Chardan NextTech Acquisition 2 Corp (CNTQ), a publicly traded acquisition company, filed a registration statement with the U.S. Securities and Exchange Commission (SEC) concerning Dragonfly Energy.
Dragonfly Energy makes Battle Born lithium-ion batteries.
While the information within the registration could change, it provides essential information about Dragonfly and CNTQ, as well as the proposed business combination of the two companies.
Dragonfly Energy assembles its batteries at the company’s 99,000-square-foot headquarters and manufacturing facility located in Reno, Nevada. Dragonfly operates two LFP (lithium iron phosphate battery/LiFePO4) battery production lines.
In a separate SEC filing, Dragonfly Energy Chairman and CEO Denis Phares said the company is going through this transaction, in large part, because Dragonfly is building a pilot line that the company will scale into full manufacturing to produce Dragonfly’s solid-state cells in house.
The pilot line success is enabling the company to further invest in the business.
“While we were developing the cell manufacturing processes, we went to market with a line of deep-cycle lithium-ion battery packs that we designed and assembled here using commodity lithium iron phosphate cells, and we attacked the RV and marine markets. That core business took off very rapidly,” Phares said. “It grew over the last five years pretty dramatically and allowed for the funding of the R&D. We are now at very much a transition phase in our development of the company where we’re ready to deploy the new cell manufacturing technology, while at the same time, the core business has grown so much that we’re moving on from our niche markets into a greater number of downstream vertical markets that require deep-cycle energy storage.”
Dragonfly is focused on cost, longevity and safety rather than propulsion, electric vehicles and high energy density, rapid charging, Phares said.
“It is a very different battery, but it is the one that we believe serves the needs of energy storage. So, when we went to market, we did so with a line of battery packs that we branded Battle Born batteries,” he said. “We achieved great success in the RV markets because ultimately, we have demonstrated how RVers can live off of the sun and shown how they can actually be off grid and still be able to power higher power appliances like microwave ovens and air conditioners and induction cooktops. And it hass really changed how RVing is done.”
Dragonfly posted financials for 2020, 2021 and 2022. For the full year of 2021, the company reported $78 million in net sales, $29.6 million in gross profit and $4.3 million in net profits. Net sales rose 65% from $47.2 million in 2020. Gross profits rose from $20.6 million in 2020 but net profits fell from $6.9 million in 2020.
Dragonfly reported 2022 first-quarter sales of $18.3 million, up from $15.6 million in the first quarter of 2021. The company reported a net loss of $2.3 million in the first quarter of 2022 as it scaled up marketing and sales expenses. The company earned $1.1 million in net profits in the first quarter of 2021.
Phares said the company invested heavily in growth as well as becoming a public company over the past year.
“We are in a position now where the core business continues to grow rapidly with our infiltration in more OEMs in our current markets,” he said.
Over the next two to three years, the company plans to automate additional aspects of its existing LFP battery production lines and add four additional LFP battery production lines. The additions are designed to maximize the capacity of the manufacturing facility, the company said.
The company expects to be cycling solid-state batteries from its pilot line sometime next year.
“Now, does that completely replace what we are doing immediately? Probably not.” Phares said. “We probably will continue to offer some of the existing product line for the foreseeable future. We will continue to work with the partners that we have. But we are very much focused on onshoring the production itself.”
Phares estimated the company has captured only 10% to 15% of the available core RV market share.
The company said automation and expansion plans may be impacted by several factors Dragonfly relies on two cell manufacturers in China and a Chinese supplier manufacturing its battery management system. The company said it intends to continue to rely on these suppliers going forward.
“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 cell delivery in advance of required demand, has helped us moderate or offset increased supply-related costs associated with currency fluctuations and tariffs imposed on our battery cell imports by the U.S. government and avoid potential shipment delays,” Dragonfly said.
If the company were unable to enter 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 product supply or materials to meet its requirements, Dragonfly’s manufacturing operations and customer deliveries would be seriously impacted, potentially resulting in liquidated damages and harm to customer relationships, the company said.
The company said it could likely locate alternative suppliers to fulfill its needs, but it may be unable to find a sufficient alternative supply in a reasonable time or on commercially reasonable terms.