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Table of Contents    

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to________________
Microvast Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware001-3882683-2530757
(State or other jurisdiction
of incorporation or organization)
(Commission File Number)(IRS Employer
Identification No.)
12603 Southwest Freeway, Suite 210
Stafford, Texas
77477
(Address Of Principal Executive Offices)(Zip Code)
(281) 491-9505
(Registrant’s telephone number, including area code)
N/A
(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 classTrading Symbol(s)Name of exchange on which registered
Common stock, par value $0.0001 per shareMVSTThe Nasdaq Stock Market LLC
Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share
MVSTWThe Nasdaq Stock Market LLC
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. Yes x No o
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of July 22, 2022, there were 302,546,766 shares of the Company’s common stock, par value $0.0001, issued and outstanding.


Table of Contents
MICROVAST HOLDINGS, INC.
FORM 10-Q
For the Quarter Ended June 30, 2022
Table of Contents
Page
i

Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report (“Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “believe,” “intend,” “plan,” “projection,” “outlook” or words of similar meaning. These forward-looking statements include, but are not limited to, statements regarding our industry and market sizes, and future opportunities for us. Such forward-looking statements are based upon the current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results and the timing of events may differ materially from the results anticipated in these forward-looking statements.
There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including:
risks of operations in the People’s Republic of China (the “PRC” or “China”);
the impact of the ongoing COVID-19 pandemic;
the conflict between Russia and Ukraine and any restrictive actions that have been or may be taken by the United States (the “U.S.”) and/or other countries in response thereto, such as sanctions or export controls;
risks related to cybersecurity and data privacy;
the impact of inflation and rising interest rates;
changes in availability and price of raw materials;
changes in the highly competitive market in which we compete, including with respect to our competitive landscape, technology evolution or regulatory changes;
changes in the markets that we target;
heightened awareness of environmental issues and concern about global warming and climate change;
the risk that we may not be able to execute our growth strategies or achieve profitability;
the risk that we are unable to secure or protect our intellectual property;
the risk that we may experience effects from global supply chain challenges, including delays in delivering our products to our customers;
the risk that our customers or third-party suppliers are unable to meet their obligations fully or in a timely manner;
the risk that our customers will adjust, cancel or suspend their orders for our products;
the risk that we will need to raise additional capital to execute our business plan, which may not be available on acceptable terms or at all;
the risk of product liability or regulatory lawsuits or proceedings relating to our products or services;
the risk that we may not be able to develop and maintain effective internal controls; and
the outcome of any legal proceedings that may be instituted against us or any of our directors or officers.
The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For more information, please see the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2021 in Part I, Item 1A and in the Registration Statement on Form S-3, (File No. 333-258978), which was initially filed on July 28, 2022, and as further amended.
Actual results, performance or achievements may differ materially, and potentially adversely, from any forward-looking statements and the assumptions on which those forward-looking statements are based. There can be no assurance that the data contained herein is reflective of future performance to any degree. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance as forward-looking statements are based on estimates and assumptions that are inherently subject to various significant risks, uncertainties and other factors, many of which are beyond our control.
All information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date hereof except as may be required under applicable securities laws. Forecasts and estimates regarding our industry and end markets are based on sources we believe to be reliable, however there can be no assurance these forecasts and estimates will prove accurate in whole or in part.
ii

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
December 31,
2021
June 30,
2022
Assets
Current assets:
Cash and cash equivalents$480,931 $333,867 
Restricted cash55,178 63,065 
Accounts receivable (net of allowance for credit losses of $5,005 and $5,828 as of December 31, 2021 and June 30, 2022, respectively)
88,717 104,992 
Notes receivable11,144 30,448 
Inventories53,424 64,460 
Prepaid expenses and other current assets17,127 14,531 
Amount due from related parties85  
Total Current Assets706,606 611,363 
Property, plant and equipment, net253,057 278,443 
Land use rights, net14,008 13,171 
Acquired intangible assets, net1,882 1,758 
Operating lease right-of-use assets 17,123 
Other non-current assets19,738 49,786 
Total Assets$995,291 $971,644 
Liabilities
Current liabilities:
Accounts payable$40,408 $39,578 
Advance from customers1,526 4,558 
Accrued expenses and other current liabilities58,740 66,793 
Income tax payables666 661 
Short-term bank borrowings13,301 8,807 
Notes payable60,953 76,605 
Bonds payable-current 29,259 
Total Current Liabilities175,594 226,261 
Long-term bonds payable73,147 43,888 
Warrant liability1,105 285 
Share-based compensation liability18,925 99 
Operating lease liabilities 14,936 
Other non-current liabilities39,822 32,171 
1

Table of Contents
MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - continued
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
December 31,
2021
June 30,
2022
Total Liabilities$308,593 $317,640 
Commitments and contingencies (Note 16)
Shareholders’ Equity
Common Stock (par value of US$0.0001 per share, 750,000,000 and 750,000,000 shares authorized as of December 31, 2021 and June 30, 2022; 300,530,516 and 302,546,766 shares issued, and 298,843,016 and 300,859,266 shares outstanding as of December 31, 2021 and June 30, 2022)
$30 $30 
Additional paid-in capital1,306,034 1,378,774 
Statutory reserves6,032 6,032 
Accumulated deficit(632,099)(720,923)
Accumulated other comprehensive income/(loss)6,701 (9,909)
Total Shareholders’ Equity686,698 654,004 
Total Liabilities and Shareholders’ Equity$995,291 $971,644 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2

Table of Contents
MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202220212022
Revenues$33,372 $64,414 $48,310 $101,082 
Cost of revenues(40,146)(59,573)(56,321)(96,228)
Gross (loss)/profit(6,774)4,841 (8,011)4,854 
Operating expenses:
General and administrative expenses(6,178)(34,335)(10,752)(60,436)
Research and development expenses(5,895)(10,244)(9,681)(21,553)
Selling and marketing expenses(3,706)(5,810)(6,862)(11,808)
Total operating expenses(15,779)(50,389)(27,295)(93,797)
Subsidy income213 576 2,131 713 
Loss from operations(22,340)(44,972)(33,175)(88,230)
Other income and expenses:
Interest income111 420 207 734 
Interest expense(1,537)(895)(3,383)(1,691)
Loss on changes in fair value of convertible notes(3,243) (6,843) 
Gain on changes in fair value of warrant liability 1,255  820 
Other income, net49 10 44 409 
Loss before provision for income taxes(26,960)(44,182)(43,150)(87,958)
Income tax expense(109) (218) 
Net loss$(27,069)$(44,182)$(43,368)$(87,958)
Less: Accretion of Series C1 Preferred1,003  2,006  
Less: Accretion of Series C2 Preferred2,281  4,562  
Less: Accretion of Series D1 Preferred4,759  9,518  
Less: Accretion for noncontrolling interests4,036  8,007  
Net loss attributable to Common Stock shareholders of Microvast Holdings, Inc.$(39,148)$(44,182)$(67,461)$(87,958)
Net loss per share attributable to Common Stock shareholders of Microvast Holdings, Inc.
Basic and diluted$(0.40)$(0.15)$(0.68)$(0.29)
Weighted average shares used in calculating net loss per share of common stock
Basic and diluted99,028,297 300,565,515 99,028,297 299,709,069 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

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MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202220212022
Net loss$(27,069)$(44,182)$(43,368)$(87,958)
Foreign currency translation adjustment3,670 (17,596)757 (16,610)
Comprehensive loss$(23,399)$(61,778)$(42,611)$(104,568)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

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MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITY
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
Three Months Ended June 30, 2021
Common StockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
Comprehensive
Income
Statutory
reserves
Total
Microvast
Holdings, Inc.
Shareholders’
Deficit
SharesAmount
Balance as of March 31, 202199,028,297 $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
99,028,297 $6 $ $(465,457)$8,113 $6,032 $(451,306)
Six Months Ended June 30, 2021
Common StockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
Comprehensive
Income
Statutory
reserves
Total
Microvast
Holdings, Inc.
Shareholders’
Deficit
SharesAmount
Balance as of December 31, 202099,028,297 $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, 202199,028,297 $6 $ $(465,457)$8,113 $6,032 $(451,306)
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MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITY - continued
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
Three Months Ended June 30, 2022
Common StockAdditional
paid-in
capital
Accumulated
deficit
Accumulated other
Comprehensive
Income (loss)
Statutory
reserves
Total
Microvast
 Holdings, Inc.
Shareholders’
Equity
SharesAmount
Balance as of March 31, 2022298,851,140 $30 $1,320,367 $(676,741)$7,687 $6,032 $657,375 
Net loss— — — (44,182)— — (44,182)
Issuance of common stock in connection with vesting of share-based awards2,008,126 — — — — — — 
Share-based compensation— — 58,407 — — — 58,407 
Foreign currency translation adjustments— — — — (17,596)— (17,596)
Balance as of June 30, 2022
300,859,266 $30 $1,378,774 $(720,923)$(9,909)$6,032 $654,004 
Six Months Ended June 30, 2022
Common StockAdditional
paid-in
capital
Accumulated
deficit
Accumulated other
Comprehensive
Income (loss)
Statutory
reserves
Total
Microvast
 Holdings, Inc.
Shareholders’
Equity
SharesAmount
Balance as of December 31, 2021298,843,016 $30 $1,306,034 $(632,099)$6,701 $6,032 $686,698 
Net loss— — — (87,958)— — (87,958)
Cumulative effect adjustment related to opening retained earnings for adoption of ASU2016-13, Financial instruments- Credit losses (Topic 326)
— — — (866)— — (866)
Issuance of common stock in connection with vesting of share-based awards2,016,250 — — — — — — 
Share-based compensation— 72,740 — — — 72,740 
Foreign currency translation adjustments— — — (16,610)— (16,610)
Balance as of June 30, 2022300,859,266 $30 $1,378,774 $(720,923)$(9,909)$6,032 $654,004 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
Six Months Ended
June 30,
20212022
Cash flows from operating activities
Net loss$(43,368)$(87,958)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of property, plant and equipment6 13 
Depreciation of property, plant and equipment9,475 10,377 
Amortization of land use right and intangible assets376 283 
Noncash lease expenses 1,112 
Share-based compensation 53,650 
Changes in fair value of warrant liability (820)
Changes in fair value of convertible notes6,843  
(Reversal) allowance of credit losses(196)380 
Provision for obsolete inventories6,098 1,919 
Impairment loss from property, plant and equipment258 493 
Product warranty9,057 6,235 
Changes in operating assets and liabilities:
Notes receivable3,352 (20,647)
Accounts receivable11,813 (21,856)
Inventories(16,134)(15,906)
Prepaid expenses and other current assets175 1,689 
Amount due from/to related parties 85 
Operating lease right-of-use assets (19,260)
Other non-current assets33 111 
Notes payable(3,989)19,237 
Accounts payable1,390 808 
Advance from customers167 3,230 
Accrued expenses and other liabilities(381)(13,704)
Operating lease liabilities 15,838 
Other non-current liabilities 1,156 
Net cash used in operating activities(15,025)(63,535)
Cash flows from investing activities
Purchases of property, plant and equipment(29,858)(67,915)
Proceeds on disposal of property, plant and equipment 2 
Net cash used in investing activities(29,858)(67,913)
Cash flows from financing activities
Proceeds from borrowings26,603 13,466 
Repayment of bank borrowings(12,265)(17,332)
Loans borrowing from related parties8,426  
Repayment of related party loans(8,426) 
Payment for transaction fee in connection with the merger(2,327) 
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MICROVAST HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
Six Months Ended
June 30,
20212022
Payment to exited noncontrolling interests(33,047) 
Issuance of convertible notes57,500  
Net cash generated from (used in) financing activities36,464 (3,866)
Effect of exchange rate changes1,050 (3,863)
Decrease in cash, cash equivalents and restricted cash(7,369)(139,177)
Cash, cash equivalents and restricted cash at beginning of the period41,196 536,109 
Cash, cash equivalents and restricted cash at end of the period$33,827 $396,932 

Six Months Ended
June 30,
20212022
Reconciliation to amounts on consolidated balance sheets
Cash and cash equivalents$13,367 $333,867 
Restricted cash20,460 63,065 
Total cash, cash equivalents and restricted cash$33,827 $396,932 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Microvast Holdings, Inc. (“Microvast” or 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.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and use of estimates
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company 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 (“U.S. GAAP”) for interim financial reporting. Accordingly, certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with U.S. GAAP have been omitted from these interim financial statements.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the period ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2022, which provides a more complete discussion of the Company’s accounting policies and certain other information. 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 Company believes that the disclosures are adequate to make the information presented not misleading.
The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2022.
The financial information as of December 31, 2021 included on the condensed consolidated balance sheets is derived from the Group’s audited consolidated financial statements for the year ended December 31, 2021.
Except for the adoption of ASU 2016-02, Leases (Topic 842) and ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) on January 1, 2022, there have been no significant changes to the significant accounting policies disclosed in Note 2 of the audited consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020, and 2019.
Significant accounting estimates reflected in the Group’s financial statements include allowance for credit losses, provision for obsolete inventories, impairment of long-lived assets, valuation allowance for deferred tax assets, product warranty, fair value measurement of warrant liability and share based compensation.
All intercompany transactions and balances have been eliminated upon consolidation.
On July 23, 2021 (the “Closing Date”), Tuscan Holdings Corp. (“Tuscan”), consummated the previously announced merger with Microvast, Inc., a Delaware corporation, pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated February 1, 2021, between Tuscan, Microvast, Inc. and TSCN Merger Sub Inc., a Delaware corporation (“Merger Sub”), pursuant to which the Merger Sub merged with and into Microvast, Inc., with Microvast, Inc. surviving the merger (the “Business Combination,” and, collectively with the other transactions described in the Merger Agreement, the “Reverse Recapitalization”). As a result of the Business Combination, Tuscan was renamed “Microvast Holdings, Inc.”

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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued


Basis of presentation and use of estimates-continued
The Business Combination is accounted for as a reverse recapitalization under U.S. GAAP. This determination is primarily based on (1) Microvast, Inc.’s stockholders comprising a relative majority of the voting power of the Company and having the ability to nominate the members of the Board, (2) Microvast, Inc.’s operations prior to the acquisition comprising the only ongoing operations of the Company, and (3) Microvast, Inc.’s senior management comprising a majority of the senior management of the Company. Under this method of accounting, Tuscan is treated as the “acquired” company for financial reporting purposes. Accordingly, the financial statements of the Company represent a continuation of the financial statements of Microvast, Inc. with the Business Combination being treated as the equivalent of Microvast, Inc. issuing stock for the net assets of Tuscan, accompanied by a recapitalization. The net assets of Tuscan are stated at historical costs, with no goodwill or other intangible assets recorded and are consolidated with Microvast Inc.’s financial statements on the Closing Date. Operations prior to the Business Combination are presented as those of Microvast, Inc. The shares and net loss per share available to holders of the Company’s Common Stock, prior to the Business Combination, have been retroactively restated as shares reflecting the Common Exchange Ratio established in the Business Combination Agreement.
Each of the options to purchase Microvast, Inc.’s common stock that was outstanding before the Business Combination was converted into options to acquire Common Stock by computing the number of shares and converting the exercise price based on the exchange ratio of 160.3 (the “Common Exchange Ratio”).
Emerging Growth Company

Pursuant to the JOBS Act, an emerging growth company (the “EGC”) may adopt new or revised accounting standards that may be issued by FASB or the SEC either (i) within the same periods as those otherwise applicable to non-EGCs or (ii) within the same time periods as private companies. The Company intends to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies. Accordingly, the information contained herein may be different than the information provided by other public companies.

The Company also intends to take advantage of some of the reduced regulatory and reporting requirements of EGCs pursuant to the JOBS Act so long as the Company qualifies as an EGC, including, but not limited to, an exemption from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.
Revenue recognition
Nature of Goods and Services
The Group’s revenue consists primarily of sales of lithium-ion 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 and six months ended June 30, 2021 and 2022, the Group derived revenues from geographic regions as follows:


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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued


Revenue recognition-continued
Three Months Ended June 30,Six Months Ended June 30,
2021202220212022
PRC$21,650 $33,946 $32,292 $53,784 
Other Asia & Pacific countries7,434 24,622 9,276 38,026 
Asia & Pacific 29,084 58,568 41,568 91,810 
Europe 4,231 4,880 6,558 7,631 
U.S.57 966 184 1,641 
Total$33,372 $64,414 $48,310 $101,082 
Contract balances
Contract balances include accounts receivable and advances from customers. Accounts receivable represent cash not received from customers and are recorded when the rights to consideration is unconditional. The allowance for credit losses reflects the best estimate of probable losses inherent to the accounts receivable balance. Contract liabilities, recorded in advance from customers in the consolidated balance sheets, represent 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, 2021 and 2022, the Group recognized $135 and $70 of revenue previously included in advance from customers as of April 1, 2021 and April 1, 2022, respectively. During the six months ended June 30, 2021 and 2022, the Group recognized $1,321 and $549 of revenue previously included in advance from customers as of January 1, 2021 and January 1, 2022, respectively, which consist of payments received in advance related to its sales of lithium batteries.
Share-based compensation
Share-based payment transactions with employees are measured based on the grant date fair value of the equity instrument and recognized as compensation expense on a straight-line basis over the requisite service period, with a corresponding impact reflected in additional paid-in capital. For share-based awards granted with performance condition, the compensation cost is recognized when it is probable that the performance condition will be achieved. The Company reassesses the probability of achieving the performance condition at the end of each reporting date and records a cumulative catch-up adjustment for any changes to its assessment. For stock options and performance-based awards with a market condition, such as awards using total shareholder return (“TSR”) as a performance metric, compensation expense is recognized on a straight-line basis over the estimated service period of the award, regardless of whether the market condition is satisfied. Forfeitures are recognized as they occur. Liability-classified awards are remeasured at their fair-value-based measurement as of each reporting date until settlement.
Operating leases

On January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASC 842”), using the modified retrospective transition method resulting in the recording of operating lease right-of-use (ROU) assets of $18,826 and operating lease liabilities of $18,776 upon adoption. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The adoption of the new guidance did not have a material effect on the unaudited condensed consolidated statements of operations. As of June 30, 2022, the Company recorded operating lease right-of-use (ROU) assets of $17,123 and operating lease liabilities of $17,042, including current portion in the amount of $2,106, which was recorded under accrued expenses and other current liabilities on the balance sheet.




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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued


Operating leases-continued
The Company determines if an arrangement is a lease or contains a lease at lease inception. Operating leases are required to record in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any expired or existing leases as of the adoption date. The Company also elected the practical expedient not to separate lease and non-lease components of contracts. Lastly, for lease assets other than real estate, such as printing machine and electronic appliances, the Company elected the short-term lease exemption as their lease terms are 12 months or less.

As the rate implicit in the lease is not readily determinable, the Company estimates its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is estimated in a portfolio approach to approximate the interest rate on a collateralized basis with similar terms and payments in a similar economic environment. Lease expense is recorded on a straight-line basis over the lease term.
Warrant Liability
The Company accounts for warrants in accordance with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. As the Private Warrants (as defined in Note 10 – Warrants) meet the definition of a derivative as contemplated in ASC 815, the Company classifies the Private Warrants as liabilities. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the condensed statements of operations. The Private Warrants are valued using a Monte Carlo simulation model on the basis of the quoted market price of Public Warrants.
Recent accounting pronouncements adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public companies, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the guidance is permitted. In July 2018, ASU 2016-02 was updated with ASU 2018-11, Targeted Improvements to ASC 842, which provides entities with relief from the costs of implementing certain aspects of the new leasing standard. Specifically, under the amendments in ASU 2018-11, (1) entities may elect not to recast the comparative periods presented when transitioning to ASC 842 and (2) lessors may elect not to separate lease and nonlease components when certain conditions are met. Before ASU 2018-11 was issued, transition to the new lease standard required application of the new guidance at the beginning of the earliest comparative period presented in the financial statements.
As an EGC, the Company adopted this standard on January 1, 2022, and elected not to recast the comparative periods presented. The adoption did not have a material impact on the Company's unaudited condensed consolidated statements of operations or consolidated statements of cash flows, and the adoption of Topic 842 did not result in a cumulative-effect adjustment to retained earnings. Further information is disclosed in Note 12 – Leases.



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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued


Recent accounting pronouncements adopted-continued

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. As an EGC, the Company adopted this standard on January 1, 2022, using a modified retrospective transition method and did not restate the comparable periods, which resulted in a cumulative-effect adjustment to decrease the opening balance of retained earnings on January 1, 2022 by $866. The adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recent accounting pronouncements not yet adopted

In August 2020, the FASB issued ASU 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)-Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is currently evaluating the impact that ASU 2020-06 may have on the condensed consolidated financial statements and related disclosures.

NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
December 31,
2021
June 30,
2022
Accounts receivable$93,722 $110,820 
Allowance for credit losses(5,005)(5,828)
Accounts receivable, net$88,717 $104,992 
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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 3. ACCOUNTS RECEIVABLE-continued
Movement of allowance for credit losses was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202220212022
Balance at beginning of the period$4,416 $5,354 $5,047 $5,005 
Cumulative-effect adjustment upon adoption of ASU2016-13, Financial instruments- Credit losses (Topic 326)
—  — 866 
Charges (Reversal) of expenses
318 925 (196)380 
Write off(28)(153)(131)(153)
Exchange difference37 (298)23 (270)
Balance at end of the period$4,743 $5,828 $4,743 $5,828 
NOTE 4. INVENTORIES
Inventories consisted of the following:
December 31,
2021
June 30,
2022
Work in process$20,760 $26,199 
Raw materials25,266 31,656 
Finished goods7,398 6,605 
Total$53,424 $64,460 
Provision for obsolete inventories at $5,880 and $1,448 were recognized for the three months ended June 30, 2021 and 2022, respectively. Provision for obsolete inventories at $6,098 and $1,919 were recognized for the six months ended June 30, 2021 and 2022, respectively.
NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
December 31,
2021
June 30,
2022
Product warranty, current$20,922 $14,843 
Payables for purchase of property, plant and equipment18,500 28,755 
Other current liabilities10,636 11,676 
Accrued payroll and welfare3,476 3,987 
Accrued expenses2,444 3,591 
Interest payable1,836 1,349 
Other tax payable926 486 
Operating lease liabilities, current 2,106 
Total$58,740 $66,793 
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Table of Contents
MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)

NOTE 6. PRODUCT WARRANTY
Movement of product warranty was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202220212022
Balance at beginning of the period$19,105 $51,431 $19,356 $58,458 
Provided during the period8,148 3,550 9,057 6,235 
Utilized during the period(1,710)(8,590)(2,870)(18,600)
Exchange difference (2,688) (2,390)
Balance at end of the period$25,543 $43,703 $25,543 $43,703 
December 31,
2021
June 30,
2022
Product warranty – current$20,922 $14,843 
Product warranty – non-current37,536 28,860 
Total$58,458 $43,703 
NOTE 7. BANK BORROWINGS
The Group entered into loan agreements and bank facilities with Chinese banks.
The original terms of the loans from Chinese banks range from 6 months to 12 months and the interest rates range from 4.50% to 5.25% per annum.
Changes in bank borrowings are as follows:
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2021202220212022
Beginning balance$13,156 $13,335 $12,184 $13,301 
Proceeds from bank borrowings13,158 13,466 26,603 13,466 
Repayments of principal (17,332)(12,265)(17,332)
Exchange difference144 (662)(64)(628)
Ending balance$26,458 $8,807 $26,458 $8,807 
All balance of bank borrowings as of December 31, 2021 and June 30, 2022 are current borrowings.
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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 7. BANK BORROWINGS-continued
Certain assets of the Group have 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, 2021 and June 30, 2022 are as follows:
December 31,
2021
June 30,
2022
Buildings$31,361 $7,755 
Machinery and equipment7,376  
Land use rights4,470 1,576 
Total$43,207 $9,331 
NOTE 8. OTHER NON-CURRENT LIABILITIES
December 31,
2021
June 30,
2022
Product warranty - non-current$37,536 $28,860 
Deferred subsidy income- non-current2,286 3,311 
Total$39,822 $32,171 
NOTE 9. BONDS PAYABLE
December 31,
2021
June 30,
2022
Bonds payable
Huzhou Saiyuan Equity Investment Partnership Firm (Limited Partnership) ("Huzhou Saiyun")$ $29,259 
Total$ $29,259 
Long–term bonds payable  
Huzhou Saiyuan$73,147 $43,888 
Total$73,147 $43,888 

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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 9. BONDS PAYABLE - continued

Convertible Bonds issued to Huzhou Saiyuan
On December 29, 2018, 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). The Company pledged its 12.39% equity holding over MPS to Huzhou Saiyuan to facilitate the issuance of convertible bonds. As of June 30, 2022, the subscription and outstanding balance of the convertible bonds was $73,147 (RMB500 million).
If the subscribed bonds are not repaid by the maturity date, Huzhou Saiyuan has the right to dispose of 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 would 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.
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 are as follows:
Issuance DateSubscribed AmountMaturity DateRepayment AmountAnnual
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.
Convertible Notes at Fair Value (the “Bridge Notes”)
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 bore no interest, provided, however, if a liquidity event (“Liquidity Event”) had not occurred prior to June 30, 2022, an interest rate of 6% would be applied retrospectively from the date of initial closing. The conversion of the promissory notes was contingent upon the occurrence of a Private Investment in Public Equity (“PIPE”) financing, a Liquidity Event or a new financing after June 30, 2022 but before the maturity date (“Next Financing”).
The fair value option was elected for the measurement of the convertible notes. 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 Business Combination between Microvast, Inc. and Tuscan, the convertible promissory notes were converted into 6,736,106 shares of Common Stock of the combined company.

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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)

NOTE 10. WARRANTS

The Company assumed 27,600,000 publicly-traded warrants (“Public Warrants”) and 837,000 private placement warrants issued to Tuscan Holdings Acquisition LLC (the “Sponsor”) and EarlyBirdCapital, Inc. (“EarlyBirdCapital”) (“Private Warrants” and together with the Public Warrants, the “Warrants”) upon the Business Combination, all of which were issued in connection with Tuscan’s initial public offering (other than 150,000 Private Warrants that were issued in connection with the closing of the Business Combination) and entitle the holder to purchase one share of the Company’s Common Stock at an exercise price of $11.50 per share. During the three and six months ended June 30, 2022, none of Public Warrants and Private Warrants were exercised.
The Public Warrants became exercisable 30 days after the completion of the Business Combination. No Warrants will be exercisable for cash unless the Company registered Common Stock issuable upon exercise of the Warrants with the SEC. Since the registration of shares was not completed within 90 days following the Business Combination, warrant holders may exercise Warrants on a net-share settlement basis. The Public Warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation.
Once the Public Warrants became exercisable, the Company may redeem the Public Warrants:
in whole and not in part;
at a price of $0.01 per warrant;
upon not less than 30 days’ prior written notice of redemption;
if, and only if, the reported last sale price of the Company’s Common Stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period ending on the third business day prior to the notice of redemption to the warrant holders; and
if, and only if, there is a current registration statement in effect with respect to the shares of Common Stock underlying the warrants.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a net-share settlement basis.
The Private Warrants are identical to the Public Warrants, except that the Private Warrants will be exercisable for cash or on a net-share settlement basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. In addition, so long as the Private Warrants are held by EarlyBirdCapital and its designee, the Private Warrants will expire five years from the effective date of the Business Combination.
The exercise price and number of shares of Common Stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuance of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Warrants.
The private warrant liability was remeasured at fair value as of June 30, 2022, resulting in a gain of $1,255 and $820 for the three and six months ended June 30, 2022, classified within change in fair value of warrant liability in the unaudited condensed consolidated statements of operations, respectively.
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MICROVAST HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
(In thousands of U.S. dollars, except share and per share data, or as otherwise noted)
NOTE 10. WARRANTS - continued

The Private Warrants were valued using the following assumptions under the Monte Carlo Model that assumes optimal exercise of the Company’s redemption option at the earliest possible date:
June 30,
2022
Market price of public stock$2.22 
Exercise price$11.50 
Expected term (years)4.07
Volatility65.65 %
Risk-free interest rate2.96 %
Dividend rate0.00 %
The market price of public stock is the quoted market price of the Company’s Common Stock as of the valuation date. The exercise price is extracted from the warrant agreements. The expected term is derived from the exercisable years based on the warrant agreements. The expected volatility is a blend of implied volatility from the Company’s own public warrant pricing and the average volatility of peer companies. The risk-free interest rate was estimated based on the market yield of US Government Bond with maturity close to the expected term of the warrants. The dividend yield was estimated by the Company based on its expected dividend policy over the expected term of the warrants.
NOTE 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 warrant liability at fair value on a recurring basis as of December 31, 2021 and June 30, 2022. 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 fair value of the warrant liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. In determining the fair value of the warrant liability, the Company used the Monte Carlo Model that assumes optimal exercise of the Company’s redemption option at the earliest possible date. See Note 10 – Warrants.
As of December 31, 2021 and June 30, 2022, 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, 2021
(In thousands)Quoted Prices in Active Market
for Identical Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Cash and cash equivalents$480,931   $480,931