Item 4.02 Non-Reliance on Previously Issued
Financial Statements or Related Audit Report or Completed Interim Review
In connection with the preparation of the
financial statements for the period ended September 30, 2021 included in the Registration Statement on Form S-1 (File No. 333-258978)
(as amended, the “Registration Statement”), Microvast Holdings, Inc. (the “Company”) reevaluated the application
of Accounting Standards Codification (“ASC”) 480-10-S99, Distinguishing Liabilities from Equity, to the
accounting classification of the Class A common stock subject to possible redemption (the “Public Shares”) issued as
part of the units sold in the initial public offering by Tuscan Holdings Corp. (“Tuscan”). Tuscan had previously classified
a portion of the Public Shares as permanent equity. Upon further evaluation, the Company determined that the Public Shares include certain
redemption features not solely within Tuscan’s control that, under ASC 480-10-S99, require such shares to be classified
as temporary equity in their entirety.
On December 6, 2021, the Company’s
management and audit committee of the board of directors (the “Audit Committee”) concluded that the previously issued (i)
audited balance sheet as of March 7, 2019 included in Tuscan’s Annual Report on Form 10-K/A filed with the U.S. Securities
and Exchange Commission (the “SEC”) on June 1, 2021; (ii) audited financial statements included in Tuscan’s Annual
Reports on Form 10-K/A and 10-K, respectively, as of and for the periods ended December 31, 2019 and 2020; (iii) unaudited interim
financial statements included in Tuscan’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2019,
June 30, 2019, September 30, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and March 31, 2021; and (iv) unaudited interim financial
statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 (collectively,
the “Affected Periods”) should have reported all Public Shares as temporary equity. Therefore, the financial statements for
the Affected Periods, as well as the other communications with respect to the financial statements covering the Affected Periods, including
management’s reports on the effectiveness of internal control over financial reporting, should no longer be relied upon.
Microvast Inc. (“Legacy
Microvast”) completed its business combination with Tuscan on July 23, 2021. The transaction is accounted for as a reverse
recapitalization under U.S. GAAP, under which Tuscan is treated as the “acquired” company for financial reporting
purposes. Accordingly, the financial statements of the Company represent a continuation of the financial statements of Legacy
Microvast, with the business combination being treated as the equivalent of Legacy Microvast issuing stock for the net assets of
Tuscan, accompanied by a recapitalization. The net assets of Tuscan are stated at historical costs, with no goodwill or other
intangible assets recorded, and are consolidated with Legacy Microvast’s financial statements on the closing date. Operations
prior to the business combination are presented as those of Legacy Microvast. The Company reflected the effect of the reverse
recapitalization in its unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2021. In addition, the Company is retroactively restating Legacy Microvast’s historical financial statements for the three years ended
December 31, 2020 to reflect the effect of the reverse recapitalization.
As the Public Shares classification error
relates solely to Tuscan’s financial statements in periods preceding the business combination, the Company does not intend to amend or
restate such financial information for the Affected Periods. The financial information presented therein should not be relied upon.
The Company’s management has concluded
that, in light of the Public Shares classification error described above, a material weakness existed in Tuscan’s internal control
over financial reporting and that Tuscan’s disclosure controls and procedures were not effective.
The Company’s management and the Audit
Committee have discussed the matters described above with Marcum LLP, Tuscan’s independent registered public accounting firm prior
to the business combination.