Cenntro Inc

The Company may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity. Please refer to the description as contained in “Item 8 Financial Statements and Supplementary Data” on page F-1 of our Annual Report and the information described below.

CAE filed an action in Landgericht Bochum, a county court in Bochum, Germany against Delivrium s.r.o., a Czech Republic company (“Delivrium”) for a claim arising from a purchase contract by and between Delivrium and CAE for a dispute of € 956,760 under which CAE is requesting payment and acceptance of vehicles previously ordered by Delivrium. As of the date of this quarterly report, CAE is waiting for a statement or notification from the court in Louny (Czech Republic). Because CAE could not deliver the claim to Delivrium in Germany, ,CAE has filed action in the District Court of Louny, Czech Republic.

In June 2022, Sevic Systems SE (“Sevic”) filed for injunctive relief in a corporate court in Brussels, Belgium, where Servic alleged CAE infringed on Sevic’s intellectual property (“IP”) rights. The injunctive action was also directed against LEIE Center SRL (“LEIE”) and Cedar Europe GmbH (“Cedar”), two of CAEs distribution partners. Sevic alleges to it acquired IP rights to the CITELEC electric vehicle model (“CITELEC”), fully and exclusively from a French company SH2M Sarl(“SH2M”). Sevic alleges these IP rights were acquired through an IP transfer agreement in 2019. According to Sevic, the METRO model (“METRO”) produced by Cenntro Electro Group Ltd. (“Cenntro”) and distributed by CAE, derives directly from the CITELEC. Thus, Sevic allegedly believes the distribution of the METRO, infringes on Sevic’s IP rights. In Sevic’s action, Sevic relies on (Belgian) copyright law and unfair business practices. On February 2, 2023, the president of the commercial court of Brussels (the “President”) rendered a judgment, declaring i) the claim against Cedar was inadmissible and ii) the claim against CAE and LEIE was founded. According to the President’s opinion, it was determined that the CITELEC-model can enjoy copyright protection, and it was proven that Sevic acquired the copyrights of the CITELEC-model. The President then concluded that the distribution of the METRO-model in Belgium constituted a violation of article XI. 165 §1 of the Belgian Code of Economic Law and thereby ordered the cessation of the distribution of the METRO-model, a penalty in the form of a fine of EUR20,000.00 per sold vehicle in Belgium and EUR5,000.00 for each other infringement in Belgium after the judgement was served with a maximum fine of EUR500,000.00 for LEIE and EUR1,000,000.00 fine for CAE. Because CAE has not sold any METRO-models in Belgium, the Company believes the judgement is incorrect but has accrued the related liability according to the judgement made. On April 17,2023 CAE filed a writ of appeal. The introductory hearing was scheduled for May 22, 2023, and the judge overseeing the hearing did not give any legal assessment at the hearing. All parties have been granted deadlines for written pleadings. The final writ was received on September 2, 2024. As of the date of this quarterly report, we expect the oral hearing will take place in 2025, however it is not possible to determine the outcome of these proceedings related to Sevic.

On July 22, 2022, Xiongjian Chen filed a complaint against Cenntro Electric Group Limited (“CEGL”), Cenntro Automotive Group Limited (“CAG”), Cenntro Enterprise Limited (“CEL”) and Peter Z. Wang (“Wang,” together with CENN, CAG and CEL, the “Defendants”) in the United States District Court for the District of New Jersey. The complaint alleges eleven causes of action sounding in contract and tort against the Defendants, all pertaining to stock options issued to Mr. Chen pursuant to his employment as Chief Operating Officer of CAG. With respect to the four contract claims, Plaintiff alleges breach of contract claims pertaining to an employment agreement between Plaintiff and CAG and a purported letter agreement between Plaintiff and CEL. With respect to the seven tort claims, Plaintiff alleges claims regarding purported misrepresentations and promises made concerning the treatment of Plaintiff’s stock options upon a corporate transaction, including claims for tortious interference, fraud, promissory estoppel, negligent misrepresentation, unjust enrichment and conversion. The complaint seeks, among other things, money damages (including compensatory and consequential damages) in the amount of $19 million, plus interest, attorneys’ fees and expenses. Defendants moved to dismiss the complaint against all Defendants for failure to state a claim and for lack of personal jurisdiction over defendants CAG and CEL. On April 30, 2023, the District Court dismissed the claims against CAG and CEL for lack of personal jurisdiction. In addition, the District Court dismissed all the claims against Wang and CEGL without prejudice and permitted the Plaintiff to amend his complaint within 30 days to address the deficiencies in his claims against Wang and CEGL. On May 28, 2023, Plaintiff filed an amended complaint. On July 20, 2023 the Defendants filed a motion seeking the dismissal of that amended complaint. On September 22, 2023, the Plaintiff filed to oppose our Motion to Dismiss and Motion to Strike. The Defendants filed reply briefs by the deadline on November 9, 2023. On January 25, 2024, the Magistrate Judge entered an Order granting Plaintiff’s Motion to Amend and denying our Motion to Strike as moot.

On February 6, 2023, Hangzhou Ronda Tech Co., Limited (“Ronda”), one of Cenntro’s wholly owned subsidiaries, commenced a lawsuit against Fujian Newlongma Automotive Co., Ltd. (“Newlongma”), one of Ronda’s suppliers, in the Hangzhou Yuhang District People’s Court (the “People’s Court”). Pursuant to that lawsuit, Ronda plead for (i) the termination of the vehicle purchase orders that Ronda placed with Newlongma on February 26, 2022; (ii) recovery of advance payments for total amount of approximately $438,702; and (iii) compensation for damages caused equal to approximately $453,290. The mediation date was March 3, 2023 and was subsequently docketed on July 3, 2023. Afterwards Newlongma filed a jurisdictional objection, which the People’s Court dismissed. Subsequently Newlongma filed a counterclaim, and the People’s Court hosted an exchange of evidence between the parties on October 17, 2023, and discovery was also organized on November 14, 2023, and January16, 2024. On March 5, 2024, the first instance judgment was made, ruling: 1) Newlongma to fully return advance payments plus 100% damage totaling $869,702; 2) Ronda was to pay for outstanding invoices totaling $583,813; and 3) to terminate all agreements between the parties, including the vehicle purchase orders which have not been fulfilled. Newlongma was dissatisfied with this third judgment and filed an appeal on March 21, 2024. The appeal was dismissed, and the original judgment was upheld by the People’s Court on July 2, 2024.

On December 18, 2023, our subsidiary Zhejiang Sinomachinery Co., Ltd. (“Zhejiang”) filed a lawsuit against Tonghe County Tianxin Agricultural Machinery Co., Ltd. (“Tianxin”), requesting payment for total of CNY461,800 (approximately US$65,104) plus interest under a disputed contract of sale. On April 17, 2024, the court issued a judgement supporting Zhejiang’s primary claims, ordering Tianxin to pay Zhejiang CNY461,800 (approximately US$65,104) plus interest and relevant legal expenses within 10 days. On July 3, 2024, the Court accepted Zhejiangs application for compulsory execution.

On January 2, 2024, MHP Americas, Inc. (“MHP”), sent a letter to Cenntro Electric Group Limited (“CEGL”) demanding payment allegedly owed by CEGL to MHP in the amount of: (i) $ 1,767,516.91 for unpaid invoices, (ii) $ 3,289,500 for total contract invoices and milestone payments for alleged breaches in connection with a master consulting services agreement dated August 8, 2022 and/or Statement of Work dated March 9, 2023 by and between the parties. On January 12, 2024, CEGL responded to the letter denying any breach and disputing the amounts claimed.

On April 10, 2024, Cenntro Electric Group Limited (“CEGL”) filed a lawsuit against MHP Americas, Inc. (“MHP”) for breach under a master consulting services agreement and SAP Business Suite forHANA statement of work (“SAP S/4HANA”), by failure to properly implement the SAP S/4HANA globally, as set forth in the related contracts, and for breach of implied covenants of good faith and fair dealing, causing CEGL to suffer significant damages; and demanded a jury trial on all issues triable. Under this claim, CEGL is seeking a remittance of $512,226 paid to date and a recission of the remaining contractual obligations with MHP. On April 30, 2024, MHP filed a notice of removal of this action from the Superior Court of New Jersey to the U.S. District Court for the District of New Jersey. At the time of this quarterly report, the case is ongoing and remains active with parties performing required interrogatories and discovery.