0001760689 true 8-K/A 0001760689 2021-08-23 2021-08-23 0001760689 MVST:CommonStockParValue0.0001PerShareMember 2021-08-23 2021-08-23 0001760689 MVST:RedeemableWarrantsExercisableForSharesOfCommonStockAtExercisePriceOf11.50PerShareMember 2021-08-23 2021-08-23 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

(Amendment No. 1)

 

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 16, 2021 (July 23, 2021)

 

Microvast Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   001-38826   83-2530757
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (IRS. Employer
Identification No.)

 

12603 Southwest Freeway, Suite 210

Stafford, Texas 77477

(Address of principal executive offices, including zip code)

 

281-491-9595

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common stock, par value $0.0001 per share   MVST   The Nasdaq Stock Market LLC
Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share   MVSTW   The Nasdaq Stock Market LLC

 

 

 

 

 

 

Introductory Note

 

On July 23, 2021 (the “Closing Date”), the registrant, Microvast Holdings, Inc. (formerly known as Tuscan Holdings Corp.) consummated the previously announced acquisition of Microvast, Inc., a Delaware corporation (“Microvast”), pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated February 1, 2021, between the Tuscan Holdings Corp., Microvast and TSCN Merger Sub Inc., a Delaware corporation (“Merger Sub”), pursuant to which Merger Sub merged with and into Microvast, with Microvast surviving the merger (the “Merger”). Unless the context otherwise requires, “Tuscan” refers to the registrant prior to the Closing, and “we,” “us,” “our” and the “Company” refer to the registrant and its subsidiaries, including Microvast, following the Closing.

 

In connection with the Merger Agreement, Tuscan, MVST SPV Inc., a wholly owned subsidiary of Tuscan (“MVST SPV”), Tuscan, Microvast Power System (Huzhou) Co., Ltd., Microvast’s majority owned subsidiary (“MPS”), certain MPS convertible loan investors (the “CL Investors”) and certain minority equity investors in MPS (the “Minority Investors” and, together with the CL Investors, the “MPS Investors”) and certain other parties entered into a framework agreement (the “Framework Agreement”), pursuant to which, among other things, (1) the CL Investors waived certain rights with respect to the convertible loans (the “Convertible Loans”) held by such CL Investors that were issued under that certain Convertible Loan Agreement, dated November 2, 2018, among Microvast, MPS, such CL Investors and the MPS Investors (the “Convertible Loan Agreement”) and, in connection therewith, certain affiliates of the CL Investors (“CL Affiliates”) subscribed for 6,719,845 shares of common stock, $0.0001 par value per share (“common stock”), of Tuscan in a private placement in exchange for MPS convertible loans (the “CL Private Placement”).

 

In connection with the Merger Agreement, Tuscan entered into subscription agreements with (a) the holders of an aggregate of $57,500,000 outstanding promissory notes issued by Microvast (the “Bridge Notes”) pursuant to which Tuscan agreed to issue an aggregate of 6,736,106 shares of common stock upon conversion (the “Bridge Notes Conversion”) of the Bridge Notes, and (b) a number of outside investors who agreed to purchase an aggregate of 48,250,000 shares of common stock at a price of $10.00 per share, for an aggregate purchase price of $482,500,000 (the “PIPE Financing”).

 

The CL Private Placement, the Bridge Notes Conversion and the PIPE Financing closed contemporaneously with the closing under the Merger Agreement (collectively, the “Closing”). Upon the Closing of the Merger, the CL Private Placement, the Bridge Notes Conversion, the PIPE Financing and related transactions (collectively, the “Business Combination”), Microvast became a wholly-owned subsidiary of the Company, with the stockholders of Microvast becoming stockholders of the Company, and with the Company renamed “Microvast Holdings, Inc.”

 

Following the completion of the Business Combination, Microvast is the Company’s accounting predecessor. This amendment to the Original Form 8-K is being filed to include the financial statements of Microvast for the six months ended June 30, 2021, including pro forma financial statements as of such time period.

 

1

 

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired

 

The historical financial statements of Microvast, Inc. for the three years ended December 31, 2020 and at and as of the three months ended March 31, 2021 included in the Proxy Statement beginning on page F-52 are incorporated herein by reference. The historical financial statements of Microvast at and as of the six months ended June 30, 2021 are included herein as Exhibit 99.3.

 

(b) Pro Forma Financial Information

 

The unaudited pro forma condensed consolidated combined financial information of Tuscan for the year ended December 31, 2020 and at and as of the three months ended March 31, 2021 are included herein as Exhibit 99.2. The unaudited pro forma condensed consolidated combined financial information of Tuscan for the year ended December 31, 2020 and at and as of the six months ended June 30, 2021 are included herein as Exhibit 99.4. 

 

(d) Exhibits

 

Exhibit No.   Description
2.1   Agreement and Plan of Merger, dated as of February 1, 2021, by and among Tuscan Holdings Corp., TSCN Merger Sub Inc., and Microvast, Inc. (incorporated by reference to the Company’s definitive proxy statement on Schedule 14A, filed with the SEC on July 2, 2021).
     
3.1*   Second Amended and Restated Certificate of Incorporation of Microvast Holdings, Inc.
     
3.2*   Amended and Restated Bylaws of Microvast Holdings, Inc.
     
4.1*   Registration Rights and Lock-Up Agreement dated as of July 23, 2021, by and among (a) Microvast Holdings, Inc., (b) the Microvast Equity Holders, (c) the CL Holders, (d) Tuscan Holdings Acquisition LLC, Stefan M. Selig, Richard O. Rieger and Amy Butte, and (e) EarlyBirdCapital, Inc.
     
4.2*   Stockholders Agreement dated July 23, 2021 by and among (a) Microvast Holdings, Inc., (b) Yang Wu and (c) Tuscan Holdings Acquisition LLC.
     
4.3   Warrant Agreement dated as of March 5, 2019 between Microvast Holdings, Inc. (formerly Tuscan Holdings Corp. and Continental Stock Transfer & Trust Company, (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 7, 2019).
     
4.4*   Specimen Common Stock Certificate.
     
4.5*   Specimen Warrant Certificate.
     
10.1*   Form of Indemnity Agreement.
     
10.2*   Employment Agreement, dated as of February 1, 2021, by and between Microvast, Inc. and Yang Wu.
     
10.3*   Employment Agreement, dated as of February 1, 2021, by and between Microvast, Inc. and Yanzhuan Zheng.
     
10.4*   Employment Agreement, dated as of February 1, 2021, by and between Microvast, Inc. and Wenjuan Mattis, Ph.D..
     
10.5*   Employment Agreement, dated as of June 1, 2017, by and between Microvast, Inc. and Sascha Rene Kelterborn.

 

2

 

 

10.6*   Microvast Holdings, Inc. 2021 Equity Incentive Plan.
     
10.7   Framework Agreement dated as of February 1, 2021, among the Registrant, MVST SPV Inc., Microvast, Inc., Microvast Power System (Huzhou) Co., Ltd., (“MPS”), certain MPS convertible loan investors (the “CL Investors”) and certain minority equity investors in MPS (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2021).
     
10.8   Form of Subscription Agreement between the Registrant and certain PIPE Investors (incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2021).
     
10.9   Subscription Agreement between the Registrant and Riheng HK Limited (incorporated by reference from Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2021).
     
10.10   Subscription Agreement between the Registrant and Aurora Sheen Limited (incorporated by reference from Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2021).
     
10.11   Sponsor Support Agreement, dated as of February 1, 2021, by and among Registrant, the Sponsor, Microvast, Inc., and certain stockholders of Registrant (incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on February 5, 2021).
     
10.12   Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Company’s Initial Stockholder (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on March 7, 2019).
     
10.13*   Amendment No. 1 to Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Company’s Initial Stockholder, dated as of July 23, 2021.
     
21.1*   Subsidiaries of the Registrant.
     
99.1   Financial statements of Microvast, Inc. for the three years ended December 31, 2020 and the three months ended March 31, 2021 (incorporated by reference to the registrant’s definitive proxy statement filed with the SEC on July 2, 2021).
     
99.2*   Unaudited pro forma condensed consolidated combined financial information of the Company for the year ended December 31, 2020 and the three months ended March 31, 2021.
     
99.3   Financial statements of Microvast, Inc. for the six months ended June, 2021.
     
99.4   Unaudited pro forma condensed consolidated combined financial information of the Company for the year ended December 31, 2020 and the six months ended June 30, 2021.
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

*Incorporated by reference to the Company’s Current Report filed July 28, 2021

 

3

 

 

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 hereunto duly authorized.

 

  MICROVAST HOLDINGS, INC.
Date: August 16, 2021  
  By: /s/ Yanzhuan Zheng
  Name: Yanzhuan Zheng
  Title: Chief Financial Officer

 

4

Exhibit 99.3

 

 

 

 

 

 

 

 

 

 

 MICROVAST, INC.
  
 Unaudited Condensed Consolidated Financial Statements
For The Three and Six Months Ended June 30, 2020 and 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

MICROVAST, INC.

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CONTENTS   PAGE(S)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND JUNE 30, 2021   F-1 – F-2
     
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021   F-3
     
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021   F-4
     

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

  F-5 – F-6
     

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2021

  F-7 – F-8
     

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  F-9 – F-25

 

- i -

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

   December 31,   June 30, 
   2020   2021 
Assets        
Current assets:        
Cash and cash equivalents  $21,496   $13,367 
Restricted cash   19,700    20,460 
Accounts receivable (net of allowance for doubtful accounts of $5,047 and $4,743 as of December 31, 2020 and June 30, 2021, respectively)   76,298    65,253 
Notes receivable   20,839    17,693 
Inventories, net   44,968    55,400 
Prepaid expenses and other current assets   6,022    8,192 
Total Current Assets   189,323    180,365 
           
Property, plant and equipment, net   198,017    217,686 
Land use rights, net   14,001    13,987 
Acquired intangible assets, net   2,279    2,067 
Other non-current assets   890    710 
Total Assets  $404,510   $414,815 
           
Liabilities          
Current liabilities:          
Accounts payable  $42,007   $43,814 
Advance from customers   2,446    2,636 
Accrued expenses and other current liabilities   60,628    35,597 
Income tax payables   664    665 
Short-term bank borrowings   12,184    16,572 
Notes payable   35,782    32,173 
Bonds payable   29,915    29,915 
Total Current Liabilities   183,626    161,372 
           
Deposit liability for series B2 convertible preferred shares (“Series B2 Preferred”)   21,792    21,792 
Long-term bonds payable   73,147    137,490 
Long-term bank borrowings   -    9,886 
Other non-current liabilities   110,597    114,362 
Total Liabilities  $389,162   $444,902 

 

F-1

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - continued

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

   December 31,   June 30, 
   2020   2021 
Mezzanine Equity (Note 12 and Note 14)        
Series C1 convertible redeemable preferred shares (“Series C1 Preferred”)
(US$0.01 par value; 166,950 authorized, issued and outstanding as of December 31, 2020 and June 30, 2021)
  $80,581   $82,587 
Series C2 convertible redeemable preferred shares (“Series C2 Preferred”)
(US$0.01 par value; 126,345 authorized, issued and outstanding as of December 31, 2020 and June 30, 2021)
   81,966    86,528 
Series D1 convertible redeemable preferred shares (“Series D1 Preferred”)
(US$0.01 par value; 139,186 authorized, issued and outstanding as of December 31, 2020 and June 30, 2021)
   146,583    156,101 
Redeemable noncontrolling interests   90,820    96,003 
Total Mezzanine Equity  $399,950   $421,219 
           
Commitments and contingencies (Note 20)          
           
Shareholders’ Deficit          
Ordinary shares (par value of US$0.01 per share, 1,500,000 shares authorized as of December 31, 2020 and June 30, 2021; 617,880 shares issued and outstanding as of December 31, 2020 and June 30, 2021)  $6   $6 
Statutory reserves   6,032    6,032 
Accumulated deficit   (397,996)   (465,457)
Accumulated other comprehensive deficit   7,356    8,113 
Total Shareholders’ Deficit   (384,602)   (451,306)
Total Liabilities, Mezzanine Equity and Shareholders’ Deficit  $404,510   $414,815 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-2

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

   Three months ended   Six months ended 
   June 30,   June 30, 
   2020   2021   2020   2021 
Revenues  $21,698   $33,372   $28,647   $48,310 
Cost of revenues   (18,144)   (40,146)   (23,875)   (56,321)
Gross profit   3,554    (6,774)   4,772    (8,011)
                     
Operating expenses:                    
General and administrative expenses   (3,760)   (6,178)   (7,949)   (10,752)
Research and development expenses   (4,242)   (5,895)   (7,960)   (9,681)
Selling and marketing expenses   (2,686)   (3,706)   (6,008)   (6,862)
Total operating expenses   (10,688)   (15,779)   (21,917)   (27,295)
Subsidy income   650    213    841    2,131 
Loss from operations   (6,484)   (22,340)   (16,304)   (33,175)
                     
Other income and expenses:                    
Interest income   125    111    436    207 
Interest expense   (1,357)   (1,537)   (2,837)   (3,383)
Loss on changes in fair value of convertible notes   -    (3,243)   -    (6,843)
Other expense, net   (4)   49    (5)   44 
Loss before provision for income taxes   (7,720)   (26,960)   (18,710)   (43,150)
Income tax expense   (137)   (109)   (275)   (218)
Net loss  $(7,857)  $(27,069)  $(18,985)  $(43,368)
                     
Net loss attributable to Microvast, Inc.  $(7,857)  $(27,069)  $(18,985)  $(43,368)
                     
Less: Accretion of Series C1 Preferred   974    1,003    1,948    2,006 
Less: Accretion of Series C2 Preferred   2,217    2,281    4,434    4,562 
Less: Accretion of Series D1 Preferred   4,662    4,759    9,324    9,518 
Less: Accretion for noncontrolling interests   3,961    4,036    7,922    8,007 
Net loss attributable to ordinary shareholders of Microvast, Inc.  $(19,671)  $(39,148)  $(42,613)  $(67,461)
                     
Net loss per share attributable to ordinary shareholders of Microvast, Inc.                    
Basic and diluted  $(31.84)  $(63.36)  $(68.97)  $(109.18)
                     
Weighted average shares used in calculating net loss per ordinary share                    
Basic and diluted   617,880    617,880    617,880    617,880 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-3

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. dollars)

 

   Three months ended   Six months ended 
   June 30,   June 30, 
   2020   2021   2020   2021 
Net loss  $(7,857)  $(27,069)  $(18,985)  $(43,368)
Foreign currency translation adjustment   (432)   3,670    (4,644)   757 
Comprehensive loss  $(8,289)  $(23,399)  $(23,629)  $(42,611)
Total comprehensive loss attributable to Microvast, Inc.  $(8,289)  $(23,399)  $(23,629)  $(42,611)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-4

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

   Three Months Ended June 30, 2020 
           Additional   Accumulated other       Microvast, Inc.   Total 
   Ordinary shares   paid-in   Accumulated   comprehensive   Statutory   Shareholders’ 
   Shares   Amount   capital   deficit   loss   reserve   Deficit 
Balance as of March 31, 2020   617,880   $6   $-   $(339,975)  $(13,478)  $6,032   $(347,415)
Net loss   -    -    -    (7,857)   -    -    (7,857)
Accretion for Series C1 Preferred   -    -    -    (974)   -    -    (974)
Accretion for Series C2 Preferred   -    -    -    (2,217)   -    -    (2,217)
Accretion for Series D1 Preferred   -    -    -    (4,662)   -    -    (4,662)
Accretion for the exiting noncontrolling interests   -    -    -    (1,409)   -    -    (1,409)
Foreign currency translation adjustments   -    -    -    -    (432)   -    (432)
Accretion for redeemable noncontrolling interests   -    -    -    (2,552)   -    -    (2,552)
Balance as of June 30, 2020   617,880   $6   $-   $(359,646)  $(13,910)  $6,032   $(367,518)

 

   Six Months Ended June 30, 2020 
           Additional   Accumulated other       Microvast, Inc.   Total 
   Ordinary shares   paid-in   Accumulated   comprehensive   Statutory   Shareholders’ 
   Shares   Amount   capital   deficit   loss   reserve   Deficit 
Balance as of January 1, 2020   617,880   $6   $3,727   $(320,760)  $(9,266)  $6,032   $(320,261)
Net loss   -    -    -    (18,985)   -    -    (18,985)
Accretion for Series C1 Preferred   -    -    (974)   (974)   -    -    (1,948)
Accretion for Series C2 Preferred   -    -    (2,217)   (2,217)   -    -    (4,434)
Accretion for Series D1 Preferred   -    -    (536)   (8,788)   -    -    (9,324)
Accretion for the exiting noncontrolling interests   -    -    -    (2,818)   -    -    (2,818)
Foreign currency translation adjustments   -    -    -    -    (4,644)   -    (4,644)
Accretion for redeemable noncontrolling interests   -    -    -    (5,104)   -    -    (5,104)
Balance as of June 30, 2020   617,880   $6   $-   $(359,646)  $(13,910)  $6,032   $(367,518)

 

F-5

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT - continued

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

   Three Months Ended June 30, 2021 
           Additional   Accumulated other       Microvast, Inc.   Total 
   Ordinary shares   paid-in   Accumulated   comprehensive   Statutory   Shareholders’ 
   Shares   Amount   capital   deficit   loss   reserve   Deficit 
Balance as of March 31, 2021   617,880   $6   $-   $(426,309)  $4,443   $6,032   $(415,828)
Net loss   -    -    -    (27,069)   -    -    (27,069)
Accretion for Series C1 Preferred   -    -    -    (1,003)   -    -    (1,003)
Accretion for Series C2 Preferred   -    -    -    (2,281)   -    -    (2,281)
Accretion for Series D1 Preferred   -    -    -    (4,759)   -    -    (4,759)
Accretion for the exiting noncontrolling interests   -    -    -    (1,430)   -    -    (1,430)
Foreign currency translation adjustments   -    -    -    -    3,670    -    3,670 
Accretion for redeemable noncontrolling interests   -    -    -    (2,606)   -    -    (2,606)
Balance as of June 30, 2021   617,880   $6   $-   $(465,457)  $8,113   $6,032   $(451,306)

 

 

   Six Months Ended June 30, 2021 
           Additional   Accumulated other       Microvast, Inc.   Total 
   Ordinary shares   paid-in   Accumulated   comprehensive   Statutory   Shareholders’ 
   Shares   Amount   capital   deficit   loss   reserve   Deficit 
Balance as of January 1, 2021   617,880   $6   $-   $(397,996)  $7,356   $6,032   $(384,602)
Net loss   -    -    -    (43,368)   -    -    (43,368)
Accretion for Series C1 Preferred   -    -    -    (2,006)   -    -    (2,006)
Accretion for Series C2 Preferred   -    -    -    (4,562)   -    -    (4,562)
Accretion for Series D1 Preferred   -    -    -    (9,518)   -    -    (9,518)
Accretion for the exiting noncontrolling interests   -    -    -    (2,824)   -    -    (2,824)
Foreign currency translation adjustments   -    -    -    -    757    -    757 
Accretion for redeemable noncontrolling interests   -    -    -    (5,183)   -    -    (5,183)
Balance as of June 30, 2021   617,880   $6   $-   $(465,457)  $8,113   $6,032   $(451,306)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-6

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars, or otherwise noted)

 

   Six months ended
June 30,
 
   2020   2021 
Cash flows from operating activities          
Net loss  $(18,985)  $(43,368)
Adjustments to reconcile net loss to net cash used in operating activities:          
Loss on disposal of property, plant and equipment   56    6 
Depreciation of property, plant and equipment   7,207    9,475 
Amortization of land use right and intangible assets   352    376 
Changes in fair value of convertible notes   -    6,843 
Reversal of doubtful accounts   (863)   (196)
Provision for obsolete inventories   646    6,098 
Impairment loss from property, plant and equipment   644    258 
Product warranty   951    9,057 
Changes in operating assets and liabilities:          
Notes receivable   14,167    3,352 
Accounts receivable   13,451    11,813 
Inventories   4,269    (16,134)
Prepaid expenses and other current assets   (821)   175 
Other non-current assets   94    33 
Notes payable   (15,094)   (3,989)
Accounts payable   (4,747)   1,390 
Advance from customers   (1,058)   167 
Accrued expenses and other liabilities   (9)   (381)
Net cash generated from/(used in) operating activities   260    (15,025)
           
Cash flows from investing activities          
Purchases of property, plant and equipment   (11,914)   (29,858)
Proceeds on disposal of property, plant and equipment   (48)   - 
Purchase of short-term investments   (1,999)   - 
Proceeds from maturity of short-term investments   2,522    - 
Net cash used in investing activities   (11,439)   (29,858)
           
Cash flows from financing activities          
Proceeds from borrowings   9,473    26,603 
Repayment of bank borrowings   (11,894)   (12,265)
Loans borrowing from related parties   10,456    8,426 
Repayment of related party loans   (10,033)   (8,426)
Repurchase shares from exiting noncontrolling interests   -    (33,047)
Issuance of convertible notes   -    57,500 
Payment for transaction fee in connection with the merger transaction   -    (2,327)
Net cash (used in)/generated from financing activities   (1,998)   36,464 
           
Effect of exchange rate changes   (1,539)   1,050 
Decrease in cash, cash equivalents and restricted cash   (14,716)   (7,369)
Cash, cash equivalents and restricted cash at beginning of the period   41,784    41,196 
Cash, cash equivalents and restricted cash at end of the period  $27,068   $33,827 

 

F-7

 

 

MICROVAST, INC.

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

   Six months ended
June 30,
 
   2020   2021 
Reconciliation to amounts on consolidated balance sheets          
Cash and cash equivalents  $21,759   $13,367 
Restricted cash   5,309    20,460 
Total cash, cash equivalents and restricted cash  $27,068   $33,827 
           
Supplemental disclosure of cash flow information          
Interest paid  $1,032   $1,376 
           
Non-cash investing and financing activities          
Payable for redemption of noncontrolling interest  $119,567   $97,979 
Payable for purchase of property, plant and equipment  $17,096   $14,103 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-8

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

 

Microvast, Inc. (the “Company” or “Microvast”) was incorporated under the laws of the State of Texas in the United States of America (“USA”) on October 12, 2006 and re-domiciled to the State of Delaware on December 31, 2015. The Company and its subsidiaries (collectively, the “Group”) are primarily engaged in developing, manufacturing, and selling electronic power products for electric vehicles primarily in the People’s Republic of China (“PRC”) and Europe.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation and use of estimates

 

The accompanying unaudited condensed consolidated financial statements include the financial information of Microvast Inc. and its subsidiaries. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and U.S. generally accepted accounting standards for interim financial reporting. Accordingly, certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted from these interim financial statements. The results of operations for the three months and six months periods ended June 30, 2020 and 2021 are not necessarily indicative of the results for the full years.

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Group’s audited consolidated financial statements for each of the three years in the period ended December 31, 2020 included in the definitive proxy statement relating to merger or acquisition between Microvast, Inc. and Tuscan Holding Corp. In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (which include normal recurring adjustments) necessary for a fair statement of financial results for the interim periods presented. The Group believes that the disclosures are adequate to make the information presented not misleading.

 

The financial information as of December 31, 2020 presented in the unaudited condensed financial statements is derived from the Group’s audited consolidated financial statements for the year ended December 31, 2020.

 

The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Group’s consolidated financial statements for each of the three years in the period ended December 31, 2020.

 

Significant accounting estimates reflected in the Group’s financial statements include allowance for doubtful accounts, provision for obsolete inventories, impairment of long-lived assets, valuation allowance for deferred tax assets, product warranties, fair value measurement of the convertible promissory notes, share based compensation and going concern assumption.

 

The unaudited condensed consolidated financial statements of the Group include the financial statements of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Group will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business is dependent on, among other things, the Group’s ability to generate sufficient cash flows from operations, and the Group’s ability to arrange adequate financing arrangements.

 

F-9

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

2. SIGNIFICANT ACCOUNTING POLICIES - continued

 

Revenue recognition

 

Nature of Goods and Services

 

The Group’s sales revenue consists primarily of sales of lithium batteries. The obligation of the Group is providing the electronic power products. Revenue is recognized at the point of time when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Group expects to be entitled to in exchange for the goods or services.

 

Disaggregation of revenue

 

For the three months ended June 30, 2020 and 2021, the Group derived revenues of $14,802 and $29,084 from Asia&Pacific, $6,890 and $4,231 from Europe and $6 and $57 from other geographic regions where the customers are located, respectively.

 

For the six months ended June 30, 2020 and 2021, the Group derived revenues of $18,687 and $41,568 from Asia&Pacific, $9,930 and $6,558 from Europe and $30 and $184 from other geographic regions where the customers are located, respectively.

 

Contract balances

 

Contract balances include accounts receivable and advance from customers. Accounts receivable represent cash not received from customers and are recorded when the right to consideration is unconditional. The allowance for doubtful accounts reflects the best estimate of probable losses inherent to the account receivable balance. Contract liabilities, recorded in advance from customers in the consolidated balance sheet, represents payment received in advance or payment received related to a material right provided to a customer to acquire additional goods or services at a discount in a future period. During the three months ended June 30, 2020 and 2021, the Group recognized $206 and $135 of revenue previously included in advance from customers as of April 1, 2020 and April 1, 2021, respectively. During the six months ended June 30, 2020 and 2021, the Group recognized $446 and $1,321 of revenue previously included in advance from customers as of January 1, 2020 and January 1, 2021, respectively, which consist of payments received in advance related to its sales of lithium batteries.

 

3. ACCOUNTS RECEIVABLE

 

Accounts receivable consisted of the following:

 

   December 31,
2020
   June 30,
2021
 
Accounts receivable  $81,345   $69,996 
Allowance for doubtful accounts   (5,047)   (4,743)
Accounts receivable, net  $76,298   $65,253 

 

F-10

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

3. ACCOUNTS RECEIVABLE - continued

 

Movement of allowance for doubtful accounts was as follows:

 

   Three months ended
June 30,
   Six months ended
June 30,
 
   2020   2021   2020   2021 
Balance at beginning of the period  $4,524   $4,416   $5,537   $5,047 
Charge to expenses   -    318    (863)   (196)
Write off   -    (28)   -    (131)
Exchange difference   10    37    (140)   23 
Balance at end of the period  $4,534   $4,743   $4,534   $4,743 

 

4. INVENTORIES, NET

 

Inventories consisted of the following:

 

   December 31,
2020
   June 30,
2021
 
Work in process  $22,167   $21,090 
Raw materials   17,451    20,223 
Finished goods   5,350    14,087 
Total  $44,968   $55,400 

 

Provision for obsolete inventory at nil and $5,880 were recognized for the three months ended June 30, 2020 and 2021, respectively. Provision for obsolete inventory at $646 and $6,098 were recognized for the six months ended June 30, 2020 and 2021, respectively.

 

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

   December 31,
2020
   June 30,
2021
 
Advances to suppliers  $2,117   $4,857 
Other receivables   688    1,242 
VAT receivables   2,471    1,342 
Deposits   746    751 
Total  $6,022   $8,192 

 

The balance of the VAT receivables represented the amount available for future deduction against VAT payable.

 

F-11

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

   December 31,
2020
   June 30,
2021
 
Payables to exiting investors  $30,000   $- 
Payables for purchase of property, plant and equipment   15,122    14,103 
Product warranty   4,296    10,299 
Other current liabilities   3,959    4,148 
Accrued payroll and welfare   2,704    2,789 
Interest payable   1,379    2,239 
Accrued expenses   1,696    1,713 
Other tax payable   1,472    306 
Total  $60,628   $35,597 

 

The payables to exiting investors represents the amount due in a year for the redemption of the shares owned by certain noncontrolling shareholders of a subsidiary. See Note 12.

 

7. PRODUCT WARRANTY

 

Movement of product warranty was as follows:

 

   Three months ended
June 30,
   Six months ended
June 30,
 
   2020   2021   2020   2021 
Balance at beginning of the period  $17,299   $19,105   $18,416   $19,356 
Provided during the period   842    8,148    951    9,057 
Utilized during the period   (783)   (1,710)   (2,009)   (2,870)
Balance at end of the period  $17,358   $25,543   $17,358   $25,543 

 

 

   December 31,
2020
   June 30,
2021
 
Product warranty – current  $4,296   $10,299 
Product warranty – non-current   15,060    15,244 
Total  $19,356   $25,543 

 

F-12

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

8. BANK BORROWINGS

 

The Group entered into loan agreements and bank facilities with Chinese banks and a German bank.

 

The original terms of the loans from Chinese banks range from 6 to 12 months and the interest rates range from 5.00% to 6.00% per annum. As of June 30, 2021, the balance of the loans from Chinese bank was $16,572.

 

The bank facility agreement with the German bank includes a $13.0 million (EUR11 million) 8-year maturity term loan and a $4.7 million (EUR4 million) revolving facility (“German Bank Facility Agreement”). The interest rate of the 8-year maturity term loan is EURIBOR plus a margin rate determined by the financial leverage ratio of the Group. The $4.7 million (EUR4 million) revolving facility at 6% annual interest, needs to be renewed every year (60 days in advance). During the six months ended June 30, 2021, the Group drew down the 8-year maturity term loan at the amount of $9,886. The German Bank Facility Agreement contains financial covenants on the equity ratio, leverage ratio and profit distribution, and also it has acceleration clauses about the occurrence of failure to comply with the financial covenants. As of June 30, 2021, the Group’s Germany subsidiary was not in compliance with the financial covenants. The Company obtained a waiver for the covenant violation through September 30, 2021, and subsequently cured the default in August 2020 by capital injection. The Group is and expects to be able to remain fully in compliance with the covenants.

 

Changes in bank borrowings were are as follows:

 

   Three months ended
June 30,
   Six months ended
June 30,
 
   2020   2021   2020   2021 
Beginning balance  $5,649   $13,156   $11,922   $12,184 
Proceeds from bank borrowings   3,714    13,158    9,473    26,603 
Repayments of principal   -    -    (11,894)   (12,265)
Exchange difference   22    (144)   (89)   (64)
Ending balance  $9,412   $26,458   $9,412   $26,458 

 

 

    December 31,
2020
   June 30,
2021
 
Current   $12,184   $16,572 
Non-current    -    9,886 
Total   $12,184   $26,458 

 

Certain assets of the Group had been pledged to secure the above banking facilities granted to the Group. The aggregate carrying amount of the assets pledged by the Group as of December 31, 2020 and June 30, 2021 are as follows:

 

   December 31,
2020
   June 30,
2021
 
Buildings  $22,732   $31,877 
Machinery and equipment   19,297    17,835 
Land use rights   2,789    4,466 
Total  $44,818   $54,178 

 

In addition, the Group’s related parties Ochem Chemical Co., Ltd (“Ochem”) and Ochemate Material Technologies Co., Ltd (“Ochemate”) provided $20,874 and $21,838 of guarantees to secure certain bank facilities granted to the Group as of December 31, 2020 and June 30, 2021, respectively.

 

F-13

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

9. OTHER NON-CURRENT LIABILITIES

 

   December 31,   June 30, 
   2020   2021 
Payable to exiting investors  $94,316   $97,979 
Product warranty - non-current   15,060    15,244 
Deferred subsidy income- non-current   1,221    1,139 
Total  $110,597   $114,362 

 

The payable to exiting investors represent the amount to be paid for the redemption of the shares owned by certain noncontrolling interests holders of a subsidiary. See Note 12.

 

10. BONDS PAYABLE

 

   December 31,   June 30, 
   2020   2021 
Bonds payable          
Third-party investors  $29,915   $29,915 
Total  $29,915   $29,915 
           
Long–term bonds payable          
Huzhou Saiyuan  $73,147   $73,147 
PIPE investors   -    64,343 
Total  $73,147   $137,490 

 

Convertible Bonds issued to Huzhou Saiyuan

 

On December 29, 2018, Microvast Power Systems Co., Ltd. (“MPS”) signed an agreement with Huzhou Saiyuan, an entity established by the local government, to issue convertible bonds to Huzhou Saiyuan for a total consideration of $87,776 (RMB600 million), of which $29,259 (RMB200 million) was converted from the existing non-interest-bearing loan with Huzhou Saiyuan as of December 31, 2018. The Company pledged its 12.39% equity holding over MPS to Huzhou Saiyuan to facilitate the issuance of convertible bonds. Besides the previous converted bond $29,259 (RMB200 million), Huzhou Saiyuan further subscribed $14,629 (RMB100 million) on January 9, 2019 and $29,259 (RMB200 million) on February 1, 2019, respectively.

 

If the subscribed bonds are not repaid by the maturity date, Huzhou Saiyuan has the right to dispose the equity interests pledged by the Company in proportion to the amount of matured bonds, or convert the bond to the equity interests of MPS within 60 days after the maturity date. If Huzhou Saiyuan decides to convert the bonds to equity interests of MPS, the equity interests pledged should be released and the convertible bonds should be converted to the equity interest of MPS based on the entity value of MPS at $950,000.

 

F-14

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

10. BONDS PAYABLE - continued

 

On September 28, 2020, MPS signed a supplemental agreement for extension on repayment of convertible bonds to Huzhou Saiyuan, and the terms on repayments and interests were agreed as below:

 

Issuance Date  Subscribed Amount  Maturity Date  Repayment Amount  Annual Interest Rate  
February 1, 2019  $29,259 (RMB200 million)  June 30, 2023  $29,259 (RMB200 million)  3%~4%  
December 31, 2018  $29,259 (RMB200 million)  April 28, 2024  $14,629 (RMB100 million)  0%~4%  
      July 11, 2024  $7,315 (RMB50 million)  0%~4%  
      October 1, 2024  $7,315 (RMB50 million)  0%~4%  
January 1, 2020  $14,629 (RMB100 million)  April 13, 2026  $14,629 (RMB100 million)  3%~4%  

 

An additional one-year extension could be granted to the Group if the Group submits a written application before the extended maturity date. As of June 30, 2021, the outstanding balance of the convertible bonds to Huzhou Saiyuan totaled at $73,147 (RMB500 million).

 

Convertible Bonds issued to third-party investors

 

On November 2, 2018, MPS signed a convertible bond agreement with two third-party investors (the “Bond Holders”), through which the Bond Holders agreed to provide a non-interest bearing loan in an aggregate amount of $58,516 (RMB400 million) or up to $73,147 (RMB500 million) to MPS, and the Bond Holders could convert the bonds into a number of Series D2 preferred shares of the Company (the “Series D2 Preferred”) once approvals from the PRC and US government were obtained. As of December 31, 2020 and June 30, 2021, $29,915 (RMB204.5 million) was subscribed by the Bond Holders.

 

On July 23, 2021, upon the completion of the merger between Microvast and Tuscan Holdings Corp., the convertible bonds were settled and converted into 6,719,845 common shares of the combined company as disclosed in Note 21.

 

Convertible Notes at Fair Value

 

On January 4, 2021, the Company entered into a note purchase agreement to issue $57,500 convertible promissory notes to certain investors, fully due and payable on the third anniversary of the initial closing date. The notes bear no interest, provided, however, if a liquidity event has not occurred prior to June 30, 2022, an interest rate of 6% shall be applied retrospectively from the date of initial closing. The conversion of the promissory notes are contingent upon the occurrence of a Private Investment in Public Equity (“PIPE”) financing, a liquidity event (“Liquidity Event”) or a new financing after June 30, 2022 but before the maturity date (“Next Financing”). The first tranche and second tranche of the convertible promissory notes were issued in January 2021 and February 2021 at amount of $25,000 and $32,500, respectively. A discounted rate of 80% or 90% would be applied to the then share issuance price upon conversion, depending on the circumstances of PIPE financing, Liquidity Event or Next Financing.

 

The fair value option was elected for the measurement of the convertible notes. As of June 30, 2021, the fair value of the convertible notes was $64,343. Changes in fair value, a loss of $3,243 and $6,843 were recorded in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2021, respectively.

 

On July 23, 2021, upon the completion of the merger between Microvast and Tuscan Holdings Corp., the convertible promissory notes were converted into 6,736,106 common shares of the combined company.

 

F-15

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

11. FAIR VALUE MEASUREMENT

 

Measured or disclosed at fair value on a recurring basis

 

The Group measured its financial assets and liabilities, including cash and cash equivalents, restricted cash and convertible notes at fair value on a recurring basis as of December 31, 2020 and June 30, 2021. Cash and cash equivalents and restricted cash are classified within Level 1 of the fair value hierarchy because they are valued based on the quoted market price in an active market. The Group determines the fair value of convertible notes, with the assistance of an independent third-party appraiser, based on Level 3 inputs. To determine the fair value of the convertible notes, the Group used probability expected return method.

 

The key assumptions used in valuation of convertible notes as of June 30, 2021 are summarized in the table below:

 

Probability for Conversion   90%
Probability for Redemption   10%
Remaining life   0.1 - 2.5 years 

 

As of December 31, 2020 and June 30, 2021, information about inputs for the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follow:

 

   Fair Value Measurement as of December 31, 2020 
   Quoted Prices
in Active Market for
Identical Assets
   Significant Other
Observable Inputs
   Significant
Unobservable Inputs
   Total 
   (Level 1)   (Level 2)   (Level 3)     
Cash and cash equivalents  $21,496    -    -   $21,496 
Restricted cash   19,700          -           -    19,700 
Total  $41,196    -    -   $41,196 

 

   Fair Value Measurement as of June 30, 2021 
   Quoted Prices
in Active Market for
Identical Assets
   Significant Other
Observable Inputs
   Significant
Unobservable Inputs
   Total 
   (Level 1)   (Level 2)   (Level 3)     
Cash and cash equivalents  $13,367    -    -   $13,367 
Restricted cash   20,460    -    -    20,460 
Convertible notes   -          -    64,343    64,343 
Total  $33,827    -    64,343   $98,170 

 

F-16

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

11. FAIR VALUE MEASUREMENT - continued

 

Measured or disclosed at fair value on a recurring basis - continued

 

The following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and six months ended June 30, 2021:

 

   Convertible notes 
Balance as of January 1, 2021  $- 
Issuance of convertible notes   57,500 
Changes in fair value of convertible notes   3,600 
Balance as of March 31, 2021  $61,100 
Changes in fair value of convertible notes   3,243 
Balance as of June 30, 2021  $64,343 

 

Measured or disclosed at fair value on a nonrecurring basis

 

The Group measured the long-lived assets using the income approach—discounted cash flow method, when events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable.

 

12. NONCONTROLLING INTERESTS

 

Noncontrolling interests of MPS

 

In March 2017, the Company sold 17.39% equity interest of its wholly-owned subsidiary, MPS, to eight third-party investors (the “Investors”) for total cash consideration of $400,000, which was received in 2017.

 

In February 2018, the Company signed a series of repurchase and redemption agreements with 6 out of the 8 investors of MPS which requested to redeem in aggregate 14.05% equity interests in MPS (“exiting Investors”), at a redemption value equal to the initial capital contribution plus 6% simple annual interest. To facilitate the repurchase and redemption transaction, MPS and the exiting Investors entered into certain property mortgage agreements on May 30, 2018.

 

Pursuant to an extension agreement signed in September 2020, the Group paid $30,000 (RMB214.2 million) in March 2021. See Note 6. Further, if the Group completes a qualified financing before 2022 with total amount of $200,000, the Group would pay the exiting Investors $30,000 (RMB214.2 million) which shall be made no later than September 30, 2023. If the Group completes new round financing in 2022 or 2023, the Group will pay the exiting Investors an amount calculated based on the proceeds received in the financing, and in no case will the repayment be less than $30,000 (RMB214.2 million). The repayment amount should be calculated based on the following rules:

 

a)Minimum repayment of $30,000 (RMB214.2 million) should be paid if the proceeds received in the financing is up to $200,000.

 

b)15% of the incremental proceeds should be paid if the proceeds received in the financing is between $200,000 and $400,000.

 

c)20% of the incremental proceeds and up to a maximum of the overdue payable amount should be paid if the proceeds received in the financing is above $400,000.

 

On July 23, 2021, upon the completion of the merger between Microvast and Tuscan Holdings Corp., the equity interest held by the investors who remained as noncontrolling shareholders of MPS were converted into 17,253,182 common shares of the combined company as disclosed in Note 21.

 

F-17

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

13. ORDINARY SHARES

 

The Company’s Amended and Restated Certificate of Incorporation authorizes 100,000,000 ordinary shares with a par value of $0.01 per share.

 

As of December 31, 2020 and June 30, 2021, the Company had 617,880 ordinary shares issued and outstanding.

 

On July 23, 2021, upon the completion of the merger between Microvast and Tuscan Holdings Corp., all of the ordinary shares were converted into common shares of the combined company at an exchange ratio of 160.3 as disclosed in Note 21.

 

14. PREFERRED SHARES

 

As of December 31, 2020 and June 30, 2021, the Company had preferred shares issued and outstanding as follows:

 

Preferred Shares  Number of Shares   Shareholders
Series C1 Preferred  166,950   Ashmore Global Special Situations Fund 4 Limited Partnership and Ashmore Global Special Situations Fund 5 Limited Partnership (“Ashmore”) and International Finance Corporation (“IFC”)
Series C2 Preferred  126,345   Ashmore Cayman SPC Limited (“Ashmore Cayman”) and IFC
Series D1 Preferred  139,186   Evergreen Ever Limited (“EEL”)
Total  432,481    

 

The changes in the balance of Series Preferred and redeemable noncontrolling interests included in the mezzanine equity for the six months ended June 30, 2020 and 2021 were as follows:

 

   Series C1 Preferred   Series C2 Preferred   Series D1 Preferred   Redeemable noncontrolling interests 
Balance as of January 1, 2020  $76,684   $73,100   $127,935   $80,561 
Accretion   974    2,217    4,662    2,552 
Ending balance as of March 31, 2020  $77,658   $75,317   $132,597   $83,113 
Accretion   974    2,217    4,662    2,552 
Ending balance as of June 30, 2020  $78,632   $77,534   $137,259   $85,665 
                     
Balance as of January 1, 2021  $80,581   $81,966   $146,583   $90,820 
Accretion    1,003    2,281    4,759    2,577 
Ending balance as of March 31, 2021  $81,584   $84,247   $151,342   $93,397 
Accretion    1,003    2,281    4,759    2,606 
Ending balance as of June 30, 2021  $82,587   $86,528   $156,101   $96,003 

 

On July 23, 2021, upon the completion of the merger between Microvast and Tuscan Holdings Corp., all preferred shares were converted into common shares of the combined company at an exchange ratio of 160.3 as disclosed in Note 21.

 

F-18

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

15. SHARE-BASED PAYMENT

 

The share options, non-vested shares and non-vested share units may be vested only upon and after the occurrence of initial public offering, sale or transfer of all or substantially all of the business, operations or assets of the Company or its subsidiaries, taken as a whole, to a third party, or such other sale or transfer of ordinary shares in the Company as determined, in each case, by the Company pursuant to legal documents and other obligations binding upon it. As of June 30, 2021, it was not considered probable that the above performance condition would be achieved and accordingly no compensation expense was recorded.

 

Share options

 

Share options activity for the six months ended June 30, 2020 and 2021 was as follows:

 

Share options  Number of shares   Weighted average exercise price   Weighted average grant date fair value   Weighted average remaining contractual life 
       (US$)   (US$)      
Outstanding as of January 1, 2020  47,277   $881.97   $343.83    7.1 
Forfeited  (4,462)   366.00    285.11      
Outstanding as of March 31, 2020  42,815   $935.74   $349.95    7.0 
Outstanding as of June 30, 2020  42,815   $935.74   $349.95    6.8 
Expected to vest and exercisable as of June 30, 2020  42,815   $935.74   $349.95    6.8 
                    
Outstanding as of January 1, 2021  216,706    991.99    468.60    9.0 
Forfeited  (5,700)   1005.85    475.71      
Outstanding as of March 31, 2021  211,006   $991.62   $468.41    8.7 
Forfeited  (800)   1005.85    475.71      
Outstanding as of June 30, 2021  210,206   $991.57   $468.38    8.5 
Expected to vest and exercisable as of June 30, 2021  210,206   $991.57   $468.38    8.5 

 

Non-vested share

 

No non-vested shares activity occurred for the six months ended June 30, 2021. The non-vested shares activity for the six months ended June 30, 2020 was as follows:

 

       Weighted 
       average 
   Number of   grant date 
   non-vested   fair value 
   shares   per share 
       (US$) 
Outstanding as of January 1, 2020   20,523   $182.13 
Transfer to non-vested share units   (20,523)  $182.13 
Outstanding as of March 31, 2020   -   $- 
Outstanding as of June 30, 2020   -   $- 

 

F-19

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

15. SHARE-BASED PAYMENT - continued

 

Non-vested share units

 

The non-vested shares units will be settled in the form of cash payments. Most of them will be settled at price per unit equal to the fair market value on initial vesting date, and others will be settled at price per unit equal to the lesser of the fair market value on initial vesting date or the value of $1,005.85.

 

       Weighted 
       average 
   Number of   grant date 
   non-vested   fair value 
   shares   per share 
       (US$) 
Outstanding as of January 1, 2020   123,575   $143.89 
Forfeited   (446)  $227.24 
Transfer from non-vested shares   20,523   $182.13 
Outstanding as of March 31, 2020   143,652   $149.10 
Outstanding as of June 30, 2020   143,652   $149.10 
           
Outstanding as of January 1, 2021   143,652   $149.10 
Forfeited   -   $- 
Outstanding as of June 30, 2021   143,652   $149.10 

 

Subsequent to the completion of the merger between Microvast and Tuscan Holdings Corp., the options granted under Microvast’s stock incentive plan were converted into options to purchase common stock of the combined company at exchange ratio of 160.3 with three-year vesting period starting from the first anniversary of the closing. And the non-vested share units granted under Microvast’s stock incentive plan will be settled in cash at price per unit determined by the fair value market of the common stock of the combined company, with three-year vesting period starting from the first anniversary of the closing. The Company is in the process of assessing the accounting impact.

 

Series B2 Preferred subscribed by employees

 

On October 30, 2015, the Company issued 79,107 Series B2 Preferred to certain employees of the Company. The Series B2 Preferred were issued for cash consideration of $366.00 per share and all the Series B2 Preferred were fully paid on the date of issuance. The Series B2 Award shall vest with respect to one-fourth of the total number of the Series B2 Award immediately upon the occurrence of a qualified IPO or initial vesting date, and on each of the first, second and third anniversaries of the initial vesting date; provided that through each applicable vesting date, the holder of the Series B2 Award remains employed with the Group.

 

As of December 31, 2020 and June 30, 2021, 53,319 shares were legally issued and outstanding and the Company recorded a deposit liability of $21,792 at the per share price equal to the original Series B2 Preferred subscription price.

 

Subsequent to the completion of the merger between Microvast and Tuscan Holdings Corp., the Series B2 Award were converted into options to purchase common stock of the combined company at exchange ratio of 160.3, with three-year vesting period starting from the first anniversary of the closing. The Company is in the process of assessing the accounting impact.

 

F-20

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2021

(In thousands of U.S. dollars, except share and per share data, or otherwise noted)

 

16. MAINLAND CHINA CONTRIBUTION PLAN

 

Full time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Group to accrue for these benefits based on certain percentages of the employees’ salaries. The total provisions for such employee benefits were $418 and $640 for three months ended June 30, 2020 and 2021, respectively. The total provisions for such employee benefits were $954 and $1,281 for six months ended June 30, 2020 and 2021, respectively.

 

17. SEGMENT INFORMATION

 

Operating segments are defined as components of an enterprise engaging in businesses activities for which separate financial information is available that is regularly evaluated by the Group’s chief operating decision makers (“CODM”) in deciding how to allocate resources and assess performance. The Group’s CODM has been identified as the Chief Executive Officer (“CEO”), who reviews consolidated results including revenue, gross profit and operating profit at a consolidated level only and does not distinguish between products for the purpose of making decisions about resources allocation and performance assessment. As such, the Group concluded that it has one operating segment and one reporting segment.

 

Long-lived assets, classified by major geographic regions are as follows.

 

   December 31,   June 30,