SEC Form 10-Q Summary
Filing entity: Tuscan Holdings Corp., not Microvast Holdings, Inc. The source filing covers the quarter ended September 30, 2019 and was filed November 12, 2019. Tuscan was a blank-check company formed to pursue a business combination, with a stated focus on the cannabis industry. It had no operating revenue and had not completed a business combination during the reporting period.
Business Context and Reporting Period
- Formed on November 5, 2018; activities through September 30, 2019 consisted primarily of formation, the March 2019 initial public offering, and searching for a target business.
- The company expected to generate no operating revenue until after completing a business combination.
- The filing identifies the company as an emerging growth company, smaller reporting company, and shell company.
- The company had until December 7, 2020 to complete a business combination or liquidate.
Financial Results and Position
| Metric | Three months ended September 30, 2019 | Nine months ended September 30, 2019 |
|---|---|---|
| Operating costs | $262,271 | $527,663 |
| Interest income | $1,577,268 | $3,657,526 |
| Unrealized loss on Trust Account securities | $(187,306) | $(35,094) |
| Income before taxes | $1,127,691 | $3,094,769 |
| Income tax provision | $231,097 | $650,041 |
| Net income | $896,594 | $2,444,728 |
| Adjusted loss attributable to non-redeemable common stock | $(194,529) | $(332,505) |
| Basic and diluted loss per share | $(0.02) | $(0.04) |
The reported earnings were generated by interest on Trust Account investments rather than business operations. The filing’s per-share measure reflects the two-class method and excludes income attributable to shares subject to possible redemption.
| Balance sheet item | September 30, 2019 | December 31, 2018 |
|---|---|---|
| Total assets | $279.6 million | $101,200 |
| Cash outside the Trust Account | $440,786 | $17,500 |
| Marketable securities in Trust Account | $278.9 million | None |
| Total liabilities | $305,931 | $75,792 |
| Common stock subject to possible redemption | $274.3 million | None |
| Stockholders’ equity | $5.0 million | $25,408 |
Cash Flow, Liquidity, Debt and Margins
- Nine-month operating cash flow was negative $1.12 million.
- Cash used in investing activities was $275.28 million, primarily reflecting the $276.0 million deposit into the Trust Account, partially offset by $720,000 withdrawn to pay income taxes.
- Financing activities provided $276.82 million, primarily from the public offering and private placements.
- Ending cash outside the Trust Account was $440,786; Trust Account securities totaled $278.9 million.
- The company reported no long-term debt, capital lease obligations, operating lease obligations, or other long-term liabilities. Its related-party promissory note was repaid in March 2019.
- There is no meaningful operating margin because the company had no operating revenue. Net income was principally investment income.
- The company paid an affiliate of the chief executive officer $10,000 per month for office, utilities, and administrative support; $70,000 was accrued at September 30, 2019.
Material Changes Versus the Prior Comparable Period
- The filing provides no prior-year third-quarter or nine-month operating results for a meaningful year-over-year comparison.
- Compared with December 31, 2018, total assets increased from $101,200 to $279.6 million following the March 2019 public offering and private placements.
- Trust Account securities increased to $278.9 million, while common stock subject to possible redemption increased to $274.3 million.
- Cash outside the Trust Account increased from $17,500 to $440,786.
- Stockholders’ equity increased from $25,408 to $5.0 million, primarily reflecting offering activity and retained earnings.
Guidance, Outlook, Risks and Unusual Items
- Management intended to use substantially all Trust Account funds to acquire a target business, with remaining funds potentially used for working capital.
- The initial business combination was required to involve a target or targets with fair market value of at least 80% of the Trust Account assets, excluding certain taxes payable.
- Public stockholders could redeem their shares for a pro rata portion of the Trust Account upon completion of a business combination.
- If no business combination occurred by December 7, 2020, the company was required to cease operations, redeem public shares, and liquidate. Warrants could expire worthless.
- The company stated that it might need additional financing if transaction or operating costs exceeded estimates or if substantial public-share redemptions occurred.
- The Sponsor agreed to certain limited protections for the Trust Account if third-party claims reduced the amount below $10 per public share, subject to stated exceptions and limitations.
- EarlyBirdCapital was entitled to a potential $9.66 million cash fee upon completion of a business combination, excluding certain possible finders’ fees.
- Management concluded that disclosure controls and procedures were effective and reported no material change in internal control over financial reporting during the quarter.
- The filing disclosed no material subsequent events requiring adjustment or disclosure through the financial statement issuance date.
Investor Verification Points
- Verify the filing entity: the supplied filing is for Tuscan Holdings Corp., not Microvast Holdings, Inc.
- Confirm whether a business combination was completed, amended, or terminated after September 30, 2019 and before the applicable deadline.
- Review the Trust Account balance, redemption activity, and any changes to the liquidation deadline.
- Assess the distinction between reported net income from Trust Account interest and the adjusted loss attributable to non-redeemable common stock.
- Review potential dilution from approximately 28.3 million public and private warrants, founder shares, representative shares, and any working-capital financing.
- Confirm related-party fees, potential Working Capital Loans, the EarlyBirdCapital transaction fee, and Sponsor indemnification obligations.