Assets |
|
|
|
|
|
|
|
| ||||
Investments held in Trust Account: |
|
|
|
|
|
|
|
| ||||
Money Market investments | $ | | $ | | $ | — | $ | — | ||||
Liabilities |
|
|
|
|
|
|
|
| ||||
Warrant liabilities – Private Warrants | $ | | $ | — | $ | — | $ | | ||||
The Company did not have any assets or liabilities measured at fair value as of December 31, 2020.
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CHARDAN NEXTECH ACQUISITION 2 CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 liability 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:
As of August 13, |
| ||||||
2021 (Initial | As of September |
| |||||
| Measurement) |
| 30, 2021 |
| |||
Common stock price | $ | | $ | | |||
Exercise price | $ | | $ | | |||
Dividend yield |
| — | % |
| — | % | |
Term to Business Combination (years) |
| |
| | |||
Volatility |
| | % |
| | % | |
Risk-free rate |
| | % |
| | % | |
Fair value | $ | | $ | | |||
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 at June 23, 2020 (inception) | $ | | |
Initial measurement at August 13, 2021 |
| | |
Initial measurement of additional warrants issued in over-allotment |
| | |
Fair value at August 13, 2021 |
| | |
Change in valuation inputs or other assumptions |
| ( | |
Fair value at September 30, 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 September 30, 2021.
The Company recognized gains in connection with changes in the fair value of warrant liabilities of $
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “our”, “us” or the “Company” refer to Chardan NexTech Acquisition 2 Corp., a Delaware corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Chardan NexTech Investments 2 LLC, a Delaware limited liability company. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering (as defined below) filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on June 23, 2020 in Delaware and formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more target businesses, which we refer to throughout this Quarterly Report as our “initial business combination”. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering (the “Initial Public Offering”) and the private placement of the Private Warrants (as defined below), 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 Initial Public Offering 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.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities for the nine months ended September 30, 2021 were organizational activities, activities necessary to prepare for the Initial Public Offering, described below, and, after the Initial Public Offering, 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 will generate non-operating income in the form of interest income on cash and cash equivalents held after the Initial Public Offering. 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.
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For the three months ended September 30, 2021, we had net income of $2,690,543, which resulted from by the change in fair value of warrant liabilities of $4,072,514 and a net gain on marketable securities held in Trust Account in the amount of $7,023, which was partially offset by operating and formation costs of $92,234, franchise tax expense of $24,034, loss on sale of Private Warrants of $1,253,929, and warrant issuance costs of $18,797.
For the nine months ended September 30, 2021, we had net income of $2,689,709, which resulted from the change in fair value of warrant liabilities of $4,072,514, and an unrealized gain on marketable securities held in Trust Account in the amount of $7,023, which was partially offset by warrant issuance costs of $18,797 associated with the Initial Public Offering, operating and formation costs of $93,068, loss on sale of Private Warrants of $1,253,929, and franchise tax expense of $24,034.
For the three months ended September 30, 2020 and the period from June 23, 2020 (inception) through September 30, 2020, we had a net loss of $1,000, which resulted entirely from formation and operating costs.
Liquidity and Capital Resources
As of September 30, 2021 and December 31, 2020, the Company had $887,208 and $25,000 in cash held outside of the Trust Account, respectively, and a working capital surplus of $1,228,758 and $24,000, respectively.
The Company’s liquidity needs prior to the consummation of the Initial Public Offering 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 Initial Public Offering, the Company’s 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 (“Working Capital Loans”). As of September 30, 2021, there were no amounts outstanding under any Working Capital Loan.
For the nine months ended September 30, 2021, net cash used in operating activities was $459,653, which was due to the change in fair value of warrants of $4,072,514, changes in operating assets and liabilities of $342,550, and net gain on investments in the Trust Account of $7,023, partially offset by our net income of $2,689,709, loss on sale of Private Warrants of $1,253,929, and expensed offering costs of $18,797.
For the nine months ended September 30, 2021, net cash used in investing activities was $128,397,500, which was due to the amount of net proceeds from the Initial Public Offering being deposited to the Trust Account.
For the nine months ended September 30, 2021, net cash provided by financing activities was $129,719,361, which was comprised of $126,000,000 in proceeds from the issuance of units in the Initial Public Offering net of underwriter’s discount paid, $4,299,500 in proceeds from the issuance of warrants in a private placement to Holdings, and proceeds from issuance of a promissory note of $155,000 to our Sponsor, offset in part by payment of $580,139 for offering costs associated with the Initial Public Offering and repayment of the outstanding balance on the promissory note to our Sponsor of $155,000.
For the period from June 18, 2020 (inception) through September 30, 2020, there was proceeds of $25,000 from the sale of Founder Shares to the Sponsor.
On August 13, 2021, we consummated the Initial Public Offering of 11,000,000 units (the “Units”), at $10.00 per Unit, generating gross proceeds of $110,000,000. Each Unit consisted of one share of common stock, par value $0.0001 per share, of the Company (the “Public Shares”) and three-quarters of one redeemable warrant (“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.
21
Simultaneously with the closing of the Initial Public Offering, 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 placement warrants at a price of $0.93 per warrant (the “Private Warrants”) ($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 (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, 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.
A portion of the proceeds from the Private Warrants was added to the proceeds from the Initial Public Offering to be held in the trust account (the “Trust Account”). If we do not complete our initial business combination within 12 months (or up to 18 months if our 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 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 of this offering, 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 which we had incurred 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.
We do not believe we will need to raise additional funds following our Initial Public Offering in order 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 Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2021.
22
Contractual Obligations
As of September 30, 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.
Critical Accounting Policies
The preparation of condensed 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 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
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.
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.
The Company will account 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.
Common stock subject to possible redemption
All of the 12,650,000 shares common stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all Public Shares have been classified outside of permanent equity.
23
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. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit.
Net Income (Loss) Per Common Share
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 10,586,519 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
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, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2021, we were not subject to any market or interest rate risk.
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Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021, due to the revision related to the classification of redeemable Class A common stock, which constitutes a material weakness in our internal control over financial reporting.
Regarding the revision, certain redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the Class A common stock in permanent equity. The Company revised its financial statements to classify all Class A common stock as temporary equity and any related impact, as the threshold in its charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Changes in Internal Control Over Financial Reporting
Other than the implementation of the remediation activities regarding the revision during the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management has enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our updated processes include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for our Initial Public Offering filed with the SEC on August 12, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for our Initial Public Offering filed with the SEC on August 12, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit No. |
| Description |
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS* | XBRL Instance Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101) |
*Filed herewith.
**Furnished.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Chardan NexTech Acquisition 2 Corp | ||
Date: November 15, 2021 | By: | /s/ Jonas Grossman |
Jonas Grossman | ||
Chief Executive Officer, | ||
(Principal Executive Officer) | ||
Chardan NexTech Acquisition 2 Corp | ||
Date: November 15, 2021 | By: | /s/ Alex Weil |
Alex Weil | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
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