Business Context and Reporting Period
This filing is a Form 10-Q for the quarter ended June 30, 2020, filed by Tuscan Holdings Corp., not Microvast Holdings, Inc. Tuscan was a blank-check company formed to identify and complete a business combination, with a stated focus on the cannabis industry. It had no operating revenue and remained a shell company; all activity related to formation, its 2019 IPO, and searching for a target.
The financial statements are unaudited and prepared under U.S. GAAP. The filing was signed August 7, 2020.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 |
|---|---|---|---|---|
| Operating revenue | None | None | None | None |
| Operating costs | $251,714 | $195,350 | $480,463 | $265,392 |
| Interest income | $983,408 | $1,670,719 | $2,010,565 | $2,080,258 |
| Net income (loss) | $(163,197) | $1,264,809 | $1,602,858 | $1,548,134 |
| Basic and diluted earnings (loss) per share | $(0.02) | $(0.02) | $(0.04) | $(0.02) |
| Net cash used in operating activities | Not separately provided | Not separately provided | $(545,136) | $(279,358) |
- June 30, 2020 cash outside the Trust Account was $144,474.
- Marketable securities in the Trust Account totaled $282.3 million, including approximately $6.3 million of accumulated interest and unrealized gains. Approximately $1.284 million of Trust Account interest had been withdrawn through June 30, 2020 to pay taxes.
- Total assets were $282.6 million, total liabilities were $761,591, and stockholders’ equity was $5.0 million.
- Common stock subject to possible redemption was reported as temporary equity of $276.8 million, representing 27,099,153 shares.
- The company had a $200,000 unsecured, non-interest-bearing convertible promissory note payable to its Sponsor. It reported no long-term debt, capital leases, operating leases, or other long-term liabilities.
- Margins are not meaningful because the company had no operating revenue and its results consisted primarily of Trust Account interest, investment gains or losses, taxes, and corporate expenses.
Material Changes Versus the Prior Comparable Period
- Second-quarter results changed from net income of $1.265 million in 2019 to a net loss of $163,197 in 2020.
- Second-quarter operating costs increased 29% to $251,714 from $195,350.
- Interest income declined to $983,408 from $1.671 million, and the company recorded a $938,273 unrealized loss on Trust Account securities versus a $133,070 unrealized gain in the prior-year quarter.
- For the first six months, net income increased modestly to $1.603 million from $1.548 million, despite operating costs increasing to $480,463 from $265,392, because of a larger unrealized gain on Trust Account securities.
- Operating cash use increased to $545,136 from $279,358 for the six-month period.
- The Sponsor committed to provide up to $500,000 of loans, and $200,000 was outstanding at June 30, 2020. The note may be converted into post-combination units at $10 per unit at the lender’s option.
Outlook, Risks, Contingencies, and Unusual Items
- The company expected to generate no operating revenue until after completing a business combination.
- It had until December 7, 2020 to complete a business combination. If unsuccessful, it was required to cease operations, redeem public shares from the Trust Account, and liquidate; public warrants could expire worthless.
- Public stockholders generally had redemption rights for a pro rata share of the Trust Account upon a business combination or liquidation. The Trust Account was intended primarily to fund a business combination.
- Management stated that available cash, supplemented by Sponsor loans, was expected to cover needs through the earlier of a business combination or December 7, 2020. The filing also warned that additional financing could be required if costs exceeded estimates or substantial redemptions occurred.
- EarlyBirdCapital was entitled to a $9.660 million cash fee upon consummation of a business combination, subject to potential allocation of up to 30% to other FINRA members.
- COVID-19 could negatively affect the company’s financial position, operations, or target search, but the specific impact was not determinable at the reporting date.
- The filing identified a risk that negative interest rates could reduce the Trust Account balance and result in a per-share redemption amount below $10.00.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Verify the issuer identity: the supplied filing is for Tuscan Holdings Corp. and does not identify Microvast Holdings, Inc.
- Verify whether a business combination was completed by the December 7, 2020 deadline and the resulting treatment of public shares, warrants, and Trust Account funds.
- Verify the amount and terms of Sponsor loans, including the $200,000 outstanding convertible note and any subsequent borrowings.
- Verify Trust Account restrictions, redemption activity, tax withdrawals, and the actual per-share redemption value.
- Verify the $9.660 million contingent business-combination advisory fee and any other transaction-related obligations.
- Review subsequent filings for the effects of COVID-19, target-search developments, liquidation, or any completed transaction.