CONVERTIBLE LOAN MEASURED AT FAIR VALUE |
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Jun. 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE LOAN MEASURED AT FAIR VALUE | CONVERTIBLE LOAN MEASURED AT FAIR VALUE On May 28, 2024, Microvast Holdings, Inc. entered into a $25,000 convertible loan agreement (the “Loan Agreement”) with Mr. Yang Wu, the Company’s Chief Executive Officer and Chairman. The loan includes an Initial Term Loan of $12,000 and a Delayed Draw Term Loan of $13,000 at an initial interest rate equal to the Secured Overnight Financing Rate (“SOFR”), plus an initial Applicable Margin of 9.75% per annum, 3.75% of which shall be paid in kind rather than in cash (collectively, the “Convertible Loan”). The maturity date is May 28, 2026, which may be accelerated upon the occurrence and continuance of an event of default in accordance with the terms of the Loan Agreement. The Loan Agreement also provides Mr. Wu with the right to convert the outstanding principal balance of the Loan, into shares of common stock at an initial conversion rate equal to two shares of Common Stock per $1.00 of principal amount to be converted. The Initial Term Loans of $12,000 was received in May 2024 and the Delayed Draw Term loan of $13,000 was received in July 2024. On March 17, 2025, the Company entered into the First Amendment to Loan and Security Agreement (the “First Amendment”) to its Loan and Security Agreement with Mr. Yang Wu. The First Amendment amends the Loan Agreement to extend the Maturity Date from November 28, 2025 to May 28, 2026. All other terms and conditions of the Loan Agreement remain the same. The modification of term is treated as a continuation of the original debt instrument. The loan is secured by a first priority security interest in substantially all of its assets by Microvast Holdings, Inc. and all other entities within the Group as guarantors. The Group has elected the fair value option to account for the Convertible Loan. Direct costs and fees related to the Convertible Loan were expensed as incurred. The fair value was determined by using a discounted cash flow model for the bond component and a Black-Scholes-Merton model for the conversion option, which is considered a Level 3 fair value measurement. Subsequent changes in the fair value are recorded as gains (losses) in the unaudited condensed consolidated statement of operation. During the three months ended June 30, 2025 and 2024, losses of $121,151 and $1,590 on fair value change of Convertible Loan were recorded respectively. During the six months ended June 30, 2025 and 2024, losses of $78,217 and $1,590 on fair value change of Convertible Loan were recorded, respectively. The fair value of the Convertible Loan liability was $181,475 as of June 30, 2025. The significant input of the discounted cash flow model for the bond component is the discount rate. Below are the key inputs used in the Black-Scholes-Merton model for the conversion option:
The market price of public stock is the quoted market price of the Company’s Common Stock as of the valuation date. The exercise price is extracted from the warrant agreement. The expected term is assumed to be until the end of expiration based on the loan agreement. The expected volatility is estimated using a blend of the average volatility of peer companies and the Company's historical volatility. The risk-free interest rate was estimated based on the market yield of U.S. Government Bond with maturity close to the expected term of the warrants. The dividend yield was estimated by the Company based on its expected dividend policy over the expected term of the loan. In connection with the Convertible Loan on May 28, 2024, the Company issued to Mr. Wu a warrant exercisable for 5,500,000 shares of Common Stock at an initial exercise price of $2.00 per share. The warrant expires on May 28, 2029. No warrants were exercised during the period ended June 30, 2025. As of June 30, 2025, 5,500,000 warrants were outstanding. The warrants were classified as equity and recorded at fair value upon issuance, No subsequent changes in fair value were recognized after the issuance date. Upon issuance, the Company recorded $779 in additional paid in capital at fair value
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