| COMMITMENTS AND CONTINGENCIES | NOTE 18 - COMMITMENTS AND CONTINGENCIES Litigation 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. Subject to retention of title and an instalment payment
agreement, CAE sold 90 vehicles for a total price of EUR 2,185,721.32 (approximately $2,358,611.88) to the French company B-Moville
under a contract dated August 23，2021. B-MOVILLE had already settled an amount of EUR 58,787.33 by the end of 2022 and, therefore,
still owed CAE an amount of EUR 2,126,933.99, of which EUR 548,244.11 was owed by the end of 2022 under the instalment agreement. B-Moville had withheld instalment payments due to alleged defects of the vehicles, without specifying the amount of
the claims for reduction of the purchase price. B-Moville had handed over the cars to its parent company SWOOPIN. SWOOPIN is insolvent and has been in judicial liquidation since November 2, 2022. The vehicles held by SWOOPIN were prevented from
becoming part of the insolvency estate and being realized by the insolvency administrator. Due to the retention of title clause, the property of the 90
vehicles shall be reclaimed by CAE. In the meantime, SWOOPIN returned the vehicles to B-Moville. As of 14 May 2023, the insolvency court of Paris opened insolvency proceedings B-Moville. CAE has filed its claims in the insolvency proceedings.
However, The liquidator has advised that there is no prospect of payment to unsecured creditors, including CAE, following its declaration of claims. The recovery of the outstanding amount owed to CAE is deemed highly unlikely. All Receivable of
CAE related to the case has been written off . In October 2021,
Sevic Systems SE (“Sevic”), a former channel partner, commenced a lawsuit against Zhangzhou Machinery, one of Cenntro’s wholly owned subsidiaries, relating to a breach of contract for the sale of goods (the “Sevic Lawsuit”). Sevic filed its
complaint with the People’s Court of Keqiao District, Shaoxing City, Light Textile City (the “People’s Court”). In the Sevic Lawsuit, Sevic alleges that the Shengzhou Machinery provided it with certain unmarketable goods and requests that the
People’s Court (i) terminate two signed purchase orders signed on July 22, 2019 under its sales contract with Shengzhou Machinery
signed on August 13, 2019 and (ii) award Sevic money damages for the cost of goods of $465,400, as well as interest and incidental
losses, including freight and storage costs, for total damages of approximately $628,109. The parties entered into mediation and on
July 27, 2023, the People’s Court issued a civil mediation letter stating that i) both Sevic and Shengzhou Machinery agreed to terminate (x) two
purchase orders signed on July 22, 2019 and (y) the sales contract signed on August 13, 2019; ii) Shengzhou Machinery shall pay Sevic a sum of approximately $13,908 by August 7, 2023; iii) Sevic voluntarily waived all other claims; and iv) Sevic shall pay the case acceptance fee and the property preservation application fee totaling approximately $3,429. After the completion of the meditation, no other disputes were outstanding between the two parties. On March 25, 2022,
Shengzhou Hengzhong Machinery Co., Ltd. (“Shengzhou”), an affiliate of Cenntro Automotive Corporation, filed a demand for arbitration against Tropos Technologies, Inc. with the American Arbitration Association (“AAA”), asserting claims for breach
of contract and unjust enrichment. Shengzhou is seeking payment of $1,126,640 (exclusive of interest, costs, and attorneys’ fees) for
outstanding invoices owed by Tropos Technologies, Inc. to Shengzhou. As of the date of this report On January 29, 2024, the arbitrator issued his opinion and order denying Tropos’ Motion to dismiss. In June 2022, Sevic Systems SE (“Sevic”) filed for injunctive relief in a corporate court in Brussels, Belgium, alleging CAE infringement of Sevic’s intellectual
property (“IP”) rights. The injunctive action was also directed against LEIE Center SRL (“LEIE”) and Cedar Europe GmbH (“Cedar”), two
distribution partners of CAE. There, Sevic claims it acquired all IP rights to an electric vehicle, the so-called CITELEC model (“CITELEC”), fully and exclusively from the French company SH2M Sarl (“SH2M”) under Mr. Pierre Millet. Sevic claims
these rights were acquired under a 2019 IP transfer agreement. According to Sevic, the METRO model (“METRO”) produced by Cenntro Electro Group Ltd. (“Cenntro”) and distributed by CAE derives directly from the CITELEC. The distribution of the METRO,
therefore, allegedly infringes on Sevic’s IP rights. In its action, Sevic relies on (Belgian) copyright law and unfair business practices. On February 2, 2023, the president of the commercial court of Brussels rendered a judgment, declaring i) the
claim against Cedar was inadmissible and ii) The main claim against CAE and LEIE was founded. According to the president’s opinion the CITELEC-model can enjoy copyright protection and determined it was sufficiently 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. The judge did not give any legal
assessment at the hearing. All parties have been granted deadlines for written pleadings. The receipt of the final writ has been planned for September 2, 2024. As of now, it is not possible to determine what the outcome of these proceedings will
be. In July 2022, Cenntro
filed a request for the cancellation of two European Union mark (“EU mark”) which belongs to a third party with European Union
Intellectual Property Office (“EUIPO”). EUIPO decided in favor of Cenntro in November 2023. The two trademarks in question were
cancelled and the costs of the cancellation proceedings were borne by the other party. On July 22, 2022,
Xiongjian Chen filed a complaint against Cenntro Electric Group Limited (“CENN”), 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 CENN without prejudice and permitted the Plaintiff to amend his complaint within 30 days to address the deficiencies in his claims against Wang and CENN. 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 our 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. As of the issuance date of this report on Form 10-Q, there remains one ongoing civil litigation case between Hangzhou Ronda Tech Co., Limited (“Ronda”), one of Cenntro’s wholly owned subsidiaries, and Fujian Newlongma Automotive Co., Ltd. (“Newlongma”), one of Ronda’s suppliers;
and the other two cases have been withdrawn: 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, under which 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 case mediation date was March 3, 2023 and was subsequently docketed on July 3, 2023. Since then, Newlongma filed a jurisdictional
objection, and the Court dismissed that jurisdictional objection. Subsequently Newlongma filed a counterclaim and the Court hosted an exchange of evidence between the parties on 17 October 2023, and discovery was also organized on November 14,
2023 and January 16, 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 to pay for outstanding invoices totaling $583,813; and 3) to terminate all agreements between the parties, including the vehicle purchase orders which have not been fulfilled. Newlongma was dissatisfied with this third judgment
and filed an appeal on March 21, 2024. The appeal was dismissed and the original judgment was upheld by the Court on July 2, 2024. On December 18, 2023, Zhejiang Sinomachinery Co., Ltd. filed a lawsuit against
Tonghe County Tianxin Agricultural Machinery Co., Ltd. (“Tianxin”), requesting payment for total contract price of CNY461,800
(approximately US$ 65,104) and interest under a disputed contract of sale. On April 17, 2024, the court made the judgement
supporting plaintiff’s primary claims, ruling Tianxin to pay Zhejiang Sinomachinery CNY461,800 (approximately US$ 65,104) plus interest and relevant legal expenses within 10 days. On July 3, 2024, the Court accepted Zhejiang Sinomachinery’s application for compulsory execution. On January 2, 2024, MHP Americas, Inc. (“MHP”), through counsel, sent a letter
to Cenntro Electric Group Limited (“Cenntro”) demanding payment allegedly owed by Cenntro to MHP in the amount of $1,767,516.91 for
unpaid invoices and $3,289,500 for total contract invoices and milestone payments for alleged breaches in connection with the
parties’ August 8, 2022, Master Consulting Services Agreement and/or March 9, 2023, Statement of Work. On January 12, 2024, Cenntro, through counsel, responded to the letter denying any breach and disputing the amounts claimed. On April 10, 2024, CEGL filed a lawsuit against MHP Americas, Inc. (“MHP”) for
breach under the Master Consulting Services Agreement and SAP S/4HANA SOW by failure to properly implement the SAP S/4HANA globally as set forth in those contracts, and for breach of implied covenants of good faith and fair dealing, causing
Cenntro to suffer significant damages; and demanded a jury trial on all issues which are triable. Under this claim, CEGL is seeking for a remittance of $512,226 paid to date and a recission of the remaining contract 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 report, the case remains active with parties performing required interrogatories and discovery. The matter is ongoing with outcomes anticipated in 4th quarter of 2025. On March 18, 2024, EastGroup Properties, LP filed a summons for eviction
against Cenntro Automotive Group for default of rents on commercial leased property located in Duval County, Jacksonville, Florida. It is alleged that Cenntro was behind in rental payments to the landlord. As of the date of this report, both
parties have reached a Settlement Agreement and General Release of All Claims. The matter is now closed. On March 20, 2024 BAL Freeway Associates, LLC filed an Unlawful Detainer
against Cenntro Automotive Corporation alleging non-payment of rents for commercial leased property in San Bernadino County, Ontario, CA. Parties were able to come to terms through counsel via Stipulated Judgement for prescribed settlement of
due rents. Said Stipulated Judgement was filed with the court in San Bernadino County on May 6, 2024. To date, all parties have honored stipulations and Cenntro continues to occupy premises. On April 22, 2024, BRI 2240 North Lane Avenue, LLC filed a summons for eviction
against Cenntro Automotive Group for default of rents on commercial leased property located in Duval County, Jacksonville, Florida. It is alleged that Cenntro was behind in rental payments to the landlord. As of the date of this report, Cenntro
has vacated the premises, the case remains open and is in the final stages of negotiating settlement between the parties. On
May 6, 2024, 225 Willow Brook Rd, LLC filed a summons notice against Cenntro Automotive Corporation noting default of rents on commercial leased property located in Monmouth County, Freehold, New Jersey. It is alleged that Cenntro was
behind in rent payments to the landlord. Cenntro has vacated the premises, turned in all keys and all other material items belonging to the landlord and in Cenntro’s possession at the time and notified the Landlord of the same. On June 7,
2024, the matter was dismissed by plaintiff noting Cenntro has no financial obligation associated with the dismissal of the matter. On June 24, 2024, EWI Worldwide, Inc through representation sent a Demand for
Arbitration regarding contract dispute with Cenntro Automotive Corporation. It is alleged that an outstanding balance is owed in the amount of $271,255.79,
excluding legal and filing fees associated therewith. Said breach of contract involves the lease and set-up of tradeshow display equipment. As of the date of this report, the parties have completed Arbitration. Accompanied by satisfaction of
the amount outstanding, a Settlement Agreement and Mutual Release of all Claims filing has been recorded. And the matter is now closed. CAE has filed an action in court Landgericht Bochum against Delivrium s.r.o., a
company in Louny, Czech Republic (“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 . Currently CAE is waiting for a statement or notification from the court in Louny (Czech Republic). As it was not possible to deliver the claim
neither to the Company nor to the Managing Director CAE files now for a public display in the court of Louny. After a period of 1 Month the claim will be handled by the court in Louny. |
