SEC Form 10-Q Summary
Filing identity: The supplied filing is for Tuscan Holdings Corp., not Microvast Holdings, Inc. It covers the quarterly period ended March 31, 2019 and was filed May 15, 2019. The company was a newly formed blank-check company focused on identifying a business combination, with an intended focus on the cannabis industry.
Business Context and Reporting Period
Tuscan was incorporated on November 5, 2018. Through March 31, 2019, its activities consisted of formation, completing its initial public offering, and searching for a target business. It had no operating revenue and expected to generate operating revenue only after completing a business combination.
The financial statements are unaudited, prepared under U.S. GAAP for interim reporting, and should be read with the company’s 2018 Form 10-K.
Financial Results and Position
| Metric | Three months ended March 31, 2019 | March 31, 2019 balance |
|---|---|---|
| Operating costs | $70,042 | |
| Interest income | $409,539 | |
| Unrealized gain on Trust Account securities | $19,142 | |
| Income before taxes | $358,639 | |
| Income tax provision | $75,314 | |
| Reported net income | $283,325 | |
| Adjusted income attributable to non-redeemable common stock | $(15,431) | |
| Basic and diluted earnings per share | $(0.00) | |
| Cash | $809,141 | |
| Marketable securities in Trust Account | $276,428,681 | |
| Total assets | $277,260,901 | |
| Total liabilities | $141,266 | |
| Common stock subject to possible redemption | $272,119,628 | |
| Stockholders’ equity | $5,000,007 |
Net income was driven by interest and unrealized gains on funds held in the Trust Account rather than operating activity. Operating margin and revenue-based profitability are not meaningful because the company had no operating revenue.
Net cash used in operating activities was $27,594. Investing cash outflows were $276.0 million, principally the deposit into the Trust Account. Financing activities provided $276.8 million, primarily from the public offering, private placements, and related-party financing activity.
The company reported no long-term debt, capital leases, operating leases, or other long-term liabilities. A $90,342 related-party promissory note and $86,748 of related-party advances were repaid upon completion of the offering. The company incurred a $10,000 monthly administrative support fee payable to an affiliate of its Chief Executive Officer.
Material Changes Versus the Prior Comparable Period
- The filing does not provide a prior-year quarterly income statement comparison; the company was incorporated in November 2018 and was in its formation and offering stage.
- Cash increased from $17,500 at December 31, 2018 to $809,141 at March 31, 2019.
- The company completed its initial public offering on March 7, 2019 and the underwriters’ full over-allotment exercise on March 12, 2019.
- It 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.
- $276.0 million was placed in the Trust Account, and 27,181,690 shares were classified as subject to possible redemption.
- Stockholders’ equity increased from $25,408 at December 31, 2018 to $5.0 million at March 31, 2019, largely reflecting the offering and related equity classifications.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The company had no operating business and provided no revenue or earnings guidance.
- Management intended to use substantially all Trust Account funds to complete an initial business combination and related transaction expenses.
- The business combination must generally involve a target or targets with a fair market value of at least 80% of the Trust Account assets, excluding certain taxes, and must result in the company obtaining control.
- The company 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. Warrants could expire worthless.
- Public stockholders had redemption rights in connection with a business combination. The company was required to maintain at least $5,000,001 of net tangible assets upon completion.
- The Sponsor agreed to cover certain third-party claims that could reduce Trust Account funds below $10 per public share, subject to significant exceptions and limitations.
- Management stated that it did not expect to need additional funds for pre-combination operations, but acknowledged possible funding needs if transaction costs exceeded estimates or if substantial redemptions occurred.
- The company identified no material market or interest-rate risk due to the short-term U.S. Treasury investments in the Trust Account.
- Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Confirm the issuer identity: the provided filing is for Tuscan Holdings Corp., while the request identifies Microvast Holdings, Inc.
- Verify the status and terms of any subsequent business combination, liquidation, or change in corporate name.
- Review the Trust Account balance, redemption activity, and the disposition of public shares and warrants.
- Assess dilution from founder shares, private units, representative shares, and approximately 28.287 million warrants.
- Review the $9.66 million potential business combination marketing fee payable to EarlyBirdCapital upon consummation of a transaction.
- Evaluate Sponsor indemnification limitations and the possibility that third-party claims could reduce funds available to public stockholders.
- Distinguish reported net income from operating performance, since substantially all income arose from Trust Account interest and unrealized gains.