Microvast Holdings, Inc. [MVST] Filings

10-Q 1 mvst-20240630.htm 10-Q mvst-20240630

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, 2024

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)

Delaware

001-38826

83-2530757

(State or other jurisdiction
of incorporation or organization)

(Commission File Number)

(IRS Employer
Identification No.)


12603 Southwest Freeway, Suite 300 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 class

Trading Symbol(s)

Name of 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

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 filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
Emerging growth company	x

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 August 5, 2024, there were 323,815,298 shares of the Company’s common stock, par value $0.0001, issued and outstanding.

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MICROVAST HOLDINGS, INC.

FORM 10-Q

For the Quarter Ended June 30, 2024

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		Page
PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited)	1

	Unaudited Condensed Consolidated Balance Sheets	1

	Unaudited Condensed Consolidated Statements of Operations	3

	Unaudited Condensed Consolidated Statements of Comprehensive Loss	4

	Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity	5

	Unaudited Condensed Consolidated Statements of Cash Flows	7

	Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	45

PART II. OTHER INFORMATION		47

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

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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 “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “plan,” “project,” “predict,” “outlook” “should,” “will,” “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. 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.

In addition to factors identified elsewhere in this Report, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•our ability to remain a going concern;

•risk that we may not be able to execute our growth strategies or achieve profitability;

•risk that we will not be able to raise additional capital to execute our business plan, which may not be available on acceptable terms or at all, or pay our debts as they come due;

•restrictions in our existing and any future credit facilities;

•risks of operations in China;

•the effects of mechanics liens filed by contractors that we do not have sufficient funds to pay;

•the effects of existing and future litigation;

•changes in general economic conditions, including increases in interest rates and associated Federal Reserve policies, a potential economic recession, and the impact of inflation on our business;

•changes in the highly competitive market in which we compete, including with respect to our competitive landscape, technology evolution or regulatory changes;

•changes in availability and price of raw materials;

•labor relations, including the ability to attract, hire and retain key employees and contract personnel;

•heightened awareness of environmental issues and concern about global warming and climate change;

•risk that we are unable to secure or protect our intellectual property;

•risk that our customers or third-party suppliers are unable to meet their obligations fully or in a timely manner;

•risk that our customers will adjust, cancel or suspend their orders for our products;

•risk of product liability or regulatory lawsuits or proceedings relating to our products or services;

•the effectiveness of our information technology and operational technology systems and practices to detect and defend against evolving cyberattacks;

•changing laws regarding cybersecurity and data privacy, and any cybersecurity threat or event;

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•the effects and associated cost of compliance with existing and future laws and governmental regulations, such as the Inflation Reduction Act;

•economic, financial and other impacts such as a pandemic, including global supply chain disruptions; and

•the impacts of geopolitical events, including the ongoing conflicts between Russia and Ukraine and between Israel and Hamas.

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, 2023 in Part I, Item 1A.

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.

All references to the “Company,” “we,” “us” or “our” refer to Microvast Holdings, Inc. and its consolidated subsidiaries other than certain historical information which refers to the business of Microvast prior to the consummation of the Business Combination.

iii

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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, 2023		June 30, 2024
Assets
Current assets:
Cash and cash equivalents	$	44,541	$	68,183
Restricted cash, current	37,477		34,737
Short-term investments	5,634		—
Accounts receivable (net of allowance for credit losses of $4,571 and $4,679 as of December 31, 2023 and June 30, 2024, respectively)	138,717		104,976
Notes receivable	23,736		10,872
Inventories, net	149,749		152,509
Prepaid expenses and other current assets	25,752		16,675
Held-for-sale assets	—		30,097
Total Current Assets	425,606		418,049
Restricted cash, non-current	6,171		1,564
Property, plant and equipment, net	620,667		519,432
Land use rights, net	11,984		11,565
Acquired intangible assets, net	3,136		2,854
Operating lease right-of-use assets	19,507		19,601
Other non-current assets	9,661		11,494
Total Assets	$	1,096,732	$	984,559

Liabilities
Current liabilities:
Accounts payable	$	112,618	$	79,891
Notes payable	63,374		48,388
Accrued expenses and other current liabilities	148,284		142,773
Advance from customers	43,087		40,810
Short-term bank borrowings	35,392		60,034
Income tax payables	655		653
Total Current Liabilities	403,410		372,549
Long-term bonds payable	43,157		43,157
Long-term bank borrowings	43,761		34,203
Warrant liability	67		3
Share-based compensation liability	199		190
Operating lease liabilities	17,087		16,363
Convertible loan with shareholder	—		13,313
Other non-current liabilities	24,861		26,678
Total Liabilities	$	532,542	$	506,456

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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, 2023		June 30, 2024
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, 2023 and June 30, 2024; 316,694,442 and 317,197,947 shares issued, and 315,006,942 and 315,510,447 shares outstanding as of December 31, 2023 and June 30, 2024)	$	32	$	32
Additional paid-in capital	1,481,241		1,506,031
Statutory reserves	6,032		6,032
Accumulated deficit	(897,501)		(1,000,767)
Accumulated other comprehensive loss	(25,614)		(33,225)
Total Equity	$	564,190	$	478,103
Total Liabilities and Equity	$	1,096,732	$	984,559

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 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,
	2023		2024		2023		2024
Revenues	$	74,953	$	83,675	$	121,926	$	165,026
Cost of revenues	(63,492)		(56,480)		(105,607)		(120,606)
Gross profit	11,461		27,195		16,319		44,420
Operating expenses:
General and administrative expenses	(23,509)		(23,511)		(43,894)		(47,305)
Research and development expenses	(9,507)		(10,107)		(20,368)		(21,599)
Selling and marketing expenses	(5,897)		(5,026)		(10,885)		(10,617)
Impairment loss of long-lived assets	(51)		(64,912)		(51)		(64,912)
Total operating expenses	(38,964)		(103,556)		(75,198)		(144,433)
Subsidy income	637		735		714		1,269
Loss from operations	(26,866)		(75,626)		(58,165)		(98,744)
Other income and expenses:
Interest income	1,518		246		2,899		365
Interest expense	(487)		(2,094)		(946)		(3,826)
Changes in fair value of warrant and convertible loan	—		(1,568)		17		(1,526)
Other (expense) income, net	(243)		601		546		465
Loss before provision for income taxes	(26,078)		(78,441)		(55,649)		(103,266)
Income tax expense	—		—		—		—
Net loss	$	(26,078)	$	(78,441)	$	(55,649)	$	(103,266)
Less: net income attributable to noncontrolling interests	11		—		21		—
Net loss attributable to Microvast Holdings, Inc.'s shareholders	$	(26,089)	$	(78,441)	$	(55,670)	$	(103,266)
Net loss per common share
Basic and diluted	$	(0.08)	$	(0.25)	$	(0.18)	$	(0.33)
Weighted average shares used in calculating net loss per share of common stock
Basic and diluted	307,742,032		315,509,552		307,728,460		315,438,336

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 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,
	2023		2024		2023		2024
Net loss	$	(26,078)	$	(78,441)	$	(55,649)	$	(103,266)
Foreign currency translation adjustment	(18,002)		(2,494)		(15,814)		(7,611)
Comprehensive loss	$	(44,080)	$	(80,935)	$	(71,463)	$	(110,877)
Comprehensive loss attributable to non-controlling interests	(107)		—		(129)		—
Total comprehensive loss attributable to Microvast Holding, Inc.'s shareholders	$	(43,973)	$	(80,935)	$	(71,334)	$	(110,877)

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 CHANGES IN SHAREHOLDERS’ EQUITY

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


	Three Months Ended June 30, 2023
	Common Stock			Additional paid-in capital		Accumulated deficit		Accumulated other Comprehensive loss		Statutory reserves		Total Microvast Holdings, Inc. Shareholders’ Equity		Non- controlling Interests		Total Equity
	Shares	Amount

Balance as of March 31, 2023	307,739,948	$	31	$	1,434,221	$	(820,746)	$	(15,861)	$	6,032	$	603,677	$	2,152	$	605,829
Net loss	—	—		—		(26,089)		—		—		(26,089)		11		(26,078)
Issuance of common stock in connection with vesting of share-based awards	198,995	—		—		—		—		—		—		—		—
Share-based compensation	—	—		17,968		—		—		—		17,968		—		17,968
Foreign currency translation adjustments	—	—		—		—		(17,884)		—		(17,884)		(118)		(18,002)
Balance as of June 30, 2023	307,938,943	$	31	$	1,452,189	$	(846,835)	$	(33,745)	$	6,032	$	577,672	$	2,045	$	579,717


	Six Months Ended June 30, 2023
	Common Stock			Additional paid-in capital		Accumulated deficit		Accumulated other Comprehensive Income (loss)		Statutory reserves		Total Microvast Holdings, Inc. Shareholders’ Equity		Non-controlling Interests		Total Equity
	Shares	Amount

Balance as of December 31, 2022	307,628,511	$	31	$	1,416,160	$	(791,165)	$	(18,081)	$	6,032	$	612,977	$	—	$	612,977
Net loss	—	—		—		(55,670)		—		—		(55,670)		21		(55,649)
Capital contribution from non-controlling interests holder	—	—		—		—		—		—		—		2,174		2,174
Issuance of common stock in connection with vesting of share-based awards	310,432	—		—		—		—		—		—		—		—
Share-based compensation	—	—		36,029		—		—		—		36,029		—		36,029
Foreign currency translation adjustments	—	—		—		—		(15,664)		—		(15,664)		(150)		(15,814)
Balance as of June 30, 2023	307,938,943	$	31	$	1,452,189	$	(846,835)	$	(33,745)	$	6,032	$	577,672	$	2,045	$	579,717

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 CHANGES IN SHAREHOLDERS’ EQUITY - continued

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


	Three Months Ended June 30, 2024
	Common Stock			Additional paid-in capital		Accumulated deficit		Accumulated other Comprehensive loss		Statutory reserves		Total Microvast Holdings, Inc. Shareholders’ Equity
	Shares	Amount

Balance as of March 31, 2024	315,508,595	$	32	$	1,493,139	$	(922,326)	$	(30,731)	$	6,032	$	546,146
Net loss	—	—		—		(78,441)		—		—		(78,441)
Issuance of common stock in connection with vesting of share-based awards	1,852	—		—		—		—		—		—
Share-based compensation	—	—		12,113		—		—		—		12,113
Issuance of warrants	—	—		779		—		—		—		779
Foreign currency translation adjustments	—	—		—		—		(2,494)		—		(2,494)
Balance as of June 30, 2024	315,510,447	$	32	$	1,506,031	$	(1,000,767)	$	(33,225)	$	6,032	$	478,103


	Six Months Ended June 30, 2024
	Common Stock			Additional paid-in capital		Accumulated deficit		Accumulated other Comprehensive loss		Statutory reserves		Total Microvast Holdings, Inc. Shareholders’ Equity
	Shares	Amount

Balance as of December 31, 2023	315,006,942	$	32	$	1,481,241	$	(897,501)	$	(25,614)	$	6,032	$	564,190
Net loss	—	—		—		(103,266)		—		—		(103,266)
Issuance of common stock in connection with vesting of share-based awards	503,505	—		—		—		—		—		—
Share-based compensation	—	—		24,011		—		—		—		24,011
Issuance of warrants	—	—		779		—		—		—		779
Foreign currency translation adjustments	—	—		—		—		(7,611)		—		(7,611)
Balance as of June 30, 2024	315,510,447	$	32	$	1,506,031	$	(1,000,767)	$	(33,225)	$	6,032	$	478,103

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,
	2023		2024
Cash flows from operating activities
Net loss	$	(55,649)	$	(103,266)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss/ (gain) on disposal of property, plant and equipment	826		16
Interest expense	—		622
Depreciation of property, plant and equipment	9,797		14,912
Amortization of land use right and intangible assets	399		387
Noncash lease expenses	1,465		1,327
Share-based compensation	35,779		23,988
Changes in fair value of warrant and convertible loan	(17)		1,526
(Reversal)/ allowance of credit losses	(832)		755
Write-down for obsolete inventories	928		1,737
Impairment loss from long-lived asset	51		64,912
Product warranty	5,450		6,329
Changes in operating assets and liabilities:
Notes receivable	(19,808)		10,278
Accounts receivable	10,251		29,622
Inventories	(16,610)		(1,454)
Prepaid expenses and other current assets	(6,842)		8,462
Operating lease right-of-use assets	(5,850)		(1,928)
Other non-current assets	199		(44)
Notes payable	(15,517)		(13,568)
Accounts payable	11,771		(30,516)
Advance from customers	(968)		(2,125)
Accrued expenses and other liabilities	1,020		(12,374)
Operating lease liabilities	3,364		(267)
Other non-current liabilities	(215)		2,811
Net cash (used in) generated from operating activities	(41,008)		2,142

Cash flows from investing activities
Purchases of property, plant and equipment	(93,630)		(13,186)
Purchase of short-term investments	(419)		—
Proceeds on disposal of property, plant and equipment	648		180
Proceeds from maturity of short-term investments	—		5,564
Net cash used in investing activities	(93,401)		(7,442)

Cash flows from financing activities
Proceeds from borrowings	9,232		40,462
Repayment of bank borrowings	(3,939)		(23,449)
Convertible loan borrowing from a shareholder	—		12,000
Payment for debt issue costs	—		(525)
Net cash generated from financing activities	5,293		28,488
Effect of exchange rate changes	(3,182)		(6,893)

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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,
	2023		2024
(Decrease) increase in cash, cash equivalents and restricted cash	(132,298)		16,295
Cash, cash equivalents and restricted cash at beginning of the period	302,617		88,189
Cash, cash equivalents and restricted cash at end of the period	$	170,319	$	104,484


	Six Months Ended June 30,
	2023		2024
Reconciliation to amounts on unaudited condensed consolidated balance sheets
Cash and cash equivalents	$	142,766	$	68,183
Restricted cash	27,553		36,301
Total cash, cash equivalents and restricted cash	$	170,319	$	104,484


Non-cash investing and financing activities
Payable for purchase of property, plant and equipment	$	82,968	$	96,771

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, 2024

(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, Inc. was incorporated under the laws of the State of Texas in the United States of America on October 12, 2006 and re-domiciled to the State of Delaware on December 31, 2015. On July 23, 2021 (the “Closing Date”), Microvast, Inc. and Tuscan Holdings Corp.(“Tuscan”) consummated the previously announced merger (the “Merger” or the "Business Combination"), 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 the Merger Agreement, the Merger Sub merged with and into Microvast, Inc., with Microvast, Inc. surviving the Merger. As a result of the Merger, Tuscan was renamed “Microvast Holdings, Inc.” (the “Company”). The Merger was accounted for as a reverse recapitalization as Microvast, Inc. was determined to be the accounting acquirer under Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”).

The Company and its subsidiaries (collectively, the “Group”) are primarily engaged in developing, manufacturing, and selling electronic power products for electric vehicles and energy storage across the globe.

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 (the "SEC") 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, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024, 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, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2024.

The financial information as of December 31, 2023 included on the condensed consolidated balance sheets is derived from the Group’s audited consolidated financial statements for the year ended December 31, 2023.

There have been no significant changes to the significant accounting policies disclosed in Note 2 of the audited consolidated financial statements for the years ended December 31, 2023.

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, fair value measurement of convertible loan and share based compensation.

All intercompany transactions and balances have been eliminated upon consolidation.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued

Going concern

The accompanying unaudited condensed consolidated financial statements of the Group have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and the discharge of liabilities in the normal course of business.

For the three months ended June 30, 2023 and 2024, the Group generated revenues of $74,953 and $83,675, and gross profit of $11,461 and $27,195, respectively. For the six months ended June 30, 2023 and 2024, the Group generated revenues of $121,926 and $165,026, gross profit of $16,319 and $44,420, respectively.

Despite the above, the Group has incurred significant losses in the three and six months ended June 30, 2023 and 2024. For the three months ended June 30, 2023 and 2024, the Group incurred net losses of $26,078 and $78,441, respectively. For the six months ended June 30, 2023 and 2024, the Group incurred net losses of $55,649 and $103,266, respectively. As of June 30, 2024, the Group had working capital of $45,500, shareholders’ equity of $478,103, including an accumulated deficit of $1,000,767, and cash and cash equivalents balance of $68,183. As of June 30, 2024, the Group also had outstanding borrowings of $94,237, of which the amount to be paid in the next 12 months is $60,034, and other current liabilities of $312,515, including accounts payable, notes payable, accrued expenses and other current liabilities. Purchase commitments for non-cancelable contractual obligations primarily related to purchases of inventory were $45,952 as of June 30, 2024.

After the Group launched its new battery cell product in 2021, it made significant investment in capacity expansions in both Huzhou, China and Clarksville, Tennessee, United States. The expansion in Huzhou, China was completed in the third quarter of 2023 and is now generating revenue. The Tennessee expansion was originally scheduled to be completed in the fourth quarter of 2023. Due to the fact that the required funding to complete the Tennessee expansion has not been secured, the expansion was suspended. During the second quarter ended June 30, 2024, the Group has decided to put the construction of Tennessee facility on hold until a project funding is secured. The timing of when this project will be resumed and completed remains uncertain.

As of June 30, 2024, the Group has made total capital commitments for construction and purchase of property, plant and equipment amounting to $49,965, $48,929 of which is payable within one year, and most of which relates to production equipment for the Tennessee facility.

As of June 30, 2024, the Group had outstanding payables in relation to assets and services provided for the Tennessee expansion amounting to $65,934 that were currently due to its suppliers and the Group has received notice of non-payment mainly from certain of these suppliers with a total amount of $2,410. Further, there are several suppliers which have filed liens, with a total amount of $35,986 received by the Group as of June 30, 2024, mostly with the county in which the Tennessee project is situated. Several suppliers have also filed litigation alleging that the Group failed to pay for their products or services delivered on the Tennessee project. Refer to Note 16 for details.

The Group has been discussing with those suppliers regarding repayment plans. Subsequent to June 30, 2024 and to the date of issuance of the financial statements, the Group has entered into several subsequent settlement agreements with certain suppliers with payables amounting to approximately $21,338 as of June 30, 2024. Those agreements grant the Group a concession by forgiving certain contractually owed amounts and release some liens, as well as allow the Group to defer certain payment schedules. Based on those subsequent settlement agreements, a total payable concession of approximately $6,573 was obtained, liens of approximately $10,610 will be ultimately released and the payment schedules were generally deferred to monthly installments in the next twelve months.

In light of the capital expenditures required to settle the outstanding payables associated with the Group's Tennessee expansion and operating requirements under its current business plan, the Group is projecting that its existing cash and cash equivalents will not be sufficient to fund its operations and capital expenditure needs through the next twelve months from the date of issuance of its unaudited condensed consolidated financial statements. These conditions and events raise substantial doubt about the Group’s ability to continue as a going concern and the Group's ability to continue as a going concern is dependent on its ability to obtain additional capital or secure financing and generate cash from operations.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued

Going concern - continued

As of the date of issuance of the financial statements, the Group has secured the following cash flow and liquidity improvement initiatives:

Loan with Mr. Yang Wu

Pursuant to the $25,000 loan agreement dated May 28, 2024 with Mr. Yang Wu, the Company’s Chief Executive Officer and Chairman, the Group has received the first tranche of $12,000 in May 2024 and the second tranche of $13,000 in July 2024. Refer to Note 14 - Convertible loan with shareholder for details.

Labor reduction in the U.S.

The Group has reduced the number of employees in the U.S. by 82% during the quarter ended June 30, 2024, which will significantly reduce its operating expenditure, ultimately improving its liquidity.

As of the date of issuance of the financial statements, the Group is pursuing the following funding initiatives:

Bank Loans

On September 27, 2022, the Group entered into a $111,483 (RMB800 million) loan facilities agreement with a group of lenders led by a bank in China. Pursuant to the agreement, the specified purpose of the loan is for capital expenditures in the PRC. The Group has drawdown $68,802 (RMB500 million) and the outstanding balance is $51,305 as of June 30, 2024. For the remaining undrawn loan facility amounting to $42,681 (RMB300 million), the effective drawdown period is until June 9, 2024. The Group has applied to extend the drawdown period to a later date. Refer to Note 7- Bank Borrowings for details. The banks are currently going through their internal approval process and there is no assurance that the drawdown date will be extended.

Disposal of non-core US real estate assets

The Group has engaged agents to sell certain US real estate assets that are not integral to the Group's cell manufacturing or assembly operations.

In addition to the above, the Group is engaged in discussions with third parties to assess strategic alternatives, including ways to enhance its liquidity.

These plans are not final and are subject to market and other conditions not within the Group’s control. As such, there can be no assurance that the Group will be successful in obtaining sufficient capital. Should sufficient capital not be secured through the plans, or should there be a delay in the timing of securing capital through these alternatives, this would have adverse implications for the Group and its shareholders. In these scenarios, the Group will need to seek other options, including delaying or reducing operating and capital expenditure and the possibility of an alternative transaction.

Accordingly, management has concluded that these plans do not alleviate the substantial doubt about the Group’s ability to continue as a going concern within one year after the date the unaudited condensed consolidated financial statements are issued. Based on the factors above, a material uncertainty exists which may cast significant doubt as to whether the Group will continue as a going concern and therefore whether it will realize its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued

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 to provide the battery 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, 2023 and 2024, the Group derived revenues from geographic regions as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2024		2023		2024
People’s Republic of China ("PRC")	$	46,122	$	33,282	$	78,734	$	60,474
Other Asia & Pacific countries	18,520		2,371		21,669		25,665
Asia & Pacific	64,642		35,653		100,403		86,139
Europe	9,337		46,745		19,522		75,666
U.S.	974		1,277		2,001		3,221
Total	$	74,953	$	83,675	$	121,926	$	165,026

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 are 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, 2023 and 2024, the Group recognized $1,068 and $1,425 of revenue previously included in advance from customers as of April 1, 2023 and April 1, 2024, respectively. During the six months ended June 30, 2023 and 2024, the Group recognized $2,485 and $4,206 of revenue previously included in advance from customers as of January 1, 2023 and January 1, 2024, respectively.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued

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 a 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 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. Liability-classified awards are remeasured at their fair-value-based measurement as of each reporting date until settlement. Forfeitures are recognized as they occur.

Operating leases

As of June 30, 2024, the Company recorded operating lease right-of-use (ROU) assets of $19,601 and operating lease liabilities of $19,606, including current portion in the amount of $3,243, which was recorded under accrued expenses and other current liabilities on the balance sheet.

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 machines 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.

Impairment of long-lived assets

In accordance with ASC 360, Property, Plant and Equipment ("ASC 360"), the Company reviews long-lived assets such as property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets, and an impairment loss is recorded as a component of operating expenses. Fair value is estimated based on various valuation techniques. For assets held for sales, the amount of potential impairment may be based upon appraisal of the asset, estimated market value of similar assets or estimated cash flow from the disposition of the asset. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.

During the three months ended June 30, 2024, the Company decided to pause the construction of the battery plant in Tennessee until additional funding for the remaining capital expenditure is secured. As a result, the Company reassessed the recoverability of the long-lived assets in the U.S. and utilized the residual method to estimate the fair value of the plant under construction located in Tennessee. For other long-lived assets in the U.S., the Company estimated market value or estimated cash flow from disposition of the assets. The Company recorded impairment loss of long-lived assets of $51 and $64,912 for the three and six months ended June 30, 2023 and 2024, respectively, in operating expenses.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued

Asset held for sales

Assets to be disposed of by sale are reported at the lower of the carrying value or fair vale less cost to sell when the Company has committed to a sale agreement and would be reported separately as asset held for sales in the unaudited condensed consolidated balance sheets.

Convertible loan with shareholder

The Company has elected the fair value option to account for the Convertible loan with shareholder, and records changes in fair value in the unaudited condensed consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk which, if present, will be recorded as a component of other comprehensive income. Interest expense related to the convertible loan is included in the changes in fair value. As a result of applying the fair value option, direct costs and fees related to the convertible loan were expensed as incurred. Losses were recognized $1,590 for the three months and six months ended June 30, 2024. The fair value of the Convertible loan with shareholder was determined by using a discounted cash flow model for the bond component and a Black-Scholes-Merton model for the conversion option, which is considered a Level 3 fair value measurement.

Warrant

The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("ASC 480"), then in accordance with ASC 815-40 ("ASC 815"), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatory redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its Common Stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the unaudited consolidated statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. Refer to Notes 10 for information regarding the warrants issued.

Recent accounting pronouncements not yet adopted

In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements and provide new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods with fiscal years beginning after December 15, 2024. ASU 2023-07 is to be adopted retrospectively to all prior periods presented. The Company is currently assessing the impact this guidance will have on the consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09 "Improvements to Income Tax Disclosures" ("ASU 2023-09"). ASU 2023-09 intends to improve the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company is currently assessing the impact of this guidance, however, the Company do not expect a material impact to the consolidated financial statements.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 3. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:


	December 31, 2023		June 30, 2024
Accounts receivable	$	143,288	$	109,655
Allowance for credit losses	(4,571)		(4,679)
Accounts receivable, net	$	138,717	$	104,976

Movement of allowance for credit losses was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2024		2023		2024
Balance at beginning of the period	$	3,270	$	5,065	$	4,407	$	4,571
Charges /(Reversal) of expenses	262		177		(832)		755
Write off	—		(529)		(66)		(529)
Recoveries of credit losses	121		—		121		—
Exchange difference	(185)		(34)		(162)		(118)
Balance at end of the period	$	3,468	$	4,679	$	3,468	$	4,679

NOTE 4. INVENTORIES, NET

Inventories consisted of the following:


	December 31, 2023		June 30, 2024
Work in process	$	86,379	$	92,254
Raw materials	35,867		41,284
Finished goods	27,503		18,971
Total	$	149,749	$	152,509

Provision for obsolete inventories at $928 and $1,737 were recognized for the six months ended June 30, 2023 and 2024, respectively.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES


	December 31, 2023		June 30, 2024
Product warranty, current	$	13,738	$	13,603
Payables for purchase of property, plant and equipment	96,350		96,771
Other current liabilities	14,312		16,490
Accrued payroll and welfare	8,089		4,730
Accrued expenses	6,224		5,926
Interest payable	41		898
Other tax payable	7,117		1,112
Operating lease liabilities, current	2,413		3,243
Total	$	148,284	$	142,773

NOTE 6. PRODUCT WARRANTY

Movement of product warranty was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2024		2023		2024
Balance at beginning of the period	$	39,610	$	35,448	$	42,060	$	35,217
Provided during the period	2,920		3,060		5,450		6,329
Utilized during the period	(3,338)		(4,098)		(8,510)		(6,546)
Exchange difference	(2,084)		(226)		(1,892)		(816)
Balance at end of the period	$	37,108	$	34,184	$	37,108	$	34,184


	December 31, 2023		June 30, 2024
Product warranty – current	$	13,738	$	13,603
Product warranty – non-current	21,479		20,581
Total	$	35,217	$	34,184

NOTE 7. BANK BORROWINGS

On September 27, 2022, the Group entered into a $111,483 (RMB800 million) loan facilities agreement with a group of lenders led by a bank in China (the "2022 Facility Agreement"). The 2022 Facility Agreement had an effective drawdown period until June 9, 2023, which was extended to June 9, 2024 by a supplemental agreement signed in October 2023. The Company is currently in negotiations with the lead bank to further extend to a later date. Should the banks not reach agreement then the Company would lose access to the undrawn amount of $42,681 (RMB300 million). This would have no impact on the amount already drawn of $68,802 (RMB500 million) which would continue to be repaid in accordance with the scheduled repayment dates. The interest rate is prime plus 115 basis points where prime is based on Loan Prime Rate published by the National Inter-bank Funding Center of the PRC and is payable on a quarterly basis. The loan facilities can only be used for the manufacturing capacity expansion at the Group’s facility located in Huzhou, China. Accordingly, the Group has the balance of restricted cash of $6,171 and $1,218 as of December 31, 2023 and June 30, 2024, respectively. The 2022 Facility Agreement contains certain customary restrictive covenants, including but not limited to disposal of assets and dividend distribution without the consent of the lender, and certain customary events of default.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 7. BANK BORROWINGS - continued

As of June 30, 2024, the Group had outstanding borrowings of $51,305 under the 2022 Facility Agreement.


Repayment Date						Repayment Amount
December 10, 2024						$8,551 (RMB62.1 million)
June 10, 2025						$8,551 (RMB62.1 million)
December 10, 2025						$8,551 (RMB62.1 million)
June 10, 2026						$12,826 (RMB93.2 million)
December 10, 2026						$12,826 (RMB93.2 million)

The amount of capitalized interest expenses, which was recorded in construction in progress and property, plant and equipment, was $504 and $0 for the three months ended June 30, 2023 and 2024, respectively, and $1,028 and $0 for the six months ended June 30, 2023 and 2024, respectively.

The Group has also entered into short-term loan agreements and bank facilities with certain banks in China. The original terms of these loans are with a maximum maturity of 12 months and the interest rates range from 3.30% to 4.85% per annum.

Changes in bank borrowings are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2024		2023		2024
Beginning balance	$	50,964	$	84,065	$	46,395	$	79,153
Proceeds from bank borrowings	4,848		21,682		9,232		40,462
Repayments of principal	(3,939)		(10,929)		(3,939)		(23,449)
Exchange difference	(2,727)		(581)		(2,542)		(1,929)
Ending balance	$	49,146	$	94,237	$	49,146	$	94,237


Balance of bank borrowings includes:	December 31, 2023		June 30, 2024
Current	$	35,392	$	60,034
Non-current	43,761		34,203
Total	$	79,153	$	94,237

Certain assets of the Group have been pledged to secure the above bank facilities granted to the Group. The aggregate carrying amount of the assets pledged by the Group as of December 31, 2023 and June 30, 2024 are as follows:


	December 31, 2023		June 30, 2024
Buildings	$	124,565	$	118,658
Machinery and equipment	—		7,499
Land use rights	11,984		11,565
Construction in progress	—		595
Total	$	136,549	$	138,317

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 8. OTHER NON-CURRENT LIABILITIES


	December 31, 2023		June 30, 2024
Product warranty - non-current	$	21,479	$	20,581
Deferred subsidy income- non-current	3,382		6,097
Total	$	24,861	$	26,678

NOTE 9. BONDS PAYABLE


	December 31, 2023		June 30, 2024
Long–term bonds payable
Huzhou Saiyuan	$	43,157	$	43,157
Total	$	43,157	$	43,157

Huzhou Saiyuan Loan

On December 29, 2018, Microvast Power Systems Co., Ltd.('MPS'), one of the Company's subsidiaries, 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 these convertible bonds.

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 bonds into equity interests of MPS within 60 days after the maturity date. If Huzhou Saiyuan decides to convert the bonds into equity interests of MPS, the equity interests pledged would be released and the convertible bonds would be converted into equity interest of MPS based on an entity value of MPS of $950,000.

In September 2020 and 2022, MPS entered into two supplement agreements with Huzhou Saiyuan, respectively, to change the repayment schedule as follows: (i) $14,629 (RMB100 million) was repaid, together with interest accrued, on or before November 10, 2022, (ii) $14,630 (RMB100 million) was repaid, together with interest accrued, on or before December 31, 2022, and (iii) the remaining $43,888 (RMB300 million) will be repaid, together with interest accrued, on or before January 31, 2027. The applicable interest rate will be increased to 12% if the Group is in default on the repayment of the bonds at the due date. The remaining terms and conditions of the convertible bonds were unchanged. The Company has complied in full with the amended repayment schedule and accordingly, as of June 30, 2024, the subscription and outstanding balance of the convertible bonds was $43,157 (RMB295 million).

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, 2024, none of the Public Warrants or the Private Warrants were exercised.

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MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 10. WARRANTS - continued

The Public Warrants became exercisable 30 days after the completion of the Business Combination. The Public Warrants are only exercisable for cash, however, if the Company were to not maintain the effectiveness of the registration statement covering the shares of Common Stock issuable upon exercise of the Public Warrants, the Public Warrants would be exercisable 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.

The Company classified the Public Warrants as equity. 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, 2024, resulting in a gain of $22 and $64 for the three and six months ended June 30, 2024, classified within changes in fair value of warrant liability in the unaudited condensed consolidated statements of operations, respectively.

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, 2024
Market price of public stock	$	0.46
Exercise price	$	11.50
Expected term (years)	2.07
Volatility	82.77		%
Risk-free interest rate	4.58		%
Dividend rate	0.00		%

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 10. WARRANTS - continued

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, the average volatility of peer companies and the Company's historical volatility. 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.

On May 28, 2024, the Company also issued a warrant exercisable for 5,500,000 shares of Common Stock at an initial exercise price of $2.00 per share. The Warrant expires on May 28, 2029 in connection of the convertible loan with shareholder. See Note 14 – Convertible loan with shareholder.

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 on a recurring basis as of December 31, 2023 and cash and cash equivalents, restricted cash and warrant liability, Convertible loan with shareholder and relative warrant at fair value on a recurring basis as of June 30, 2024. 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, Convertible Loan with shareholder are 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. The Convertible Loan and relative warrants were valued using the following assumptions under the Black-Scholes-Merton model, which is a generally accepted computational model typically used for pricing options and is considered a Level 3 fair value measurement. See Note 14 – Convertible loan with shareholder.

As of December 31, 2023 and June 30, 2024, 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 follows:


	Fair Value Measurement as of December 31, 2023
	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	$	44,541	—	—	$	44,541
Restricted cash	43,648		—	—	43,648
Total financial asset	$	88,189	—	—	$	88,189
Warrant liability	$	—	—	67	$	67
Total financial liability	$	—	—	67	$	67

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 11. FAIR VALUE MEASUREMENT - continued

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


	Fair Value Measurement as of June 30, 2024
	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	$	68,183	—	—	$	68,183
Restricted cash	$	36,301	—	—	$	36,301
Total financial asset	$	104,484	—	—	$	104,484
Warrant liability	$	—	—	3	$	3
Convertible loan with shareholder	$	—	—	13,313	$	13,313
Total financial liability	$	—	—	13,316	$	13,316

The following is a reconciliation of the beginning and ending balances for Level 3 warrant liability during the six months ended June 30, 2023 and 2024:


	Six Months Ended June 30,
	2023		2024
Balance at the beginning of the period	$	126	$	67
Changes in fair value	(17)		(64)
Balance at end of the period	$	109	$	3

The following is a reconciliation of the beginning and ending balances for Level 3 convertible loan with shareholder during the six months ended June 30, 2024:


	Six Months Ended June 30, 2024
Balance at the beginning of the period	$	—
Issuance of convertible loan with shareholder	11,723
Changes in fair value	1,590
Balance at end of the period	$	13,313

Measured or disclosed at fair value on a nonrecurring basis

The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The fair value of the asset or asset group is determined using cost approach, sales comparison approach and income capitalization approach with unobservable inputs (Level 3), depending on the underlying nature of the asset or the asset group.

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 12. LEASES

The Group has operating leases for office spaces and warehouses. Certain leases include renewal options and/or termination options, which are factored into the Group's determination of lease payments when appropriate.

Operating lease cost for the three and six months ended June 30, 2024 was $859 and $1,719, which excluded cost of short-term contracts. Short-term lease cost for the three and six months ended June 30, 2024 was $145 and $304.

As of June 30, 2024, the weighted average remaining lease term was 9.3 years and weighted average discount rate was 5.2% for the Group's operating leases.

Supplemental cash flow information of the leases were as follows:


	Six months ended June 30, 2024
Cash payments for operating leases	$	1,688
Right-of-use assets obtained in exchange for new operating lease liabilities	$	2,217

The following is a maturity analysis of the annual undiscounted cash flows for lease liabilities as of June 30, 2024:


	As of June 30, 2024
Six months period ending December 31, 2024	$	2,301
2025	$	3,663
2026	$	2,823
2027	$	2,384
2028	$	1,808
2029	$	1,615
Thereafter	$	9,828
Total future lease payments	$	24,422
Less: Imputed interest	$	(4,816)
Present value of operating lease liabilities	$	19,606

NOTE 13. SHARE-BASED PAYMENT

On July 21, 2021, the Company adopted the Microvast Holdings, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), effective upon the Closing Date. The 2021 Plan provides for the grant of incentive and non-qualified stock option, restricted stock units, restricted share awards, stock appreciation awards, and cash-based awards to employees, directors, and consultants of the Company. Options awarded under the 2021 Plan expire no more than 10 years from the date of grant. Concurrently with the closing of the Business Combination, the share awards granted under 2012 Share Incentive Plan of Microvast, Inc. (the “2012 Plan”) were rolled over by removing original performance conditions and converting into options and capped non-vested share units with modified vesting schedules, using the Common Exchange Ratio of 160.3. The 2021 Plan reserved 5% of the fully-diluted shares of Common Stock outstanding immediately following the Closing Date plus the shares underlying awards rolled over from the 2012 Plan for issuance in accordance with the 2021 Plan’s terms.

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 13. SHARE-BASED PAYMENT - continued

Stock options

On April 10, 2024, a terminated and a transition advisory services agreement was entered between a former employee and the Company. According to this agreement, all unvested restricted stock units, performance-based restricted stock units and stock options held by the employee as of April 10, 2024 will vest in full immediately following April 10, 2025.The Company accounted for the modification as a Type III (improbable-to-probable) modification, which represents the modification of the award that was not expected to vest under the original vesting conditions at the date of the modification. The Company recognized compensation cost equal to the modified award’s fair value at the date of the modification over the period in which the former employee serves as consultant to the Company.

The modification date fair value of the stock options was determined using the Black Scholes model with the following assumptions:


	Six months ended June 30, 2024
Exercise price	$	5.69
Expected terms (years)	1.25
Volatility	85.66		%
Risk-free interest rate	5.00		%
Expected dividend yields	0.00		%
Fair value of options granted	$	0.0035

The exercise prices for each award were extracted from the option agreements. The expected terms for each award were derived using the simplified method, and is estimated to occur at the midpoint of the vesting date and the expiration date. The volatility of the underlying common stock during the lives of the options was a blend of implied volatility from the average volatility of peer companies, implied volatility and the Company's historical volatility. Risk-free interest rate was estimated based on the market yield of US Government Bonds with maturity close to the expected term of the options. The dividend yield was estimated by the Company based on its expected dividend policy over the expected term of the options.

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 13. SHARE-BASED PAYMENT - continued

Stock options - continued

Stock options activity for the six months ended June 30, 2023 and 2024 was as follows:


Stock options life	Number of Shares	Weighted Average Exercise Price (US$)	Weighted Average Grant Date Fair Value (US$)	Weighted Average Remaining Contractual Life
Outstanding as of December 31, 2022	36,091,071	6.08	4.80	6.8
Grant	240,000	1.25	0.67
Forfeited	(347,317)	6.28	4.86
Outstanding as of June 30, 2023	35,983,754	6.04	4.77	6.3
Expected to vest and exercisable as of June 30, 2023	35,983,754	6.04	4.77	6.3
Exercisable as of June 30, 2023	12,563,621	6.14	4.87	6.3
Outstanding as of December 31, 2023	32,876,682	6.01	4.73	5.7
Forfeited	(1,243,497)	4.22	2.83
Outstanding as of June 30, 2024	31,633,185	6.08	4.80	5.2
Expected to vest and exercisable as of June 30, 2024	31,633,185	6.08	4.80	5.2
Exercisable as of June 30, 2024	20,922,066	6.15	4.88	5.2

During the three months ended June 30, 2023 and 2024, the Company recorded share-based compensation expense of $13,396 and $10,285 related to the option awards, respectively. During the six months ended June 30, 2023 and 2024, the Company recorded share-based compensation expense of $27,055 and $22,313 related to the option awards, respectively.

The total unrecognized equity-based compensation costs as of June 30, 2024 related to the stock options was $4,031, which is expected to be recognized over a weighted-average period of 0.1 years. The aggregate intrinsic value of the stock options as of June 30, 2024 was $0.

Capped Non-vested share units

The capped non-vested share units (“CRSUs”) represent rights for the holder to receive cash determined by the number of shares granted multiplied by the lower of the fair market value and the capped price, which will be settled in the form of cash payments. The CRSUs were accounted for as liability classified awards.

During the three months ended June 30, 2023 and 2024, the Company recorded share-based compensation expense of $3,302 and $1,226, related to these CRSUs, respectively. During the six months ended June 30, 2023 and 2024, the Company recorded share-based compensation expense of $6,546 and $2,481, related to these CRSUs, respectively.

The total unrecognized equity-based compensation costs as of June 30, 2024 related to the CRSUs was $313.

Restricted Stock Units

Following the Business Combination, the Company granted 2,721,624 restricted stock units (“RSUs”) and 2,680,372 performance-based restricted stock units (“PSUs”) subject to service, performance and/or market conditions. The service condition requires the participant’s continued services or employment with the Company through the applicable vesting date, and the performance condition requires the achievement of the performance criteria defined in the award agreement. The market condition is based on the Company’s TSR relative to a comparator group during a specified performance period.

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 13. SHARE-BASED PAYMENT - continued

Restricted Stock Units - continued

The fair value of RSUs is determined by the market closing price of Common Stock at the grant date and is amortized over the vesting period on a straight-line basis. The fair value of PSUs that include vesting based on market conditions are estimated using the Monte Carlo valuation method. For PSUs with performance conditions, share-based compensation expense is only recognized if the performance conditions become probable to be satisfied. Compensation cost for these awards is amortized on a straight-line basis over the vesting period based on the grant date fair value, regardless of whether the market condition is satisfied. Accordingly, the Company recorded share-based compensation expense of $271 and $700 related to these RSUs and $324 and $(1,492) related to these PSUs during the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2023, the Company recorded share-based compensation expense of $512 and $959 related to these RSUs and $789 and $1,508 related to these PSUs, respectively.

The non-vested shares activity for the six months ended June 30, 2023 and 2024 was as follows:


	Number of Non-Vested Shares	Weighted Average Grant Date Fair Value Per Share (US$)
Outstanding as of December 31, 2022	1,222,837	6.92
Grant	2,900,695	1.86
Vested	(310,432)	3.85
Forfeited	(51,036)	4.21
Outstanding as of June 30, 2023	3,762,064	3.31
Outstanding as of December 31, 2023	3,598,606	3.07
Grant	79,909	1.40
Vested	(503,505)	2.65
Forfeited	(749,267)	4.33
Outstanding as of June 30, 2024	2,425,743	2.72

The total unrecognized equity-based compensation costs as of June 30, 2024 related to the non-vested shares was $2,880.

The following summarizes the classification of share-based compensation:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2024		2023		2024
Cost of revenues	$	1,525	$	1,481	$	3,029	$	2,619
General and administrative expenses	12,419		7,633		24,587		15,800
Research and development expenses	2,693		2,521		5,707		4,298
Selling and marketing expenses	1,213		488		2,456		1,271
Construction in process	149		(17)		289		14
Total	$	17,999	$	12,106	$	36,068	$	24,002

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 14. CONVERTIBLE LOAN WITH SHAREHOLDER

On May 28, 2024, Microvast Inc. entered into a $25,000 convertible loan agreement ("Loan Agreement") with Mr. Yang Wu, the Company’s Chief Executive Officer and Chairman.

The loan includes an Initial Term Loan of $12,000 and a Delayed Draw Term Loan of $13,000 at an initial interest rate equal to Secured Overnight Financing Rate("SOFR"), plus an initial Applicable Margin of 9.75% per annum, 3.75% of which shall be paid in kind rather than in cash. The maturity date is November 28, 2025, which may be accelerated upon the occurrence and continuance of an event of default in accordance with the terms of the Loan Agreement. The Loan Agreement also provides Mr. Wu with the right to convert the outstanding principal balance of the Loan, into shares of common stock at an initial conversion rate equal to two shares of Common Stock per $1.00 of principal amount to be converted.

The Initial Term Loans of $12,000 was received in May 2024 and the Delayed Draw Term loan was received in July 2024.

The loan is secured by a first priority security interest in substantially all of its assets by Microvast Inc. and all other entities within the Group as guarantors.

The Group has elected fair value option to account for the convertible loan. Direct costs and fees related to the convertible loan were expensed as incurred. The fair value was determined by using a discounted cash flow model for the bond component and a Black-Scholes-Merton model for the conversion option, which is considered a Level 3 fair value measurement. Subsequent changes in the fair value are recorded as gains (losses) in the unaudited condensed consolidated statement of operation. During the three months ended June 30, 2024, a loss of $1,590 on fair value change of convertible loan with shareholder was recorded. The outstanding balance for the Convertible loan with shareholder was $13,313 as of June 30, 2024.

In connection with the convertible loan from Mr. Wu Yang, on May 28, 2024, the Company issued to Mr. Wu a warrant exercisable for 5,500,000 shares of Common Stock at an initial exercise price of $2.00 per share. The warrant expires on May 28, 2029. No warrants were exercised during the period ended June 30, 2024. As of June 30, 2024, 5,500,000 warrants were outstanding and the Group recorded the warrant value of $779 in additional paid in capital.

The significant input of the discounted cash flow model for the bond component is the discount rate. Below are the key inputs used in Black-Scholes-Merton model for the conversion option:


	June 30, 2024
Market price of public stock	$	0.46
Exercise price	$	0.50
Expected term (years)	1.50
Volatility	53.08		%
Risk-free interest rate	4.94		%
Dividend rate	0.00		%

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 estimated using a blend of the average volatility of peer companies and the Company's historical volatility. 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.

Table of Contents

MICROVAST HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

NOTE 15. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2024		2023		2024
Numerator:
Net loss attributable to common stock shareholders	$	(26,089)	$	(78,441)	$	(55,670)	$	(103,266)
Denominator:
Weighted average common stock used in computing basic and diluted net loss per share	307,742,032		315,509,552		307,728,460		315,438,336
Basic and diluted net loss per share	$	(0.08)	$	(0.25)	$	(0.18)	$	(0.33)

For the three and six months ended June 30, 2023 and 2024, the following Common Stock outstanding were excluded from the calculation of diluted net loss per share, as their inclusion would have been anti-dilutive for the periods prescribed.

Three Months Ended June 30,

Six Months Ended June 30,

Microvast Holdings, Inc. [MVST] Filings
Microvast Holdings, Inc. [MVSTW] Filings
10-Q	[2024-08-09]
10-Q	[2024-05-09]
10-K	[2024-04-01]
10-Q	[2023-11-09]
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-16]
10-Q	[2022-11-10]
10-Q	[2022-08-11]
10-Q	[2022-05-16]
10-K	[2022-03-29]
10-Q	[2021-11-15]
S-1	[2021-08-20]
10-Q	[2021-08-17]
10-Q	[2021-06-02]
10-K	[2021-03-25]
10-Q	[2020-11-09]
10-Q	[2020-08-07]
10-Q	[2020-05-04]
10-K	[2020-03-13]
10-Q	[2019-11-12]
10-Q	[2019-08-12]
10-Q	[2019-05-15]
10-K	[2019-04-01]
S-1	[2019-02-13]

Microvast Holdings, Inc. [MVST] Filings

Microvast Holdings, Inc. [MVSTW] Filings