Microvast Holdings, Inc.

NOTE 1. BACKGROUND AND BASIS OF PRESENTATION

Organization

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 , Microvast, Inc. and Tuscan Holdings Corp. (“Tuscan”) consummated the 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.

The Company and its subsidiaries are primarily engaged in developing, manufacturing, and selling lithium-ion battery technologies for use in commercial electric vehicles and battery energy storage systems across the globe.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. In our opinion, all adjustments, consisting only of normal recurring items, which are considered necessary for a fair presentation of the consolidated financial statements, have been included.

The results of operations for the three months ended March 31, 2026 are not necessarily indicative of results to be expected for any future interim period or the year ending December 31, 2026.

Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications did not have a material effect on the Company's financial position, results of operations, or cash flows. In the first quarter of 2026, the Company changed the presentation of foreign currency transaction gains and losses previously presented as general and administrative expenses to be presented as foreign exchange (loss) gain, which did not change net income or otherwise materially change the consolidated financial statements.

The accompanying consolidated financial statements of the Company have been prepared on a going concern basis, which assumes that the Company will continue to realize its assets and settle its liabilities in the ordinary course of business.

As of March 31, 2026, the Company had stockholders' equity of $466.1 million, including an accumulated deficit of $1,074.0 million, cash and cash equivalents of $126.1 million, restricted cash of $47.9 million and other current assets of $251.8 million. As of March 31, 2026, the Company had outstanding borrowings of $138.8 million, with $111.2 million due within the next 12 months, a bond payable of $41.7 million that matures in January 2027, a convertible loan with repayment amount of $26.7 million that matures in May 2026, and other current liabilities of $214.8 million. Additionally, as of March 31, 2026, the Company had $29.1 million in purchase commitments primarily related to inventory, and $17.3 million in capital commitments with $15.0 million due within the next 12 months.

Based on the Company's current business plan, the existing cash and assets held for sale may not be sufficient to fund operations through the next twelve months. These conditions and events raise substantial doubt about the Company's ability to continue as a going concern.

The Company's primary plans to alleviate the substantial doubt include 1) obtaining sufficient funding through operations; it is anticipated that the Company will generate cash through operations in the forecasted period in consideration of the existing contract backlog and anticipated market conditions; and 2) refinancing short-term borrowings; historically, the Company, on an as needed basis, has rolled over or obtained replacement borrowings from existing creditors for its short-term bank loans upon the maturity date of the loans. During the three months ended March 31, 2026, the Company refinanced $30.1 million of short-term borrowings and anticipates that it will continue to be able to do so for the next twelve months. The Company has concluded it is probable that the execution of these plans will alleviate the substantial doubt about the Company's ability to continue as a going concern.

The consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern.

Recent Accounting Standards

Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures” (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amended guidance requires disaggregation of certain expense captions into specified natural expense categories in the disclosures within the notes to the financial statements. In addition, the guidance requires disclosure of selling expenses and its definition. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance can be applied either prospectively or retrospectively. The Company continues to evaluate the impact of this guidance on its disclosures, but plan to adopt this guidance prospectively and conform with the disclosure requirements when it becomes mandatorily effective for the Company's annual report for the year ending December 31, 2027.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which provides updated guidance on how to recognize, measure, and present government grants. The ASU will be effective for annual reporting periods beginning after December 15, 2028, including interim periods within those fiscal years with early adoption permitted. The Company continues to evaluate the impact of this guidance on its disclosures.

NOTE 2. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (in thousands):

Change in allowance for credit losses was as follows (in thousands):

NOTE 3. INVENTORIES, NET

Inventories consisted of the following (in thousands):

The Company wrote-down inventories to net realizable value and incurred losses of $1.6 million and nil on battery inventory for the three months ended March 31, 2026 and 2025, respectively. The write-downs were primarily related to technology development or product upgrade.

NOTE 4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following (in thousands):

(1) See Note 16 – Commitments and Contingencies.

NOTE 5. PRODUCT WARRANTY

Changes in product warranty were as follows (in thousands):

NOTE 6. BANK BORROWINGS

On September 27, 2022, Microvast Power Systems Co., Ltd. (“MPS”), one of the Company’s subsidiaries, entered into a $111.5 million (RMB 800 million) loan facilities agreement with a group of lenders led by a bank in China (the “2022 Facility Agreement”). The interest rate is prime plus 115 basis points where prime is based on the Loan Prime Rate published by the National Inter-bank Funding Center of China and is payable on a quarterly basis. The loan facilities can only be used for the manufacturing capacity expansion at the Company’s facility located in Huzhou, China. 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.

As of March 31, 2026, MPS had outstanding borrowings of $43.5 million under the 2022 Facility Agreement with the following repayment schedule:

Capitalized interest, which was recorded in construction in progress, was $162 thousand and $278 thousand for the three months ended March 31, 2026 and 2025, respectively.

In June 2025, MPS entered into a long-term loan agreement with a Chinese bank for a facility of RMB 100 million to be used for working capital. The maturity period for this loan istwo years with an interest rate of 2.70%. The interest expense under this long-term loan agreement for the three months ended March 31, 2026 and 2025 was $97 thousand andnil, respectively. As of March 31, 2026, MPS had outstanding borrowings of $14.1 million under this agreement with the following repayment schedule:

In March 2026, MPS entered into a long-term loan agreement and bank facility with a Chinese bank for RMB 100 million to be used for working capital purposes and to refinance a portion of the loans with higher interest rates. The maturity period for this loan istwo years with an interest rate of 2.80%. As of March 31, 2026, MPS had outstanding borrowings of $14.5 million under this agreement with the following repayment schedule:

The Company's PRC subsidiaries have 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 2.40% to 4.85% per annum. The amount of interest expense was $428 thousand and $390 thousand for the three months ended March 31, 2026 and 2025, respectively.

Changes in bank borrowings were as follows (in thousands):

Certain assets of the Company have been pledged to secure the above bank facilities granted to the Company. The aggregate carrying amount of the assets pledged by MPS as of March 31, 2026 and December 31, 2025 is as follows (in thousands):

NOTE 7. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consisted of the following (in thousands):

NOTE 8. BONDS PAYABLE

Bonds payable consisted of the following (in thousands):

Huzhou Saiyuan Loan

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 $87.8 million (RMB 600 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 $950.0 million.

In September 2020 and 2022, MPS entered intotwo supplemental agreements with Huzhou Saiyuan, respectively, to change the repayment schedule as follows: (i) $14.6 million (RMB 100 million) was repaid, together with interest accrued, on or before November 10, 2022, (ii) $14.6 million (RMB 100 million) was repaid, together with interest accrued, on or before December 31, 2022 and (iii) the remaining $43.9 million (RMB 300 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 Company 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 fully complied with the amended repayment schedule. With $692 thousand (RMB 5 million) repaid in 2023 and $1.4 million (RMB 10 million) repaid in 2025, the subscription and outstanding balance of the convertible bonds was $41.7 million (RMB 285 million) as of March 31, 2026.

NOTE 9. WARRANTS

The Company has 27.6 million publicly-traded warrants (“Public Warrants”) and 837 thousand private placement warrants issued to Tuscan Holdings Acquisition LLC and EarlyBirdCapital, Inc. (“Private Warrants” and together with the

Public Warrants, the “Warrants”) that entitle the holder to purchaseone share of the Company’s common stock at an exercise price of $11.50 per share. During the three months ended March 31, 2026, none of the Warrants were exercised.

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 on July 23, 2026.

The Private Warrants are identical to the Public Warrants, except that the Private Warrants are 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. The Private Warrants will expire on July 23, 2026.

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, recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for the 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 March 31, 2026 and 2025, resulting in gain of $15 thousand and $226 thousand for the three months ended March 31, 2026 and 2025 respectively and is classified within changes in fair value of warrant liability in the consolidated statements of operations.

The Private Warrants were valued using a Monte Carlo simulation with the following assumptions:

On May 28, 2024, the Company also issued a warrant exercisable for 5.5 million shares of common stock at an initial exercise price of $2.00 per share. The Warrant expires on May 28, 2029. See further discussion in Note 14 – Convertible Loan measured at fair value.

NOTE 10. FAIR VALUE MEASUREMENT

Measured or Disclosed at Fair Value on a Recurring Basis

The Company measured its financial assets and liabilities, including cash and cash equivalents, restricted cash, warrant liability and Convertible Loan at fair value on a recurring basis. 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 and Convertible Loan 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 a Monte Carlo simulation as described in Note 9 – Warrants. See Note 14 – Convertible Loan measured at fair value for assumptions utilized in measuring the fair value of the Convertible Loan.

As of March 31, 2026 and December 31, 2025, information about inputs for the fair value measurements of the Company’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows (in thousands):

The following is a reconciliation of the beginning and ending balances for Level 3 warrant liability during the three months ended March 31, 2026 and 2025 (in thousands):

The following is a reconciliation of the beginning and ending balances for Level 3 Convertible Loan during the three months ended March 31, 2026 (in thousands):

NOTE 11. LEASES

The Company is lessee of office space and warehouses. Certain leases include renewal options and/or termination options, which are factored into the Company's determination of lease payments when appropriate.

Operating lease cost for the three months ended March 31, 2026 and 2025 was $904 thousand and $857 thousand, respectively, which excluded cost of short-term contracts. Short-term lease cost for the three months ended March 31, 2026 and 2025 was $16 thousand and $46 thousand, respectively.

As of March 31, 2026, the Company had operating lease liabilities of $16.8 million, including current portion of $2.8 million, which is presented under accrued expenses and other current liabilities on the consolidated balance sheet. The weighted average remaining lease term was 8.5 years and weighted average discount rate was 5.0%.

Supplemental cash flow information of the leases were as follows (in thousands):

Maturity of operating lease liabilities are as follows (in thousands):

Lessor Accounting

For the three months ended March 31, 2026 and 2025, the Company recognized sales-type lease revenue of $46 thousand and $4.1 million respectively, which are included in products sales in the accompanying consolidated statements of operations. As of March 31, 2026, the Company recorded net investment in sales-type leases of $5.6 million including current portion in the amount of $3.8 million, which is presented in accounts receivable on the consolidated balance sheets.

NOTE 12. REVENUE

Revenues by major geographic regions in which the Company's customers are located are as follows (in thousands, except percentages):

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 (see Note 2). 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.

The following table reflects the changes in our contract liabilities (in thousands):

As of March 31, 2026, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied was $6.7 million. Of this amount, we expect to recognize $3.4 million over the next 12 months and the remainder over the remaining performance obligation period.

NOTE 13. SHARE-BASED COMPENSATION

The Company has granted restricted stock and restricted stock units (collectively, “Restricted Stock”), as well as unrestricted stock and stock options, to employees and directors under the 2021 Equity Incentive Plan. Upon vesting of Restricted Stock, shares of common stock are released to the grantee.

As of March 31, 2026, the Company had approximately 2.3 million shares of service-based Restricted Stock and approximately 134 thousand shares of performance-based Restricted Stock outstanding. The Company also had approximately 25.6 million stock options outstanding, of which 24.2 million stock options were exercisable as of March 31, 2026.

For the three months ended March 31, 2026 and 2025, the Company recognized share-based compensation expense related to all share-based awards as follows (in thousands):

NOTE 14. CONVERTIBLE LOAN MEASURED AT FAIR VALUE

On May 28, 2024, Microvast Holdings, Inc. entered into a $25.0 million convertible loan agreement (the “Loan Agreement”) with Mr. Yang Wu, the Company’s Chief Executive Officer and Chairman, which was subsequently amended on March 17, 2025 to extend the maturity date to May 28, 2026.

The loan includes an Initial Term Loan of $12.0 million and a Delayed Draw Term Loan of $13.0 million at an initial interest rate equal to the 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 (collectively, the “Convertible Loan”). The maturity date 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 Convertible Loan, into shares of common stock at an initial conversion rate equal totwo shares of common stock per $1.00 of principal amount to be converted.

The Initial Term Loan of $12.0 million was received in May 2024 and the Delayed Draw Term Loan of $13.0 million was received in July 2024.

The Convertible Loan is secured by a first priority security interest in substantially all of the assets of Microvast Holdings, Inc. and all other entities within the Company as guarantors.

The Company elected the fair value option to account for the Convertible Loan. 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 fair value are presented as gains or losses in the consolidated statements of operations. Interest expense related to the Convertible Loan is included in the changes in fair value. During the three months ended March 31, 2026 and 2025, gains of $63.8 million and $42.9 million were recognized, respectively.

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

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 agreement. The expected term is assumed to be until the end of expiration based on the loan agreement. 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 U.S. 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 loan.

In connection with the Convertible Loan on May 28, 2024, the Company issued to Mr. Wu a warrant exercisable for 5.5 million shares of common stock at an initial exercise price of $2.00 per share that expires on May 28, 2029. As of March 31, 2026,5.5 million warrants were outstanding.

NOTE 15. NET PROFIT (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net profit (loss) per share for the periods indicated (in thousands, except per share data):

Potentially dilutive securities not included in the diluted net profit (loss) per share computations because their effect would have been anti-dilutive were as follows (in thousands):

NOTE 16. COMMITMENTS AND CONTINGENCIES

Litigation

Corporate Governance Actions

Stephen Vogel, Ruth Epstein, Stefan Selig, Richard Rieger, Amy Butte, Yang Wu and Yanzhuan Zheng have been named as defendants in litigation filed in the Court of Chancery captioned Matt Jacob v. Stephen A. Vogel, et al., C.A. No. 2022-0600-PAF (Del. Ch.) (filed July 7, 2022). The plaintiff is seeking to certify the litigation as a stockholder class action. The complaint alleges that Stephen Vogel, Ruth Epstein, Stefan Selig, Richard Rieger and Amy Butte breached their fiduciary duties in connection with Tuscan's acquisition of Microvast, Inc., including by making inadequate disclosures concerning the projected earnings of Microvast, Inc. The complaint further alleges that once the earnings of the combined company became public, the Company's stock dropped, causing losses to investors. The complaint also alleges that Yang Wu and Yanzhuan Zheng aided and abetted these purported breaches. Amy Butte, Yang Wu, and Yanzhuan Zheng filed motions to dismiss the complaint. On March 7, 2026, the Court dismissed the claims against Messrs. Wu and Zheng, without prejudice but denied Ms. Butte's motion to dismiss. On March 30, 2026, the plaintiff served initial discovery requests on the remaining defendants. Amy Butte filed an answer to the complaint on April 15, 2026.

On December 13, 2023, in response to a stockholder litigation demand, the Company filed a petition in the Court of Chancery pursuant to Section 205 of the Delaware General Corporation Law seeking validation of an amendment to the Company’s Amended Certificate of Incorporation, the Business Combination and the issuance of the shares issued pursuant thereto, and the Company’s Second Amended and Restated Certificate of Incorporation adopted in connection with the Business Combination (collectively, the “Acts”) to resolve any uncertainty with respect to those matters, which action was captioned In re Microvast Holdings Inc., C.A. No. 2023-1245-PAF. On March 18, 2024, the Court of Chancery granted the petition, validating and declaring effective each Act as of the time and date such Act was originally taken.

The Company, the directors of the Company predecessor, Tuscan, and certain former and current Company officers and directors have also been named as defendants in litigation filed in the Court of Chancery captioned Denish Bhavsar v. Stephen Vogel, et al., Case No. 2024-0137-PAF (Del. Ch.) (filed Feb. 14, 2024). The plaintiff purports to assert derivative claims on behalf of the Company. The complaint alleges that the individual defendants breached their fiduciary duties in connection with Tuscan’s acquisition of Microvast, Inc., including by making inadequate disclosures concerning Microvast, Inc.’s earnings and alleged conflicts of interest that existed between certain directors and Company stockholders. Certain defendants filed motions to dismiss, which are fully briefed.

The Company, and certain former and current Company officers and directors have also been named as defendants in a litigation filed in the Court of Chancery captioned Henry Park v. Yang Wu, et al., C.A. No. 2024-0868-PAF (Del. Ch.) (filed August 19, 2024). The plaintiff purports to assert derivative claims on behalf of the Company. The complaint alleges that certain individual defendants breached their fiduciary duties in connection with Tuscan’s acquisition of Microvast, Inc., including by making inadequate disclosures concerning Microvast, Inc.’s earnings and by refusing to investigate a litigation demand. On October 14, 2024, the Company and other defendants filed a motion to dismiss. That motion has been fully briefed.

Following an April 7, 2026 telephonic status conference on the Bhavsar and Park cases, the parties agreed to stay the cases pending disposition of the Jacob litigation. Stipulations were filed and so-ordered by the court in Bhavsaron April 24, 2026 and in Park on April 27, 2026.

The Company has received additional demands from purported Company stockholders, requesting that the Company’s Board of Directors investigate whether current and former directors and officers of the Company and its predecessors, Tuscan and Microvast Inc., breached their fiduciary duties by allegedly making material misrepresentations about inter alia (1) Microvast Inc.’s performance and financial health in connection with the merger between Tuscan and Microvast, Inc., and (2) the Company’s loss of a conditional grant from the United States Department of Energy. The Company has responded to the demands. The Company has also received and responded to stockholder demands for books and records made pursuant to Section 220 of the Delaware General Corporation Law that purportedly seek to investigate the (i) loss of the DOE grant, and (ii) Company's bases for denying one of the referenced stockholder demands.

Securities Litigation

The Company and certain of its officers have also been named as defendants in a putative class action complaint by a stockholder of the Company in the U.S. District Court for the Southern District of Texas under the caption Schelling v. Microvast Holdings, Inc., Case No. 4:23-cv-04565 (S.D. Tex.) (filed Dec. 5, 2023) (the “Schelling Action”). The complaint alleges that defendants violated certain federal securities laws by making misleading statements regarding the receipt of a conditional grant from the United States Department of Energy, the Company’s profitability, the nature of Company-associated operations in China, and the status and progress of the construction of a facility owned by the Company. On March 1, 2024, the court appointed Co-Lead Plaintiffs and Co-Lead Counsel for the proposed class of Company investors. Plaintiffs amended their complaint on May 13, 2024, and Defendants filed a motion to dismiss on June 20, 2024. On August 22, 2025, the Court granted in part and denied in part the motion to dismiss. Defendants filed their Answer on October 14, 2025. The lawsuit is currently in the discovery phase. Briefing on the class certification is scheduled to take place from June to October 2026, and briefing on dispositive motions from April to July 2027. The case has not yet been set for trial. Jury selection for the trial of the case is set to begin on November 8, 2027.

The Company and certain of its officers and directors have also been named as defendants inthree derivative actions filed in the Southern District of Texas under the captions Bhavsar v. Wu et al., No. 4:24-cv-00372 (S.D. Tex.) (filed Jan. 31, 2024), Marti et al v. Wu et al, Case No. 4:24-cv-00633 (S.D. Tex.) (filed Feb. 23, 2024), Gidaro v. Wu et al, Case No. 4:24-cv-00828 (S.D. Tex.) (filed Mar. 6, 2024). The complaints allege that the officer and director defendants violated the federal securities laws by making inadequate disclosures substantially similar to those alleged in the Schelling Action. The complaints further allege that these inadequate disclosures resulted from, and constituted, breaches of the officer and director defendants’ fiduciary duties. On February 24, 2024, the court entered in an order in the first-filed case, Bhavsar v. Wu et al., No. 4:24-cv-00372, consolidating the Bhavsar case and Marti et al v. Wu et al, Case No. 4:24-cv-00633. The consolidated derivative litigation (the “Consolidated Derivative Action”) is captioned In re Microvast Holdings, Inc. Derivative Litigation, Lead Case No. 4:24-cv-00372 (S.D. Tex.). The parties in the Gidardo action filed a stipulation to consolidate the Gidaro case into the Consolidated Derivative Action. The Consolidated Derivative Action is currently stayed. The allegations in the Consolidated Derivative Action are substantially similar to the allegations raised in the Securities Class Action. On March 18, 2024, the parties in the Derivative Action filed a joint motion to stay the proceedings pending a ruling in the Securities Class Action on the anticipated motion to dismiss. The Court granted the motion to stay on March 24, 2024. As of March 9, 2026, the stay remained in effect.

A fourth derivative complaint was filed on November 19, 2025 in the United States District Court (S.D. Tex) under the caption Richard Swenson and Lori Swenson v. Yang Wu, et al., No. 4:25-cv-05561. Following entry of a stipulation to consolidate the Swenson action with already-pending cases, the Swenson case was voluntarily dismissed on January 27, 2026.

Pursuant to the Company's governing documents and indemnification agreements entered into by the Company with certain of the named defendants, in the above-described actions, the Company has indemnified those defendants for all expenses and losses related to the litigation subject to the terms of those indemnification agreements. While the lawsuits are being vigorously defended, other reported lawsuits of this type have resulted in a broad range of outcomes, with each case being dependent on its own unique set of facts and circumstances. Litigation of this kind can lead to settlement negotiations, including negotiations prompted by pre-trial civil court procedures. The outcome of any litigation is inherently uncertain, and there is always the possibility that a court rules in a manner that is adverse to the interests of the Company and the individual defendants. However, the amount of any such loss in that scenario, which could be material, cannot be reasonably estimated at this time.

Other Matters

Deidra Milan is an ex-employee of Microvast, and is the putative representative of a class of more than 100 individual employees who were let go from their jobs at a plant in Clarksville, Tennessee. She has filed Civil Action No. 3:24-cv-00627, Deidra Milan, Plaintiff v. Microvast, Inc. and Microvast Holdings, Inc. in the U.S. District Court for the Middle District of Tennessee. The Company filed an answer to the suit on July 19, 2024. The class action complaint is brought under the Worker Adjustment and Notification Act, 29 U.S.C. §§2101-2109 (the “WARN Act”), which requires advance notice before certain types of plant closings and mass layoffs. Plaintiff alleges that defendants failed to give proper advance notice of a mass layoff in violation of the WARN Act. Plaintiffs seek backpay, medical expenses, attorney’s fees and statutory penalties in an unspecified amount. Class counsel and the Company have agreed on the terms of a class action settlement agreement subject to court approval. The Court has granted preliminary court approval of the class action settlement. Potential class members will now receive notice of the settlement and an opportunity to object to the settlement terms or opt out of the settlement. The court will then need to rule on any objections and finally approve the settlement for all class members who do not opt out of the class settlement. The Court has set a hearing on Plaintiff's unopposed motion for final approval for May 21, 2026.

Microvast, Inc., a subsidiary of the Company, has been named as a defendant in a contract dispute litigation filed in Montgomery County Chancery Court for the State of Tennessee under the caption DPR Construction, GP vs. Microvast, Inc., et al, Case No. CD-24-31 (Tenn. Ch.) (filed June 20, 2024) (the "DPR Litigation"). The Plaintiff alleged that the Company failed to pay it for construction work that is performed on a Microvast facility in Tennessee, and sought damages of $19.9 million in progress billings, the additional sum of $1.6 million being held as retainage on Plaintiff's progress billings under the contract, lost profits on the work yet to be performed under the contract plus certain fees and expenses, and foreclosure on the facility to satisfy the payment allegedly owed. The parties entered into a settlement agreement on November 11, 2024, and an agreed order of dismissal was filed on February 9, 2026.

Microvast, Inc. was named as a defendant in a contract dispute litigation filed in Montgomery County Chancery Court for the State of Tennessee under the caption Faith Technologies, Inc. v. Microvast, Inc. et al., Case No. CD-24-36 (Tenn. Ch.) (filed on July 15, 2024). Plaintiff asserts claims for damages related to its subcontract with DPR Construction, GP under which Plaintiff provided fire protection system services on a Microvast facility in Tennessee, and seeks damages of $1.7 million plus cost of court and attorneys and prejudgment interest. The parties entered into a settlement agreement and this matter has been stayed by order of the court. The parties entered into a settlement agreement, and the court dismissed the case with prejudice on March 4, 2026.

Microvast, Inc. was named as a defendant in an action filed in Montgomery County Chancery Court for the State of Tennessee under the caption Bernhard MCC, LLC. v. U.S. Engineering Innovations, LLC, DPR Construction, Microvast, Inc. and the Industrial Development Board of the County of Montgomery, Case No. CD-24-27 (Tenn. Ch.) (filed on May 28, 2024 ) brought by a subcontractor on the Microvast Facility in Tennessee for lien enforcement of $5.7 million. The Parties entered into a settlement agreement and this matter has been stayed by order of the court on November 11, 2024. The court entered the order dismissing the case with prejudice on March 12, 2026.

Microvast, Inc. was named as a defendant in an action filed in Montgomery County Chancery Court for the State of Tennessee under the caption Virginia Transformer Corp. v. Microvast, Inc.and the Industrial Development Board of the County of Montgomery, Tennessee, Case No. RE-24-32 (Tenn. Ch.) (filed on July 01, 2024) brought by a prime contractor on the Microvast Facility in Tennessee for lien enforcement of $1.8 million. The parties entered into a settlement agreement, but after defendant made one settlement payment, a dispute arose when a third party hacked plaintiff’s email system and directed defendant to wire settlement payments to a fictitious bank account. Plaintiff amended its complaint to add a claim for breach of the settlement agreement, and defendant amended its answer to assert a counterclaim for plaintiff's breach of the settlement agreement. Defendant also filed a motion to compel arbitration of the entire matter based on an arbitration provision in the parties' underlying contract, which the trial court denied. Defendant has appealed the trial court’s order denying arbitration, resulting in a stay of the trial court proceedings pending the appeal. Briefing has just commenced, with Microvast filing its initial brief. The parties have agreed on a mediation that is scheduled for May 19, 2026.

Microvast, Inc. has initiated a lawsuit as a plaintiff in an action filed in the 11th Judicial District Court, Harris County, Texas under the caption Microvast, Inc. v. Grupo Basan Barba Santana, S.A. De C.V., Cause No. 2025-11326 (filed on February 19, 2025). Microvast claims it is entitled to the $2.6 million balance of its $3.5 million deposit. Grupo Basan has counterclaimed for $2.4 million in additional compensation for products and for expenses, which claims Microvast contends are prohibited by the contract. Microvast filed a summary judgment motion to dispose of Grupo Basan's claims which will be heard at approximately the end of July. Grupo Basan's attorneys have withdrawn. It is unknown at this time whether Grupo Basan will retain new counsel. Discovery is proceeding and trial is set for September 2026.

On November 14, 2024, Microvast Energy, Inc. was named as a defendant in breach of contract action filed before the American Arbitration Association (“AAA”) under the caption Clenera Battery Holdco LLC v. Microvast, Inc.., Case No. 01-24-0008-7288. Clenera asserted a claim for breach of a supply agreement between Microvast and Clenera for custom-made battery containers. Clenera alleges that Microvast must refund approximately$36 milliondue to Microvast's failure to deliver the containers by the contractual deadline, per the terms of the supply agreement. Clenera also seeks interest and attorneys’ fees. On November 15, 2024, Clenera filed an action for the same claim against Microvast Holdings, Inc. in the Supreme Court of the State of New York, County of New York, under the caption Clenera Battery Holdco LLC v. Microvast Holdings, Inc., Index No. 659103/2024. The guaranty action was consolidated into the arbitration. On December 3, 2025, the AAA issued the final award to Clenera of approximately $42.9 million, plus 9% interest for any amounts unsatisfied after December 3, 2025. This award was amended on January 6, 2026 and January 16, 2026. On February 12, 2026, the parties entered into a confidential settlement agreement. The Company made the first payment to Clenera, and the agreement contemplates a second payment to be made on or before July 15, 2026.

The Company is also involved in other litigation, claims, and proceedings. The Company evaluates the status of each legal matter and assesses the potential financial exposure. If the potential loss from any legal proceedings or litigation is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. Significant judgment is required to determine the probability of a loss and whether the amount of the loss is reasonably estimated. As of March 31, 2026 and December 31, 2025, based on the information currently available, the Company believes that any loss contingencies that may arise as a result of currently pending legal proceedings cannot be accurately quantified at this time and thus cannot determine whether they will have a material adverse effect on the Company’s business, results of operations, financial condition, and cash flows.

Capital Commitments

Capital commitments for construction of property and purchase of property, plant and equipment were $17.3 million as of March 31, 2026.

Purchase Commitments

Purchase commitments for non-cancelable contractual obligations primarily related to purchases of inventory were $29.1 million as of March 31, 2026.

Pledged Assets

Other than those disclosed in Note 6 - Bank Borrowings, the Company may pledge certain assets to banks to secure the issuance of bank acceptance notes for the Company. As of March 31, 2026, certain of the Company's machinery and equipment with a carrying value of $20.5 million has been pledged to secure the issuance of such notes.

Liens

As of March 31, 2026, the Company had $2.3 million of liens, a decrease of $21.3 million from December 31, 2025 due in part to the settlement of the DPR Litigation.

NOTE 17. SEGMENT INFORMATION

The Company’s business includes the design, development, manufacturing, sales and leasing of battery components and systems primarily for electric commercial vehicles and energy storage systems. Revenue, classified by major geographic region in which the customers are located, is disclosed in Note 12. The Chief Executive Officer (“CEO”), as the CODM, organizes the Company as a single operating and reportable segment. The CODM uses operating income to allocate operating and capital resources and assesses performance by comparing actual operating income results to historical results and previously forecasted financial information. The measure of operating income is reported on the consolidated statements of operations as operating income. The segment assets are reported on the consolidated balance sheets as total assets.

Long-lived assets, classified by major geographic regions, are as follows (in thousands, except percentages):

NOTE 18. SUBSEQUENT EVENTS

From March 31, 2026 to the date of issuance of the consolidated financial statements in this report, the Company has refinanced $10.1 million in short-term bank borrowings.