Microvast Holdings Inc.

03/16/2026 | Press release | Distributed by Public on 03/16/2026 15:22

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read together with the historical consolidated financial statements and related notes that are included elsewhere in this Annual Report. Discussion of the earliest of the three years covered by the Consolidated Financial Statements presented in this report has been omitted as that disclosure is included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within that report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
The Business
Founded in 2006 and headquartered in Stafford, Texas, Microvast Holdings, Inc. (NASDAQ: MVST) is a global leader in advanced specialized battery technologies. Since our public listing in 2021, we have focused on delivering high-performance lithium-ion battery solutions for the next generation of commercial and industrial electrification. We specialize in the design, development, and manufacturing of battery components and systems primarily for electric commercial vehicles and energy storage systems ("ESS"). Our guiding principle is to innovate lithium-ion battery designs from the ground up without relying on legacy technologies. We believe that this approach allows us to create purpose-built solutions for new markets, rather than repurposing existing ones.
Our mission is to become a leader in U.S. domestic battery production, reducing reliance on overseas suppliers, and strengthening national energy independence. We believe that this mission, along with our engineering expertise, vertically integrated business model, and our focus on continuous investment in our research and development and operations, differentiates us from competitors and positions us for long-term revenue and income growth.
We employ a vertically integrated approach, which we believe provides a competitive advantage in optimizing performance and cost. Our proprietary technology stack spans the entire battery system, including core cell materials (cathode, anode, electrolyte, and separator), cells, modules, packs, thermal management systems, and intelligent battery management systems. This end-to-end expertise has driven critical advancements in ultra-fast charging, high energy density, long cycle life, and safety, all critical factors for commercial transportation and ESS applications. With significant in-house capabilities in design, testing, and R&D, we continue to build an industry-leading body of knowledge in battery chemistry and performance.
Our Strategy
Our objective is to drive long-term stakeholder value by scaling our proprietary battery technologies across high-growth sectors. Since 2008, our research and development efforts have been dedicated to pioneering cutting-edge battery technologies that offer ultra-fast charging, extended cycle life, high energy density, and enhanced safety. Our commitment to innovation has well positioned us developing the next-generation lithium-ion batteries. We are focused on designing battery technologies for electric commercial vehicles and ESS. Our solutions empower industries to transition to cleaner, more efficient power sources, unlocking new levels of performance, longevity, and cost efficiency.Historically, demand for electric commercial vehicle batteries was concentrated in the Asia & Pacific regions. We are now working towards a balanced global strategy throughout EMEA and North America. As customer demand for our products and services has grown in Europe and the U.S., we have expanded to meet these growth opportunities. We continue to invest in our operations in Asia-Pacific to capitalize on regional growth. This provides a balanced global strategy while maintaining strong partnerships with OEMs in high-demand markets. We have primarily supplied our battery solutions to OEMs for use in electric commercial and specialty vehicles. We are continuously advancing our battery technologies to improve performance, efficiency, and reliability in commercial applications.
We believe the energy storage industry is positioned for continued expansion. In 2025, third-party industry data shows that global power capacity grew by approximately 90 gigawatts, an estimated 23% increase from the previous year. Industry projections indicate expected further expansion, with an average CAGR in deployed gigawatts of 23% between 2025 and 2035. The U.S. and China are expected to lead this growth, with U.S. power capacity projected to increase from approximately 45 gigawatts in 2025 to approximately 125 gigawatts by 2030. By refining our technology, we aim to advance our ESS solutions to meet the evolving demand of power sector and complement existing resources in meeting growing global demand for reliable and flexible power. We are leveraging many of the component-level technologies from our commercial vehicle segment to develop our energy storage products.
Segment Reporting and Financial Performance
We operate as a single reportable segment. Our business includes the design, development, manufacturing, sales, and leasing of battery components and systems primarily for electric commercial vehicles and ESS. The Company evaluates segment performance based on geographic revenue and operating income. In accordance with ASU 2023-07, we have expanded our segment disclosures to provide enhanced insights into key financial metrics in Note 23 - Segment Information.
Segment Revenue and Performance Overview
Geographical Revenue: Revenue contributions from North America, Europe, and Asia-Pacific reflect our diversified business strategy. Driven by the market expansion and improved sales execution, the Company experienced a 12.6% increase in revenue for the most recent fiscal year, with revenue in North America increasing by 173.2% and revenue in Europe increasing by 12.9%.
Operating Performance: Key operational improvements in cost management and product optimization led to enhanced segment profitability.
Smaller Reporting Company
Based on the market value of our common stock held by our non-affiliates as of the last business day of the fiscal quarter ended June 30, 2025, we no longer qualify as a "smaller reporting company" as defined in the Exchange Act, effective December 31, 2025. Therefore, beginning with our Quarterly Report on Form 10-Q for the fiscal quarter ending March 31, 2026, we will no longer be eligible to rely on the reduced disclosure and reporting requirements applicable to smaller reporting companies, while still applying the scaled disclosure requirements for smaller reporting companies in this Annual Report.
Key Factors Affecting Our Performance
Our future success depends on several critical factors, including those outlined below. While these represent opportunities for growth, they also pose challenges and risks that we must effectively manage to sustain our business momentum and improve financial performance.
Technology and Product Innovation
Our financial performance is driven by development and sales of new products with innovative technology. Our ability to develop innovative technology has been and will continue to be dependent on our dedicated research team. We plan to continue expanding our R&D presence in the U.S. We also plan to continue leveraging our knowledge base in our overseas locations, including China and to continue expanding our R&D efforts on a global basis. We expect our results of operations will continue to be impacted by our ability to develop new products with improved performance and reduced ownership cost, as well as the cost of our R&D efforts.
Market Demand
Our revenue and profitability depend substantially on the demand for battery systems and battery components, which is driven by the growth of the commercial and passenger electric vehicle and energy storage markets. Many factors contribute to the development of the electric vehicle and battery energy storage sector, including product innovation, general economic and political conditions, environmental concerns, energy demand, government support and economic incentives (e.g., the IRA in the U.S. and the E.U. Green Deal, E.U. Fit for 55). While governmental economic incentives
and mandates can drive market demand for the markets in which we operate and, as a result, battery systems and components, governmental economic incentives can always be gradually reduced or eliminated. These incentives are subject to evolving geopolitical dynamics, including Foreign Entity of Concern restrictions and domestic content requirements. We continuously monitor these shifts, as any reduction, elimination, or disqualification from such incentives could adversely affect demand for our products and our overall financial performance.
Manufacturing Capacity
Our ability to scale depends on the timely expansion of our manufacturing footprint. As of December 31, 2025, our order backlog was primarily composed of long-term transit and logistics partners in Europe. To address this demand, we have utilized our capital resources to strategically expand our global production capabilities.
In 2023, we successfully completed the 2 GWh cell, module, and pack production line (Phase 3.1) for our 53.5Ah cell technology at our Huzhou, China facility. This Phase 3.1 line has been operating safely and efficiently, providing a stable manufacturing base. In addition to the 53.5Ah cell, this line also supports the production of our 48Ah and 55Ah cells.
To support our expanding product portfolio, we are building a second 2 GWh production line, Phase 3.2, at our Huzhou, China facility. While this new Phase 3.2 line is primarily configured for the manufacturing of our next-generation 120Ah high-energy cells, it has been designed with flexible tooling and process architecture to accommodate multiple cell formats, including the 53.5Ah, 48Ah, and 55Ah variants. The clean rooms and utility equipment installation have been completed for Phase 3.2. Installation of the production equipment is expected to be completed in 2026, with commissioning and pilot production to follow. This investment enhances our agile manufacturing capability and reinforces our commitment to delivering high-performance solutions across diverse application scenarios.
Construction and equipment installation for our U.S. facility was suspended in the second quarter of 2024 due to funding constraints. We have since pivoted the site's strategic focus from NMC production to our 565Ah LFP battery. Resumption of full-scale construction is contingent upon securing additional financing or strategic partnerships. Once completed, Clarksville is intended to be a vertically integrated hub for LFP cell and ESS container assembly, satisfying domestic content preferences for the U.S. market.
Future capacity expansions will require significant capital expenditures and will require a corresponding expansion of our supporting infrastructure, further development of our sales and marketing team, an expansion of our customer base, and strengthened quality control. This capacity expansion will be carried out in a measured manner based on our ongoing assessment of medium- and long-term demand for our solutions.
Sales Geographic Mix
After initially being focused on the Asia & Pacific regions, we have expanded and continue to expand our presence and product promotion to Europe and the U.S. to capitalize on the rapidly growing electric vehicle and battery energy storage markets in those geographies. As we continue to expand our geographic focus to Europe and the U.S., we believe sales of our products in Europe and the U.S. will have the potential to generate higher gross margins because average sales prices for customers in the U.S. and Europe are typically significantly higher than the average sales prices in China. It has been our experience that buyers in Europe and the U.S. are more motivated by the technologies and quality of our products than are buyers in China, making them less sensitive to the price of our products than are similarly situated buyers in China where we are also faced with intense competition from local Chinese battery manufacturers. Therefore, the geographic sources of our revenue will have an impact on our revenue and gross margins.
Manufacturing Costs
Our profitability may also be affected by our ability to effectively manage our manufacturing costs. Our manufacturing costs are affected by fluctuations in the price of raw materials. If raw material prices increase, we will have to offset these higher costs either through price increases to our customers or through productivity improvements. Our ability to control our raw materials costs is also dependent on our ability to negotiate with our suppliers for a better price and our ability to source raw materials from reliable suppliers in a cost-efficient manner. In addition, we expect that an increase in our sales volume will enable us to lower our manufacturing costs through economies of scale.
Regulatory Landscape
The battery industry is subject to stringent and evolving environmental regulations, particularly concerning hazardous waste management, pollution control, and sustainability requirements. Over time, these regulations have become increasingly strict, impacting both product costs and gross margins. In the U.S., newly proposed RCRA regulations for lithium batteries under the EPA are expected to be finalized this year and become effective in 2027, which would create a new waste category specifically for lithium batteries and establish new requirements for transportation, handling, and storage. Compliance with these standards requires continuous investment in manufacturing processes, material sourcing, and waste disposal practices to ensure adherence to environmental mandates across multiple jurisdictions.
Additionally, government policies and economic incentives play a critical role in shaping demand for the EV and ESS markets. Incentives such as EV purchase subsidies, tax credits for battery manufacturers, and renewable energy project grants have historically supported market growth. Similarly, carbon emission penalties and fleet-wide regulatory requirements for automakers further drive the adoption of zero-emission transportation and clean energy solutions. These policies expand our total addressable market, creating opportunities for increased sales and broader adoption of our battery technologies. However, changes in these incentives-such as reductions or eliminations of subsidies-could negatively affect demand for our products.
As a global company with operations and sales in China, the Asia-Pacific region, Europe, and the U.S., we are also exposed to trade policies, tariffs, and regulatory shifts that could impact our ability to meet projected sales and maintain profit margins. Any significant changes in international trade agreements, supply chain restrictions, or geopolitical tensions may influence production costs, material sourcing, and cross-border sales strategies. Navigating these regulatory complexities is essential to sustaining our competitive position and long-term growth trajectory.
Components of Results of Operations
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 are not included in this Form 10-K, and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K filed on March 31, 2025.
Revenue
We derive revenue from the sales of our electric battery products and components. While historically concentrated in the Asia-Pacific region, our revenue mix has shifted significantly toward EMEA, which accounted for the largest portion of our revenue mix for both 2025 and 2024. This shift reflects our strategy to capture higher-margin opportunities in the European commercial vehicle sectors.
The following table provides a breakdown of our revenue by major geographic regions, based on the locations of our customers, for the periods indicated (in thousands, except percentages):
Year ended December 31,
2025 2024
Revenue % Revenue %
China $ 138,945 33 % $ 127,138 33 %
India 34,568 8 % 48,767 13 %
Other Asia & Pacific countries 2,754 1 % 1,791 - %
Asia & Pacific Region 176,267 42 % 177,696 46 %
Italy 92,941 22 % 150,809 40 %
France 78,192 18 % 12,764 3 %
Other European countries 40,811 9 % 24,145 7 %
Europe 211,944 49 % 187,718 50 %
U.S. 39,305 9 % 14,387 4 %
Total $ 427,516 100 % $ 379,801 100 %
We have historically received a portion of our revenue in a given reporting period from a limited number of key customers, which have varied from period to period. For the year ended December 31, 2025, the two largest customers accounted for 22% and 17% of our net revenues respectively. In 2024, one customer accounted for 39% of our net revenues.
Cost of Revenues and Gross Profit
Cost of revenues includes direct and indirect materials, manufacturing overhead (including depreciation, freight, and logistics), warranty reserves and expenses, and provision for obsolete inventories. These costs also include labor costs and personnel expenses, including stock-based compensation and other related expenses that are directly attributable to the manufacturing of products.
Gross profit is equal to revenue less cost of revenues. Gross profit margin is equal to gross profit divided by revenue.
Operating Expenses
Our operating expenses consist of general and administrative expenses ("G&A"), research and development expenses ("R&D"), selling and marketing expenses ("S&M"), and impairment loss of long-lived assets.
General and administrative expenses.G&A expenses primarily comprise personnel-related costs for our executive, legal, finance, human resources, and IT teams, along with professional service fees, depreciation, amortization, and insurance costs. As we scale operations, we anticipate additional expenditures for personnel hiring, infrastructure development, and compliance-related activities. These investments are necessary to support our anticipated growth and operational efficiency.
Research and development expenses. R&D expenses primarily include salaries and stock-based compensation for our engineers and scientists, as well as raw material costs for experimental development, utility expenses, and depreciation costs related to R&D activities. As we continue to invest in new product development, advanced battery technologies, and enhanced functionality, we expect R&D expenditures to increase in absolute dollar terms. These investments are critical to maintaining technological leadership and delivering next-generation battery solutions to the market.
Selling and marketing expenses.S&M expenses include personnel-related costs for our sales and marketing teams, including salaries, stock-based compensation, and commission-based incentives. These expenses also cover advertising, promotional activities, and customer engagement efforts to drive product awareness and sales growth. As we continue to expand, we plan to hire additional sales personnel, enhance marketing programs, and strengthen customer relationships. Consequently, S&M expenses are expected to increase in absolute dollar terms over the long term.
Impairment loss of long-lived assets. Impairment loss of long-lived assets primarily from the impairment of long-lived assets in the U.S. The impairment loss is measured by the amount by which the carrying amount of the assets exceeds the fair value of the long-lived assets.
Subsidy Income
Government subsidies represent government grants received from local government authorities. The amounts of and conditions attached to each subsidy were determined at the sole discretion of the relevant governmental authorities. Our subsidy income is non-recurring in nature.
Other Income and Expenses
Other income and expenses consist primarily of fair value changes of warrant liability and convertible loan, these figures are highly sensitive to fluctuations in our stock price. This section also includes interest expense associated with our debt financing arrangements, interest income earned on our cash balances and gain on debt restructuring.
Income Tax Expense
We are subject to income taxes in the U.S. and the foreign jurisdictions in which we do business, namely China, Germany and the U.K. These foreign jurisdictions have statutory tax rates different from those in the U.S. Accordingly, our
effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the absorption of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws. We regularly assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S. Internal Revenue Service and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary. Any such adjustments could have a significant impact on our results of operations.
Income tax in China is generally calculated at 25% of the estimated assessable profit of our subsidiaries in China, except that two of our subsidiaries in China are qualified as "High and New Tech Enterprises" and receive a preferential income tax rate of 15%. The federal corporate income tax rate of 21% is applied for our U.S. entities. Our income tax in the U.K. is calculated at an average tax rate of 19% of the estimated assessable profit of our subsidiary in the U.K. The German enterprise income tax, which is a combination of corporate income tax and trade tax, is calculated at 29.1% of the estimated assessable profit of our subsidiary in Germany.
Results of Operations
This section of this Form 10-K generally discusses 2025 and 2024items and year-to-year comparisons between 2025and 2024.
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
The following table sets forth our historical operating results for the periods indicated (in thousands, except percentages):
Year Ended December 31,
2025 2024 $ Change % Change
Revenues $ 427,516 $ 379,801 47,715 12.6 %
Cost of revenues (272,899) (260,249) (12,650) 4.9 %
Energy storage system impairment (32,507) - (32,507) 100.0 %
Gross profit 122,110 119,552 2,558 2.1 %
28.6 % 31.5 %
Operating expenses:
General and administrative expenses (57,821) (81,486) 23,665 (29.0) %
Research and development expenses (34,109) (41,065) 6,956 (16.9) %
Selling and marketing expenses (22,197) (22,576) 379 (1.7) %
Impairment loss of long-lived assets (4,142) (93,173) 89,031 (95.6) %
Total operating expenses (118,269) (238,300) 120,031 (50.4) %
Subsidy income 3,142 2,658 484 18.2 %
Income/(loss) from operations 6,983 (116,090) 123,073 (106.0) %
Other income and expenses:
Interest income 957 742 215 29.0 %
Interest expense (4,903) (9,711) 4,808 (49.5) %
Gain on debt restructuring 1,297 9,406 (8,109) (86.2) %
Other income 244 156 88 56.4 %
Changes in fair value of warrant liability and convertible loan (39,121) (79,960) 40,839 (51.1) %
Loss before provision for income tax (34,543) (195,457) 160,914 (82.3) %
Benefit from (provision for) income taxes 5,325 - 5,325 100.0 %
Net loss $ (29,218) $ (195,457) 166,239 (85.1) %
Revenue
Our revenue increased from $379.8 million in 2024 to $427.5 million in 2025, reflecting a 12.6% year-over-year growth. This expansion was primarily driven by a 16.5% increase in sales volume, rising from 1,613.6 MWh in 2024 to 1,879.5 MWh in 2025. This volume growth was supported by rising demand for our battery cell products from existing and new customers across the European and U.S. markets. Our full-year revenue was impacted by evolving regulatory shifts in the Korean market and customer platform ramp up delays.
Cost of Revenue, Energy Storage System Impairment, and Gross Profit
Our cost of revenues for the year ended December 31, 2025, increased by 4.9% compared to 2024, primarily due to higher sales volumes. However, this increase was significantly lower than the 12.6% year-over-year revenue growth, reflecting improved utilization which enhanced the absorption of fixed costs, decreases in raw material costs, and improved economies of scale as we grow our manufacturing capacity.
Our gross profit margin was 28.6% for the year ended December 31, 2025, compared to 31.5% in 2024. This change was primarily attributable to a $32.5 million inventory impairment charge related to specialized ESS components, which negatively impacted our gross margin by 7.6 percentage points. Excluding the impact of this specific non-cash charge, the underlying gross margin performance reflected a more favorable product mix and improved manufacturing efficiencies across our battery solution portfolio.
Operating Expenses
General and administrative expenses
General and administrative expenses for the year ended December 31, 2025, decreased by $23.7 million, or 29.0%, compared to 2024. This decline was primarily driven by a $17.4 million reduction in share-based compensation expenses and a favorable $8.6 million increased impact from foreign currency fluctuations related to the Euro and RMB.
Research and development expenses
Research and development expenses for the year ended December 31, 2025, decreased by $7.0 million, or 16.9%, compared to 2024. This reduction in R&D was primarily driven by a $5.5 million decrease in share-based compensation expenses.
Selling and marketing expenses
Selling and marketing expenses for the year ended December 31, 2025, decreased by $0.4 million, or 1.7%, compared to 2024.
Impairment loss of long-lived assets
The impairment loss of long-lived assets for the year ended December 31, 2025 decreased by $89.0 million, or 95.6%, compared to the same period in 2024. The 2025 loss was primarily driven by the charges related to assets held for sale, where carrying values exceeded fair value less costs to sell.
Subsidy Income
Subsidy income increased from $2.7 million for the year ended December 31, 2024 to $3.1 million in 2025. The amounts are the one-time awards granted by local governments in 2024 and 2025.
Gain on Debt Restructuring
During the year ended December 31, 2025, the Company recognized a gain of $1.3 million from negotiated settlements of payables.
Changes in Fair Value of Warrant Liability and Convertible Loan
For the year ended December 31, 2025, we recognized a loss of $39.1 million. This loss was primarily driven by the period-over-period remeasurement of our convertible loan at fair value. For further discussion regarding the valuation methodology and inputs, see Note 25 - Convertible loan measured at fair value.
Benefit from (provision for) Income Taxes
For the year ended December 31, 2025, we recognized deferred tax benefits of $5.4 million, primarily due to the remeasurement of our deferred tax assets for MPS. This was partially offset by $0.1 million in income tax expense associated with profitable foreign operations.
Liquidity and Capital Resources
Overview
Since inception, we have financed our operations primarily through capital contributions from equity holders, the issuance of convertible notes, and bank borrowings. As of December 31, 2025, our principal sources of liquidity included cash, cash equivalents, and restricted cash totaling $169.2 million, of which $105.0 million was comprised in cash and cash equivalents.
Of the cash and cash equivalents as of December 31, 2025, $40.3 million is held by our China subsidiary and $21.9 million is held by our European subsidiaries. These funds are generally intended to support local operations. If we were to repatriate these funds to the U.S., we may be required to accrue and pay applicable withholding taxes. We currently intend to retain available funds and future earnings to support ongoing operations and expansion efforts in China, Europe, and the U.S.
Going Concern Evaluation
In accordance with ASU No. 2014-15, management evaluated whether conditions and events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern within one year after the date these consolidated financial statements are issued. Based on our current business plan, we projected that existing cash and assets held for sale would not be sufficient to fund operations through the next twelve months. These conditions initially raised substantial doubt about our ability to continue as a going concern.
Management has implemented several primary plans intended to alleviate these conditions:
•Operating Cash Flows: For the year ended December 31, 2025, we generated $75.9 million in net cash from operating activities. Our order backlog stood at $196.1 million, the majority of which is expected to be fulfilled in 2026 and 2027. While we anticipate some absorption pressure during the ramp up of our Huzhou 3.2 manufacturing line expansion, we expect gross margins to remain relatively stable.
•Refinancing of Short-term Borrowings: Based on our historical ability to access credit, we expect to maintain the ability to refinance these obligations as needed as they become due over the next twelve months.
•Equity Funding: Under our Controlled Equity Offering Sales Agreement (the "Sales Agreement"), the Company has received $27.9 million in net proceeds through the date of this issuance. We intend to continue utilizing the Sales Agreement to raise additional capital as needed for general corporate purposes and debt repayment.
Based on the execution of these plans, management has concluded it is probable that these actions will alleviate substantial doubt about the Company's ability to continue as a going concern and provide adequate liquidity to meet our requirements for the next twelve months. However, there is no assurance that the Company will be able to alleviate these concerns.
Additional Liquidity Initiatives
We secured $85.7 million in bank loans during the year ended December 31, 2025 (see Note 12 - Bank Borrowings). The Company has been exploring a potential sale of its Lake Mary, Florida facility with a prospective buyer
for a gross purchase price of $11,500. This divestiture is intended to provide additional liquidity without impacting core operations. The transaction is subject to customary closing conditions and a due diligence period for the buyer. The Company currently anticipates that, if completed, the transaction would close during the second quarter of 2026.
Financings
As of December 31, 2025, our debt obligations consisted of:
•Bank borrowings of $106.3 million, the terms of which range from 1 to 18 months. The interest rates of our bank borrowings ranged from 2.60% to 4.85% per annum.
•Convertible bonds of $41.7 million, with interest rates ranging from 3% to 4%. The convertible bonds are due in 2027.
•Convertible loan measured at fair value of $140.9 million. This loan bears interest at Term SOFR plus an applicable margin of 9.75%. Of this, 3.75% is paid in kind and added to the outstanding principal balance, and the remainder is paid in cash. See Note 25 - Convertible loan measured at fair value for details.
As of December 31, 2025, we were in compliance with all material terms and covenants of our loan agreements, credit agreements, and bonds.
On July 23, 2021, we received $705.1 million in net proceeds from our Business Combination. We have used $514.2 million of the net proceeds to expand our manufacturing facilities and for the purchase of property and equipment associated with our existing manufacturing and R&D facilities. In addition, $190.9 million of the net proceeds were used for general working capital.
Although no additional binding financing agreements have been entered into, the Company remains engaged in discussions with third parties to explore further capital-raising opportunities. Future capital requirements may change based on business developments, market conditions, and liquidity needs. The Company continues to evaluate potential options, including equity offerings and debt financing, to provide financial flexibility and long-term growth.
The exercise price for our outstanding warrants is $11.50 per share of common stock, and the trading price of our common stock was $2.10 as of March 9, 2026. There is no guarantee that the warrants will be exercised prior to their expiration, however, we do not expect this to impact our liquidity.
Capital Expenditures and Other Contractual Obligations
Our capital expenditures amounted to $38.7 million and $49.9 million for the years ended December 31, 2025 and 2024, respectively. Our capital expenditures in 2025 were primarily related to our Huzhou Phase 3.2 expansion, which is funded primarily by localized borrowings and cash flow from our China operations, and deferred payments related to our Clarksville facility. 2024 capital expenditures were primarily related to the construction of manufacturing facilities in Clarksville, Tennessee and Huzhou, China.
In 2021, we started our capacity expansion plans in Huzhou, China, Berlin, Germany and Clarksville, Tennessee. The project in Germany was completed in 2021. The Huzhou Phase 3.1 expansion was successfully completed in 2023.
Because of delays in securing additional financing, in the fourth quarter of 2023 we began experiencing slow progress in continuing construction of our Clarksville expansion, slowing down certain construction work streams due to the need for additional financing. This facility was initially intended to produce 53.5Ah cells for our ESS solutions; however, we believe that LFP cells are better suited for our ESS solutions and intend to utilize the Tennessee facility to produce LFP cells instead of 53.5Ah cells. Additionally, our ESS products that were previously developed and assembled in Colorado are now planned to be assembled at our Tennessee facility once the facility is completed. The proceeds from the Business Combination alone will not be sufficient to complete the Clarksville expansion and meet our general working capital needs. Due to regulatory restrictions, adverse tax consequences, and localized working capital needs, we are currently unable to repatriate cash from China to fund U.S. operations or the Clarksville expansion. We are seeking alternate sources of capital to complete this facility and satisfy domestic content requirements for our U.S. customers.
Our future capital requirements will depend on many factors, including, but not limited to funding planned production capacity expansions and for general working capital. In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses or technologies. We may need to seek additional equity or debt financing in order to meet these future capital requirements. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition, and results of operations could be adversely affected. There are no material off-balance sheet arrangements other than those described below.
Lease commitments
We lease certain facilities and equipment under non-cancellable lease agreements that expire at various dates through 2036. For additional information, see Note 17 - Leases, in the notes to the consolidated financial statements in Part II, Item 8 of this Report on Form 10-K.
Purchase commitments
We regularly enter into non-cancelable contractual obligations primarily related to purchases of inventory. As of December 31, 2025, such purchase commitments, which do not qualify for recognition on our consolidated balance sheets, amount to $37.2 million, most of which is short-term.
Cash Flows
The following table provides a summary of our cash flow data for the years indicated (in thousands):
Year Ended
December 31,
2025 2024
Net cash generated from operating activities $ 75,908 $ 2,814
Net cash used in investing activities (16,045) (12,152)
Net cash (used in)/ provided by financing activities (2,683) 37,589
Cash Flows from Operating Activities
Net cash provided by operating activities was $75.9 million for the year ended December 31, 2025, an increase of $73.1 million compared to $2.8 million in 2024. This improvement was primarily driven by a $49.9 million increase in net income after adjusting for non-cash items and a $23.2 million net improvement in operating assets and liabilities. The increase in our net operating assets and liabilities was mainly driven by an increase of accounts payable and a decrease of inventories as compared to 2024, partially offset by an increase of accounts receivables due to revenue growth.
Cash Flows from Investing Activities
Net cash used in investing activities was $16.0 million for the year ended December 31, 2025, compared to $12.2 million in 2024. This outflow was primarily driven by capital expenditures related to the expansion of our manufacturing facilities and the acquisition of property and equipment for existing manufacturing and R&D operations, partially offset by disposal of property, plant and equipment and short-term investments.
Cash Flows from Financing Activities
Net cash used in financing activities was $2.7 million for the year ended December 31, 2025, a decrease of $40.3 million compared to $37.6 million provided in 2024. The decrease was primarily due to a $29.8 million increase in repayments of bank borrowings and $15.8 million decrease in proceeds from bank borrowings, partially offset by net proceeds from sales of common stocks of $27.9 million.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe the following critical accounting policies involve a higher degree of judgment and complexity than our other accounting policies. Therefore, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.
Convertible Loan Measured at Fair Value
We elected the fair value option to account for the convertible loan and record changes in fair value in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk which, if present, will be recorded as a component of other comprehensive income. Interest expense related to the convertible loan is included in the changes in fair value. The fair value of the convertible loan 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.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. Inventory levels are analyzed periodically and written down to their net realizable value if they have become obsolete, have a cost basis in excess of expected net realizable value or are in excess of expected demand. We analyze current and future product demand relative to the remaining product life to identify potential excess inventories. These forecasts of future demand are based upon historical trends and analysis as adjusted for overall market conditions. Inventory write-downs are measured as the difference between the cost of the inventory and its net realizable value, and charged to inventory reserves, which is a component of cost of revenue. At the point of the loss recognition, a new, lower cost basis for those inventories is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. We monitor the inventory impairments periodically and, since battery technology continues to advance, we may incur inventory impairment losses in the future.
Income Taxes
We utilize the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities reflect the estimated future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that the deferred tax assets will not be realized. We make estimates, assumptions and judgments to determine its provision for its income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we established a valuation allowance.
We account for uncertain tax positions by reporting a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Tax benefits are recognized from uncertain tax positions when we believe that it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Stock-Based Compensation
We recognize compensation expense on a straight-line basis over the service period that awards are expected to vest, based on the estimated fair value of the awards on the date of the grant. We recognize forfeitures as they occur. Fair value excludes the effect of non-market based vesting conditions. The fair value of RSUs with service conditions is based on the grant date share price. We estimate the fair value of options utilizing the Binomial-Lattice Model. The fair value of non-vested shares that vest based on market conditions are estimated using the Monte Carlo valuation method. These fair value estimates of stock related awards and assumptions inherent therein are estimates and, as a result, may not be reflective of future results or amounts ultimately realized by recipients of the grants. For these awards with performance
conditions, we recognize compensation expense when the performance goals are achieved, or when it becomes probable that the performance goals will be achieved. Management performs the probability assessment on a quarterly basis by reviewing external factors, such as macroeconomic conditions and the analog industry revenue forecasts, and internal factors, such as our business and operational objectives and revenue forecasts. Changes in the probability assessment of achievement of the performance conditions are accounted for in the period of change by recording a cumulative catch-up adjustment as if the new estimate had been applied since the service inception date. As a result, our stock-based compensation expense is subject to volatility and may fluctuate significantly each quarter due to changes in our probability assessment of achievement of the performance conditions or actual results being different from projections made by management. Liability-classified awards are remeasured at lower of capped value or fair value as of each report date during settlement.
Internal Control Over Financial Reporting
The information required by this Item regarding internal control over financial reporting is set forth in Part II, Item 9A of this Annual Report.
Recent Accounting Pronouncements
See Note 2 to the consolidated financial statements beginning on page 84 of this Annual Report for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and its results of operations and cash flows.
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