Filing Scope and Business Context
This Form 10-Q is for Tuscan Holdings Corp., not Microvast Holdings, Inc. It covers the unaudited quarter and six months ended June 30, 2019, and was filed August 12, 2019. Tuscan was a newly formed blank-check company focused on identifying a business combination, with an intended focus on the cannabis industry. Its activities consisted of formation, its March 2019 initial public offering, and target-company searches. The filing states that the company would not generate operating revenue until after a business combination.
Financial Position and Performance
| Metric | Three months ended June 30, 2019 | Six months ended June 30, 2019 |
|---|---|---|
| Operating revenue | None | None |
| Operating costs | $195,350 | $265,392 |
| Interest income | $1,670,719 | $2,080,258 |
| Unrealized gain on Trust Account securities | $133,070 | $152,212 |
| Net income | $1,264,809 | $1,548,134 |
| Income attributable to redeemable shares | $1,390,417 | $1,689,537 |
| Adjusted net loss attributable to other common shares | $125,608 | $141,403 |
| Basic and diluted loss per common share | $0.02 | $0.02 |
The reported net income was generated by interest and investment gains in the Trust Account rather than operating activities. Because income attributable to redeemable shares exceeded total net income, the company reported a basic and diluted loss per common share of $0.02.
- Cash at June 30, 2019: $1,027,377.
- Marketable securities in the Trust Account: $277,762,470, substantially invested in U.S. Treasury bills.
- Total assets: $278,960,155.
- Total liabilities: $575,711, including $386,979 of income taxes payable and $31,965 of deferred tax liability.
- Common stock subject to possible redemption: $273,384,442, representing 27,212,685 shares.
- Stockholders’ equity: $5,000,002.
- Net cash used in operating activities for the six months: $279,358.
- Net cash used in investing activities: $275,530,000, primarily the funding of the Trust Account.
- Net cash provided by financing activities: $276,819,235.
- The filing reports no long-term debt, capital leases, operating leases, or other long-term liabilities, apart from a $10,000 monthly administrative-support commitment.
Material Changes Versus the Prior Comparable Period
A meaningful prior comparable operating period is not provided because the company was incorporated on November 5, 2018 and had no operating business. Compared with December 31, 2018, cash increased from $17,500 to $1,027,377, Trust Account securities increased from zero to $277,762,470, and stockholders’ equity increased from $25,408 to $5,000,002, primarily as a result of the IPO, private placements, and related transactions.
In March 2019, Tuscan sold 27.6 million public units for gross proceeds of $276.0 million and 687,000 private units for gross proceeds of $6.87 million. The company placed $276.0 million in the Trust Account and incurred $6.059 million of IPO-related costs.
Guidance, Outlook, Risks, and Unusual Items
- Management provided no revenue, earnings, or operating guidance. The company expected to remain without operating revenue until a business combination.
- The company had until December 7, 2020 to complete a business combination. If unsuccessful, it was required to cease operations, redeem the public shares using the Trust Account, and liquidate.
- Public shareholders could redeem shares for their pro rata share of the Trust Account, initially approximately $10 per share plus eligible interest.
- There was no assurance that a business combination would be completed. The company could require additional financing or incur debt if transaction costs or redemption levels exceeded available funds.
- Warrants to purchase up to 28,287,000 shares were excluded from diluted earnings per share because exercise was contingent on future events. If no business combination occurred, the warrants could expire worthless.
- The company owed EarlyBirdCapital a potential $9.66 million cash fee upon completion of a business combination, excluding possible finders’ fees.
- The sponsor agreed to protect the Trust Account against certain third-party claims that would reduce its balance below $10 per public share, subject to stated exceptions and limitations.
- Interest earned in the Trust Account could be withdrawn for taxes; $470,000 had been withdrawn through June 30, 2019.
- Management stated that disclosure controls were effective and that there were no material changes in internal control over financial reporting.
- The filing disclosed no subsequent events requiring adjustment or disclosure through the issuance date.
Investor Verification Checklist
- Verify the issuer identity: the supplied filing is for Tuscan Holdings Corp., whereas the request identifies Microvast Holdings, Inc.
- Confirm the status and terms of any subsequent business combination, liquidation, or change in corporate name.
- Reconcile the $277.8 million Trust Account balance, the $273.4 million redemption liability, and the number of redeemable shares.
- Assess the effect of potential redemptions, sponsor support, working-capital loans, and additional financing on post-combination capitalization.
- Review the $9.66 million contingent EarlyBirdCapital fee and other transaction costs before evaluating available combination capital.
- Confirm warrant exercise, redemption, and potential dilution terms, including the 28.287 million warrants outstanding.