Microvast Holdings Inc

Previous wording

Our most recent innovation is our high-energy nickel manganese cobalt (“NMC”) 53.5 ampere-hour battery cell (the “53.5Ah”), whose performance characteristics make it an ideal solution for commercial vehicle and ESS applications. To bring this product to market we have made significant investments in capacity expansion in Huzhou, China. This facility employs fully-automated production equipment for the 53.5Ah cell, ensuring significant operating efficiencies.

Current wording

Our most recent innovation is our high-energy nickel manganese cobalt (“NMC”) 53.5 ampere-hour battery cell (the “53.5Ah”), whose performance characteristics make it an ideal solution for electric vehicles. To bring this product to market we made significant investments in capacity expansion in Huzhou, China, and this facility now employs fully-automated production equipment for the 53.5Ah cell.

Previous wording

Since 2009, when we launched our first ultra-fast battery system, we have sold and delivered approximately 4,840.7 megawatt hours (“MWh”) of battery systems. Our revenue for the period ended March 31, 2024, increased $34.4 million to $81.4 million, a 73% increase compared to the period ended March 31, 2023. As of March 31, 2024, we had an order backlog of approximately $348.3 million for our battery systems (the equivalent of approximately 1,765.8 MWh), over 80% of which is attributable to Europe and the U.S.. We expect to fulfill a majority of our backlog within 2024 and 2025.

Current wording

Since 2009, when we launched our first ultra-fast battery system, we have sold and delivered approximately 5,142.4 megawatt hours (“MWh”) of battery systems for electric vehicles. Our revenue for the three months ended June 30, 2024, increased $8.7 million to $83.7 million, a 12% increase compared to the same period ended June 30, 2023. As of June 30, 2024, we had an order backlog of approximately $278.6 million for our battery systems for electric vehicles (the equivalent of approximately 1,257.1 MWh), over 63% of which is attributable to Europe and the U.S. We expect to fulfill a majority of our electric vehicle battery backlog within 2024 and 2025.

Previous wording

In the future, in addition to expanding our production of battery systems and battery components, we expect to increase our focus on producing ESS solutions to support the shift to electrification, with the goal of becoming a leading global ESS solution provider to the energy market. This necessity stems from the premise that electric vehicles are truly green only if powered by green energy. Addressing this symbiotic relationship is at the heart of our research activities and we expect it will shape our strategies for the foreseeable future.

Current wording

In the future, in addition to expanding our production of battery systems and battery components for electric vehicles, we expect to increase our focus on producing ESS solutions to support the shift to electrification, with the goal of becoming a leading global ESS solution provider to the energy market. This necessity stems from the premise that electric vehicles are truly green only if powered by green energy. Addressing this symbiotic relationship is at the heart of our research activities and we expect it will shape our strategies for the foreseeable future.

Previous wording

On July 23, 2021, Microvast Holdings, Inc. (formerly known as Tuscan Holdings Corp.) consummated the previously announced acquisition of Microvast, Inc., a Delaware corporation, pursuant to the Agreement and Plan of

Current wording

On July 23, 2021, Microvast Holdings, Inc. (formerly known as Tuscan Holdings Corp.) consummated the previously announced acquisition of Microvast, Inc., a Delaware corporation, pursuant to the Agreement and Plan of Merger dated February 1, 2021, between Tuscan, Microvast and TSCN Merger Sub Inc., a Delaware corporation, pursuant to which Merger Sub merged with and into Microvast, with Microvast surviving the merger.

Previous wording

Our revenue and profitability depend substantially on the demand for battery systems and battery components, which is driven by the growth of the commercial and passenger electric vehicle and energy storage markets. Many factors contribute to the development of the electric vehicle and battery energy storage sector, including product innovation, general economic and political conditions, environmental concerns, energy demand, government support and economic incentives(e.g., the IRA in the U.S. and the E.U. Green Deal, E.U. Fit for 55). While governmental economic incentives and mandates can drive market demand for the markets in which we operate and, as a result, battery systems and components, governmental economic incentives can always be gradually reduced or eliminated. Any reduction or elimination of governmental economic incentives may result in reduced demand for our products and adversely affect our financial performance.

Current wording

Our revenue and profitability depend substantially on the demand for battery systems and battery components, which is driven by the growth of the commercial and passenger electric vehicle and energy storage markets. Many factors contribute to the development of the electric vehicle and battery energy storage sector, including product innovation, general economic and political conditions, environmental concerns, energy demand, government support and economic incentives (e.g., the Inflation Reduction Act in the U.S. and the E.U. Green Deal, E.U. Fit for 55). While governmental economic incentives and mandates can drive market demand for the markets in which we operate and, as a result, battery systems and components, governmental economic incentives can always be gradually reduced or eliminated. Any reduction or elimination of governmental economic incentives may result in reduced demand for our products and adversely affect our financial performance.

Previous wording

Our growth depends on being able to meet anticipated demand for our products. In order to do this, we will need to increase our manufacturing capacity. As of March 31, 2024, we had a backlog of approximately $348.3 million for our battery systems, equivalent to approximately 1,765.8 MWh. So far, we have used $435.8 million of the proceeds from the Business Combination to expand our manufacturing facilities in order to increase our manufacturing output, enabling us to address our backlog and to capture growing market opportunities.

Current wording

Our growth depends on being able to meet anticipated demand for our products. As of June 30, 2024, we had a backlog of approximately $278.6 million for our electric vehicles battery systems, equivalent to approximately 1,257.1 MWh. To increase our manufacturing output, address our backlog and capture growing market opportunities, we have made significant investment in capacity expansions in both Huzhou, China and Tennessee, United States.

Previous wording

In the third quarter of 2023, we successfully completed the 2 GWh cell, module and tray capacity expansion for our 53.5Ah cell technology in Huzhou, China. The demand for our 53.5Ah cell technology from our commercial vehicle and ESS customer base will be primarily met from this facility until the Clarksville Phase 1A expansion is completed and in production. Subject to our ability to access additional financing to continue and complete this expansion, management now estimates that Clarksville Phase 1A will be producing qualified 53.5Ah cells beginning approximately eight months after we secure such financing.

Current wording

In the third quarter of 2023, we successfully completed the 2 GWh cell, module and tray capacity expansion for our 53.5Ah cell technology in Huzhou, China which is now in operation and generating revenue from sales of electric battery systems.

Previous wording

Our revenues increased from approximately $47.0 million for the three months ended March 31, 2023 to approximately $81.4 million for the same period in 2024, primarily driven by an increase in sales volume from approximately 132.6 MWh for three months ended March 31, 2023 to approximately 353.3 MWh for the same period in 2024.

Current wording

Our revenues increased from approximately $75.0 million for the three months ended June 30, 2023 to approximately $83.7 million for the same period in 2024, primarily driven by an increase in sales volume from approximately 270.2 MWh for three months ended June 30, 2023 to approximately 301.7 MWh for the same period in 2024.

Previous wording

Our gross margin increased from 10.3% for the three months ended March 31, 2023 to 21.2% for the same period in 2024. The increase in gross margin was due to a combination of factors including better economies of scale through improving utilization, more favorable product mix and lower raw material prices.

Current wording

Our gross margin increased from 15.3% for the three months ended June 30, 2023 to 32.5% for the same period in 2024. The increase in gross margin was due to a combination of factors including better economies of scale through improving utilization, more favorable product mix and lower raw material prices.

Previous wording

Our cost of revenues for the three months ended March 31, 2024 increased by $22.0 million, or 52.3%, compared to the same period in 2023. The increase in the cost of revenues was primarily in line with the increased sales.

Current wording

Our cost of revenues for the six months ended June 30, 2024 increased by $15.0 million, or 14.2%, compared to the same period in 2023. The increase in the cost of revenues was primarily in line with the increased sales, partially offset by $0.4 million of decreased share-based compensation expenses.

Previous wording

General and Administrative expenses for the three months ended March 31, 2024 increased by $3.4 million, or 16.7%, compared to the same period in 2023. The increase in General and Administrative expenses was primarily due to $2.3 million of increased personnel-related expenses and other increases related to business expansion.

Current wording

General and Administrative expenses for the six months ended June 30, 2024 increased by $3.4 million, or 7.8%, compared to the same period in 2023. The increase in General and Administrative expenses was primarily due to $2.4 million of increased personnel-related expense, $5.6 million of increased professional fee and insurance fee, $0.9 million of increased depreciation and amortization, $1.6 million of increased credit loss, $1.3 million of increased exchange loss and other increases related to business expansion, offset by $8.8 million of decreased share-based compensation expenses.

Previous wording

The consolidated net cash position as of March 31, 2024 included cash and cash equivalents of $23.2 million and $8.2 million held by our PRC and European subsidiaries, respectively, that is not available to fund our U.S. operations unless funds are repatriated. Should we need to repatriate to the U.S. part or all of the funds held by our international subsidiaries in the form of a dividend, we would need to accrue and pay withholding taxes. We do not intend to pay any cash dividends on our common stock in the foreseeable future and intend to retain all of the available funds and any future earnings for use in the operation and expansion of our business in the PRC, Europe and the U.S.

Current wording

The consolidated net cash position as of June 30, 2024 included cash and cash equivalents of $43.9 million and $13.8 million held by our PRC and European subsidiaries, respectively, that is not available to fund our U.S. operations unless funds are repatriated. Should we need to repatriate to the U.S. part or all of the funds held by our international subsidiaries in the form of a dividend, we would need to accrue and pay withholding taxes. We do not intend to pay any cash dividends on our common stock in the foreseeable future and intend to retain all of the available funds and any future earnings for use in the operation and expansion of our business in the PRC, Europe and the U.S.

Previous wording

In accordance with Accounting Standards Update ("ASU") No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40),” management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the unaudited condensed consolidated financial statements are issued and has determined that the Company’s ability to continue as a going concern is dependent on its ability to raise additional capital or secure financing. In light of the Company’s projected capital expenditures required to complete and ramp-up its Clarksville Phase 1A expansion and operating requirements under its current business plan, the Company is projecting that its existing cash and assets available for sale and equity securities will not be sufficient to fund its operations through the next twelve months. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

Current wording

In accordance with Accounting Standards Update ("ASU") No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40),” management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the unaudited condensed consolidated financial statements are issued and has determined that the Company’s ability to continue as a going concern is dependent on its ability to raise additional capital or secure financing. 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 Company 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 Company’s ability to continue as a going concern.

Previous wording

As of March 31, 2024, our principal sources of liquidity were our cash and cash equivalents and restricted cash in the amount of $86.7 million.

Current wording

As of June 30, 2024, our principal sources of liquidity were our cash and cash equivalents and restricted cash in the amount of $104.5 million. We are currently working with our banks in China to extend the drawdown date on the $42.7 million (RMB300 million) that is undrawn under our RMB800 million project finance facility for the construction of our Huzhou capacity expansions.

Previous wording

As of March 31, 2024, we had bank borrowings of $84.1 million, the terms of which range from 0.5 to 33 months. The interest rates on our bank borrowings ranged from 3.40% to 4.85% per annum. As of March 31, 2024, we had convertible bonds outstanding of $43.2 million, with interest rates ranging from 3% to 4%. The convertible bonds are all due in 2027. As of March 31, 2024, we were in compliance with all material terms and covenants of our loan agreements, credit agreements and bonds.

Current wording

As of June 30, 2024, we had bank borrowings of $94.2 million, the terms of which range from 2 to 30 months. The interest rates on our bank borrowings ranged from 3.30% to 4.85% per annum. As of June 30, 2024, we had convertible bonds outstanding of $43.2 million, with interest rates ranging from 3% to 4%. The convertible bonds are all due in 2027. As of June 30, 2024, we also had the Convertible loan with shareholder of $13.3 million outstanding at an initial interest rate equal to Term SOFR for the applicable interest period, plus an initial applicable margin of 9.75% per annum, 3.75% of which shall be paid in kind and added to the outstanding principal under the Convertible loan with shareholder, with the remaining interest to be paid in cash. See Note 14 for details. As of June 30, 2024, we were in compliance with all material terms and covenants of our loan agreements, credit agreements and bonds.

Previous wording

On July 23, 2021, we received $708.4 million from the completion of the Business Combination, $705.1 million net of transaction costs paid by Microvast, Inc. We have used $435.8 million of the net proceeds from the Business Combination to expand our manufacturing facilities and for the purchase of property and equipment associated with our existing manufacturing and R&D facilities. In addition, $129.9 million of the net proceeds were used for working capital as of March 31, 2024.

Current wording

On July 23, 2021, we received $708.4 million from the completion of the Business Combination, $705.1 million net of transaction costs paid by Microvast, Inc. We have used $438.8 million of the net proceeds from the Business Combination to expand our manufacturing facilities and for the purchase of property and equipment associated with our existing manufacturing and R&D facilities. In addition, $143.9 million of the net proceeds were used for working capital as of June 30, 2024.

Previous wording

Our capital expenditures amounted to $150.9 million and $186.8 million for the years ended December 31, 2022 and 2023, respectively. Our capital expenditures in 2022 and 2023 related primarily to the construction of manufacturing facilities under our Clarksville Phase 1A expansion and Huzhou, China.

Current wording

Our capital expenditures amounted to $150.9 million and $186.8 million for the years ended December 31, 2022 and 2023, respectively. Our capital expenditures in 2022 and 2023 related primarily to the construction of manufacturing facilities in Huzhou, China and Clarksville, Tennessee. The Huzhou, China expansion was completed in the third quarter of 2023.

Previous wording

Because of delays in securing additional financing, including our fund-raising process being negatively impacted by the loss of the DOE grant, in the fourth quarter of 2023 we experienced slow progress in continuing construction of our Clarksville Phase 1A expansion, slowing down certain project work streams due to the need for additional financing. This has resulted in further delays and costs with negative effects on our liquidity and ability to meet accounts payable, especially for our U.S. operations. The proceeds from the Business Combination alone will not be sufficient to complete the Clarksville Phase 1A capacity expansion and meet our general working capital needs. Further, due to the working capital needs of MPS China and adverse tax consequences as well as foreign restrictions, we are unable to repatriate cash from China to pay our accounts payable in the U.S. and fund the continued expansion of our U.S. operations. We are seeking alternate sources of capital. Until financing is in place, this will limit our growth opportunities especially in the U.S. market where our customers desire products that meet their domestic content requirements. Also, we will be forgoing potential IRA credits until such time as the Clarksville Phase 1A expansion is in operation.

Current wording

Because of delays in securing additional financing, including our fund-raising process being negatively impacted by the loss of the DOE grant, in the fourth quarter of 2023 we experienced slow progress in continuing construction of our Clarksville, Tennessee expansion, slowing down certain project work streams due to the need for additional financing. This resulted in further delays and increased costs with negative effects on our liquidity and ability to meet accounts payable, especially for our U.S. operations. The Tennessee expansion was originally scheduled to be completed in the fourth quarter of 2023 and was intended for production of 53.5Ah cells for our ESS solutions. However, we now believe LFP cells are a better battery fit for our ESS solutions and intend to produce LFP cells from the Tennessee facility instead of 53.5Ah cells. In order to complete the Tennessee expansion, we need to secure financing to meet the remaining capital expenditure needs, and the timing of when this project will be in operation remains uncertain. We are in the process of evaluating the amount of capital expenditures needed to complete the Tennessee expansion in light of the intended production shift from NMC cells to LFP cells.

Previous wording

We regularly enter into non-cancelable contractual obligations primarily related to purchases of inventory. As of March 31, 2024, such purchase commitments, which do not qualify for recognition on our Unaudited Condensed Consolidated Balance Sheets, amount to $57.8 million , most of which is short-term.

Current wording

We regularly enter into non-cancelable contractual obligations primarily related to purchases of inventory. As of June 30, 2024, such purchase commitments, which do not qualify for recognition on our Unaudited Condensed Consolidated Balance Sheets, amount to $46.0 million , most of which is short-term.

Previous wording

There have not been any other material changes during the three months ended March 31, 2024 to our contractual obligations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

There have not been any other material changes during the three and six months ended June 30, 2024 to our contractual obligations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

During the three months ended March 31, 2024, our operating activities generated $2.0 million in cash. This increase in cash consisted of (1) a net loss of $24.8 million and non-cash charges of $24.0 million, of which $7.5 million is depreciation of property, plant and equipment and $11.9 million is non-cash share-based compensation expense; and (2) a $2.9 million increase in cash flows from operating assets and liabilities including $22.6 million cash inflow due to the net decrease of accounts receivable and notes receivable, $16.3 million decrease in inventories, $26.8 million cash outflow from accounts payable and notes payable, $6.3 million cash outflow from accrued and other liabilities and prepaid expense and other current asset, and $2.9 million cash outflow from other operating assets and liabilities.

Current wording

During the six months ended June 30, 2024, our operating activities generated $2.1 million in cash. This increase in cash consisted of (1) a net loss of $103.3 million and non-cash charges of $116.5 million, of which $14.9 million is depreciation of property, plant and equipment, $24.0 million is non-cash share-based compensation expense and $64.9 million is impairment loss from long-lived asset; and (2) a $11.1 million decrease in cash flows from operating assets and liabilities including $39.9 million cash inflow due to the net decrease of accounts receivable and notes receivable, $1.5 million increase in inventories, $44.1 million cash outflow from accounts payable and notes payable, $3.9 million cash outflow from accrued and other liabilities and prepaid expense and other current asset, and $1.5 million cash outflow from other operating assets and liabilities.

Previous wording

During the three months ended March 31, 2024, cash used in investing activities totaled $4.5 million. This cash outflow primarily consisted of capital expenditures related to the expansion of our manufacturing facilities and to the purchase of property and equipment associated with our existing manufacturing and R&D facilities.

Current wording

During the six months ended June 30, 2024, cash used in investing activities totaled $7.4 million. This cash outflow primarily consisted of capital expenditures related to the expansion of our manufacturing facilities and to the purchase of property and equipment associated with our existing manufacturing and R&D facilities.

Previous wording

During the three months ended March 31, 2024, cash generated from financing activities totaled $6.3 million. This cash inflow was a result of $18.8 million proceeds from bank borrowings offset by $12.5 million repayment on bank borrowings.

Current wording

During the six months ended June 30, 2024, cash generated from financing activities totaled $28.5 million. This cash inflow was a result of $40.5 million proceeds from bank borrowings and $12.0 million proceeds from Convertible loan offset by $23.5 million repayment on bank borrowings and $0.5 million of debt cost for Convertible loan.

Previous wording

There have been no substantial changes to these estimates, or the policies related to them during the three months ended March 31, 2024. For a full discussion of these estimates and policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

There have been no substantial changes to these estimates, or the policies related to them during the six months ended June 30, 2024, except for the impairment of long-lived assets illustrated in below paragraphs. For other discussion of these estimates and policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.