| SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The consolidated financial statements of the Group
have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) . Basis of consolidation The consolidated financial statements of the Group
include the financial statements of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated
upon consolidation. Noncontrolling interests and redeemable noncontrolling interests For the Company’s consolidated subsidiaries, noncontrolling interests
are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling
shareholder. Noncontrolling interests are classified as a separate line item in the equity section of the Company’s consolidated
balance sheets and have been separately disclosed in the Company’s consolidated statements of operations and comprehensive loss
to distinguish the interests from that of the Company. Noncontrolling interests in subsidiaries that are redeemable at the
option of the holder and not solely within the control of the Company for cash or other assets are classified outside of permanent equity
at redemption value as redeemable noncontrolling interests. If the redemption event is probable to occur, the Company records the redeemable
noncontrolling interests at the redemption value on each balance sheet date with the changes recognized as an adjustment to equity. Use of estimates The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
revenue, costs and expenses in the consolidated financial statements and accompanying notes, and disclosure of contingent liabilities
at the date of the consolidated financial statements. Actual results could differ from these estimates. Significant accounting estimates
reflected in the Group’s financial statements include allowance for doubtful accounts, provision for obsolete inventories, impairment
of long-lived assets, valuation allowance for deferred tax assets, product warranties, fair value measurement of Bridge Notes, fair value
measurement of warrant liability and share based compensation. Emerging Growth Company Pursuant to the JOBS Act, an emerging growth company
may adopt new or revised accounting standards that may be issued by FASB or the SEC either (i) within the same periods as those otherwise
applicable to non-emerging growth companies or (ii) within the same time periods as private companies. The Company intends to take advantage
of the exemption for complying with new or revised accounting standards within the same time periods as private companies. Accordingly,
the information contained herein may be different than the information provided by other public companies. The Company also intends to take advantage of
some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as the Company
qualifies as an emerging growth company, including, but not limited to, an exemption from the auditor attestation requirements of Section
404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements
of holding non-binding advisory votes on executive compensation and golden parachute payments. Cash and cash equivalents Cash and cash equivalents consist of cash on hand
and highly liquid investments, which are unrestricted from withdrawal or use, or which have maturities of three months or less. Restricted cash Restricted cash represents deposits made to banks
to secure bank acceptance notes (or Notes Payable) and letter of credit issued by the Group. It’s common in PRC that the banks require
the Group to pledge notes received from its customers, up to 111%, or make a deposit for up to 100% of the face amount of the bank acceptance
notes the Group issued as collateral. The deposits and the matured bank acceptance notes from its customers are recorded as restricted
cash in the consolidated balance sheets. Accounts receivable Accounts receivable represents those receivables
derived in the ordinary course of business, net of allowance for doubtful accounts. The Group maintains an allowance for doubtful accounts
for estimated losses on accounts receivable. Management considers the following factors when determining the collectability of specific
accounts: creditworthiness of customers, aging of the receivables, past transaction history with customers and their current financial
condition, changes in customer payment terms, specific facts and circumstances, and the overall economic climate in the industries the
Group operates. Notes receivable and payable The Group accepts bank acceptance notes (“notes”)
from customers in the PRC in the normal course of business. The Group may present these notes with banks in the PRC for cash payment or
endorse these notes to its suppliers to settle its accounts payable. When the notes are endorsed by the Company, the Company is jointly
liable with other endorsers in the note. Notes that have been presented with banks or endorsed to suppliers are derecognized from the
consolidated balance sheets when the notes are settled with banks or the obligations as endorser are discharged. Notes receivable and
payable are typically non-interest bearing and have maturities of one year or less. As of December 31, 2020 and 2021, the balance
of notes receivable were $20,839 and $11,144, respectively while certain notes receivable was pledged in the bank to secure the issuance
of the bank acceptance notes by the Group. Short-term investments The Group’s short-term held-to-maturity investments
are classified based on their contractual maturity dates which are less than one year and are recorded at their amortized costs. The Company
recognized $366, $37 and $ nil The Group reviews its held-to-maturity investments
for other-than-temporary impairment (“OTTI”) based on the specific identification method. The Group considers available quantitative
and qualitative evidence in evaluating the potential impairment of its short-term investments. If the cost of an investment exceeds the
investment’s fair value, the Group considers, among other factors, general market conditions, expected future performance of the instruments,
the duration and the extent to which the fair value of the investment is less than the cost, and the Group’s intent and ability to hold
the investments. OTTI is recognized as a loss in the consolidated statements of operations. Inventories, net Inventories of the Group consist of raw materials,
work in process and finished goods. Inventories are stated at the lower of cost or net realizable value. Inventory costs include expenses
that are directly or indirectly incurred in the acquisition, including shipping and handling costs charged to the Group by suppliers,
and production of manufactured product for sale. Such as the cost of materials and supplies used in production, direct labor costs and
allocated overhead costs are all included in the inventory costs. The allocated overhead cost includes the depreciation, insurance, employee
benefits, and indirect labor. Cost is determined using the weighted average method. Inventories are written down to net realizable value
taking into consideration of estimates of future demand, technology developments, market conditions and reasonably predicative costs of
completion or disposal. Prepaid expenses and other current assets Prepaid expenses and other current assets primarily
consist of advances to suppliers, prepaid expenses, deposits and value-added tax receivables. Property, plant and equipment, net Property, plant and equipment are carried at cost
less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives:
Buildings 20 years
Machineries and equipment 10 years
Fixtures and electronic equipment 4 - 5 years
Motor vehicles 5 years
Leasehold improvements Shorter of the lease term or estimated useful lives Construction in progress represents manufacturing
facilities and equipment under construction, and is stated at cost. The capitalization of these costs is ceased when construction in progress
is transferred to property, plant and equipment and substantially ready for its intended use. No depreciation is recorded for construction
in progress. Repair and maintenance costs are charged to expenses as incurred. Land use rights, net Land use rights are recorded at cost less accumulated
amortization. Amortization is provided on a straight-line basis over the estimated useful lives, which are generally 50 years and represent
the shorter of the estimated usage periods or the terms of the land use rights agreements. Acquired intangible assets, net Acquired intangible assets with definite lives
are amortized on a straight-line basis over their expected useful economic lives. Impairment of long-lived assets The Company reviews long-lived assets with finite
lives, including identifiable intangible assets with determinable useful lives, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Fair value is estimated based on various valuation techniques, including the discounted value of estimated future
cash flows. The evaluation of asset impairment requires the Group to make assumptions about future cash flows over the life of the asset
being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. During
the years ended December 31, 2019, 2020 and 2021, the Group recognized impairment losses of $2,908, $567 and $2,443 related to long-lived
assets, respectively. Fair value of financial instrument Financial instruments include cash and cash equivalents,
restricted cash, accounts receivable, notes receivable, other receivable, amount due from/to related parties, accounts payable, short-term
bank borrowings, notes payable, bonds payable, Bridge Notes, product warranty and warrant liability. The Group carries its accounts receivable,
notes receivable, other receivable, amount due from/to related parties, accounts payable, short-term bank borrowings, notes payable ,
Fair value Fair value is the price that would be received
from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When
determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers
the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when
pricing the asset or liability. Authoritative literature provides a fair value
hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. An asset or liability categorization within the fair value hierarchy is based upon the lowest level of input that is significant
to the fair value measurement as follows: Level 1 Level 1 applies to assets or liabilities for which
there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which
there are inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities such as quoted prices
for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived
principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which
there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or
liabilities. Revenue recognition Nature of Goods and Services The Group’s revenue consists primarily of
sales of lithium batteries. The obligation of the Group is providing the electronic power products. Revenue is recognized at the point
of time when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the
Group expects to be entitled to in exchange for the goods or services. Contract balances Contract balances include accounts receivable
and advances from customers. Accounts receivable represent cash not received from customers and are recorded when the rights to consideration
is unconditional. The allowance for doubtful accounts reflects the best estimate of probable losses inherent to the accounts receivable
balance. Contract liabilities, recorded in advance from customers in the consolidated balance sheet, represent payment received in advance
or payment received related to a material right provided to a customer to acquire additional goods or services at a discount in a future
period. During the years ended December 31, 2019, 2020 and 2021, the Group recognized $556 $582 Value added taxes Value added tax (“VAT”) on sales was
calculated at 16% and changed to 13% since April 1, 2019 on revenue from products and 6% on services. The Group reports revenue net of
VAT. Entities in PRC that are VAT general tax payers are allowed to offset qualified VAT paid against their output VAT liabilities. Cost of revenues Cost of revenues primarily consists of the cost
of the products ultimately sold to customers, shipping and handling costs charged to the Group in the sales, the direct labor costs, product
warranty expense, provision for obsolete inventories and other related cost that are directly attributable to the production of products. Product Warranty The Group provides product warranties, which entail
repair or replacement of non-conforming items, in conjunction with sales of products. Estimated costs related to warranties are recorded
in the period in which the related product sales occur. The warranty liability recorded at each balance sheet date reflects management’s
best estimates of its product warranties based on historical information and other currently available evidence. The Group’s product warranties generally range
from one to eight years. The Group establishes a reserve for the estimated cost of the product warranty at the time revenue is recognized.
The portion of the warranties is expected to incur within the next 12 months is recorded in accrued expenses and other current liabilities,
while the remaining is recorded in other non-current liabilities on the consolidated balance sheets. Product Warranty are recorded as
a cost of revenues. Research and development expenses Research and development expenses primarily consist
of salaries and benefits for research and development personnel, materials, office rental expense, general expenses and depreciation expenses
associated with research and development activities. Subsidy income Government subsidies represent government grants
received from local government authorities. Government subsidies related to the investment
in production facilities initially records as other current or other non-current liabilities and amortized on a straight-line basis to
offset the cost of revenues over the lives of relevant production assets or amortized on an effective interest method over the term of
the loan. The Group amortized the deferred subsidy at $2,304,
$166 Income taxes Current income taxes are provided for in accordance
with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases
of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits
are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The Group accounts 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 the Group believes 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. The Group recognizes interest
and penalties, if any, related to unrecognized tax benefits in income tax expense. Share-based compensation Share-based payment transactions with employees
are measured based on the grant date fair value of the equity instrument and recognized as compensation expense on a straight-line basis
over the requisite service period, with a corresponding impact reflected in additional paid-in capital. For share-based awards granted with performance
condition, the compensation cost is recognized when it is probable that the performance condition will be achieved. The Company reassesses
the probability of achieving the performance condition at the end of each reporting date and records a cumulative catch-up adjustment
for any changes to its assessment. For performance-based awards with a market condition, such as awards based on total shareholder return
(“TSR”), compensation expense is recognized on a straight-line basis over the estimated service period of the award, regardless
of whether the market condition is satisfied. Forfeitures are recognized as they occur. Liability-classified awards are remeasured at their fair-value-based
measurement as of each reporting date until settlement. Warrant Liability The Company accounts for warrants in accordance
with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded
as liabilities. As the Private Warrants (as defined below Note 15) meet the definition of a derivative as contemplated in ASC 815, the
Company classifies the Private Warrants as liabilities. This liability is subject to re-measurement at each balance sheet date until exercised,
and any change in fair value is recognized in the statements of operations. The Private Warrants are valued using a Monte Carlo simulation
model on the basis of the quoted market price of the Company’s publicly-traded warrants. Comprehensive loss Comprehensive loss includes net loss and foreign
currency translation adjustments. Comprehensive loss is reported in the consolidated statements of comprehensive loss. Net loss per share Basic loss per share is computed by dividing net
loss attributable to Common Stock, considering the accretions to redemption value of the preferred shares, by the weighted average number
of Common Stock outstanding during the year using the two-class method. Under the two-class method, any net loss is allocated between
Common Stock and other participating securities based on their participating rights. Net loss is not allocated to participating securities
when the participating securities do not have a contractual obligation to share losses. The Company’s preferred shares are participating
securities as they participate in undistributed earnings on an as-if-converted basis. The preferred shares have no contractual obligation
to fund or otherwise absorb the Company’s losses. Accordingly, any undistributed net loss is allocated on a pro rata basis to the
Common Stock and preferred shares; whereas any undistributed net loss is allocated to ordinary shares only. Diluted loss per share is calculated by dividing
net loss attributable to Common Stock, as adjusted for the accretion and allocation of net loss related to the preferred shares, if any,
by the weighted average number of Common Stock and dilutive Common equivalent stock outstanding during the period. Common equivalent stock
consist of shares issuable upon the conversion of the preferred shares and convertible bonds using the if-converted method, and Common
Stock issuable upon the vesting of non-vested shares or exercise of outstanding share option (using the treasury stock method). Common
equivalent stock are calculated based on the most advantageous conversion rate or exercise price from the standpoint of the security holder.
Common equivalent stock are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares
would be anti-dilutive. Foreign currencies The functional currency of the Company and MP
Solutions is the United States dollar (“U.S. dollar”). For the Company’s subsidiaries located in the PRC, the functional currency
is the Chinese Renminbi (“RMB”); the Company’s UK subsidiary, MP UK, the functional currency is the Great British Pound (“Pound”);
the Company’s Germany subsidiary, MV GmbH, the functional currency is the Euro, and the Company’s Singapore subsidiary, MV Singapore,
the functional currency is the Singapore Dollar (“SGD”). In preparing the consolidated financial statements
of each individual group subsidiary, transactions in currencies other than the subsidiary’s functional currency (foreign currencies) are
converted into the functional currency at the rates of exchange prevailing on the dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items that
are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on the monetary items are
recognized in the consolidated statements of operations in the period in which they arise. For the purposes of presenting the consolidated
financial statements, the assets and liabilities of the Group’s foreign operations are translated into the reporting currency of the Group
(i.e. US$) at the prevailing exchange rate at the end of the reporting period, and their income and expenses are translated at the average
exchange rates for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a component of
other comprehensive loss. Foreign currency risk RMB is not a freely convertible currency. The
State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into other
currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments
affecting supply and demand in the China Foreign Exchange Trading System market. Cash and cash equivalents and restricted cash of the
Group included aggregate amounts of $35,194 and $102,782 as of December 31, 2020 and 2021, respectively, which were denominated in RMB. Concentration of credit risk Financial instruments that potentially expose
the Group to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, notes
receivable and short-term investments. The Group places its cash and cash equivalents with financial institutions with high credit ratings
and quality. The Group conducts credit evaluations of customers and generally does not require collateral or other security from its customers. The following table summarizes net revenues from
customers that accounted for 10% or more of the Group’s net revenues for 2019, 2020 and 2021:
December 31, December 31, December 31,
Percentage of revenue contributed by Customer A 11 % - -
Percentage of revenue contributed by Customer B - - 11 % The following table summarizes accounts receivable
from customers that accounted for 10% or more of the Group’s accounts receivable:
December 31, December 31,
Percentage of accounts receivable from Customer C 10 % 18 % Supplier Concentration The Group relies on third parties for the supply
of raw materials. In instances where these parties fail to perform their obligations, the Group may find alternative suppliers in the
open market. For the years ended December 31, 2019, 2020 and 2021, 17% 12% Newly adopted accounting pronouncements In May 2014, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standard Updates (“ASU”) 2014-09, “Revenue from Contracts
with Customers”. ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an
amount that reflects the consideration that a company expects to be entitled to in exchange for the goods or services. To achieve
this principle, a company must apply five steps including identifying the contract with a customer, identifying the performance
obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and
recognizing revenue when (or as) the company satisfies the performance obligations. Additional quantitative and qualitative
disclosure to enhance the understanding about the nature, amount, timing, and uncertainty of revenue and cash flows is also
required. ASU 2014-09 is effective for fiscal years beginning after December 15, 2018 for non-public companies, and for interim
periods within those years beginning after December 15, 2019. The Group adopted ASU 2014-09 and all related ASUs beginning January
1, 2019 and recorded $1,565 adjustment to retained earnings for the cumulative impact upon adoption of Topic 606. Newly adopted accounting pronouncements
- continued In January 2016, the FASB issued a new pronouncement
ASU 2016-01 Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU requires
equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee)
to be measured at fair value with changes in fair value recognized in net income. The ASU also requires an entity to present separately
in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific
credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial
instruments. ASU 2016-01 was further amended in February 2018 by ASU 2018-03, “Technical Corrections and Improvements to Financial
Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU
2016-01 and ASU 2018-03 are effective for non-public business entities for fiscal years beginning after December 15, 2018, and interim
periods within fiscal years beginning after December 15, 2019. Adoption of the amendment must be applied by means of a cumulative-effect
adjustment to the balance sheet as of the beginning of the fiscal year of adoption, except for amendments related to equity instruments
that do not have readily determinable fair values which should be applied prospectively. The Group adopted this ASU beginning January
1, 2019 and the adoption did not have a material impact on the Group’s financial position or results of operations. In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses the following
eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other
debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing;
contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from
the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs));
distributions received from equity method investees; beneficial interests in securitization transactions; and separately
identifiable cash flows and application of the predominance principle. For non-public entity, the amendments are effective for
fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early
adoption is permitted. The Group adopted this ASU beginning January 1, 2019 and the adoption did not have a material impact on the
Group’s financial position or results of operations. In November 2016, the FASB issued ASU
2016-18: Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this Update require that amounts generally described
as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update are
effective for non-public business entities for fiscal years beginning after December 15, 2018, and interim periods within fiscal
years beginning after December 15, 2019. The Group adopted this standard on January 1, 2019 and applied a retrospective transition
method on its consolidated statements of cash flows. In August 2018, the FASB issued ASU 2018-13,
Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement to ASC Topic 820, Fair Value
Measurement (“ASC 820”). ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing,
modifying, and/or adding certain disclosures. For non-public business entities, the ASU’s amendments are effective for annual
and interim periods within those years, beginning after December 15, 2019. The Group adopted this ASU beginning January 1, 2020 and
the adoption did not have a material impact on the Group’s financial statements. Recent accounting pronouncements not yet
adopted In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases
are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present
value of the lease payments. For operating leases with a term of 12 months or less, a lessee is permitted to make an accounting policy
election not to recognize lease assets and liabilities. Non-public business entities should apply the amendments to annual periods beginning
after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Early application of the guidance is
permitted. In transition, entities are required to recognize and measure leases at the beginning of the earliest period presented using
a modified retrospective approach. In July 2018, ASU 2016-02 was updated with ASU No. 2018-11, Targeted Improvements to ASC 842, which
provides entities with relief from the costs of implementing certain aspects of the new leasing standard. Specifically, under the amendments
in ASU 2018-11, (1) entities may elect not to recast the comparative periods presented when transitioning to ASC 842 and (2) lessors may
elect not to separate lease and non-lease components when certain conditions are met. Before ASU 2018-11 was issued, transition to the
new lease standard required application of the new guidance at the beginning of the earliest comparative period presented in the consolidated
financial statements. In November 2019 and June 2020, the FASB issued ASU 2019-10 and ASU 2020-05 to defer the effective date. Therefore,
Leases (Topic 842) is effective for private entities to fiscal years beginning after December 15, 2021, and interim periods within fiscal
years beginning after December 15, 2022. The Group adopted ASU 2016-02 on January 1, 2022. The Group does not expect any material impact
on net assets and the consolidated statement of comprehensive loss and cash flows as a result of adopting the new standard. In June 2016, the FASB issued ASU 2016-13, Financial
Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. This ASU requires a financial asset
(or group of financial assets) measured at amortized cost basis to be presente |
