Cenntro Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (the Company’s principal executive officer and interim principal accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. 90 Table of Contents Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process used to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. GAAP. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our Board and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Any system of internal control, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the inherent limitations in all internal control systems, no system of internal control over financial reporting can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, management concluded that Cenntro has limited accounting personnel and other resources with which to address its internal control over financial reporting in accordance with requirements applicable to public companies. Historically, Cenntro had not retained a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters under U.S. GAAP. Management’s Remediation Initiatives Management has taken- and is continuing to take-actions to remediate our material weakness and strengthen our internal control over our financial reporting and risk management. To that end, in April 2021, we hired an experienced officer, Mr. Edmond Cheng to be our Chief Financial Officer. As a result of the Combination, Management has taken- and is continuing to take-actions to remediate our material weakness and is taking steps to strengthen our internal control over financial reporting and risk management. In 2022, we steadily increased our finance team resources based in our Freehold, NJ, headquarters. Also in in January 2022, we appointed our Financial Controller for North America who is a CPA license holder. As of the date of this report, we have a total of six professionals on our finance team in the United States including three certified public accountants (CPAs) and one staff accountant with public accounting experience who has passed their CPA exams. We intend to hire additional professional accountants with greater familiarity with U.S. GAAP and SEC reporting requirements. Additionally, we have retained a consulting firm to assist us in assessing our compliance with The Sarbanes-Oxley Act to help us (i) further develop and implement formal policies, processes and documentation procedures relating to our financial reporting as well as (ii) address the accounting function’s staffing needs and training and strengthen our internal control processes. Our material weakness will not be considered remediated until management completes the design and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded that these controls are effective. Changes in Internal Controls over financial reporting No change in our internal control over financial reporting occurred during the fiscal year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. 91 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. The following table sets forth certain information with respect to our directors, executive officers and significant employees: Name Age Position Executive Officers: Peter Z. Wang 68 Chief Executive Officer, Managing Director and Chairman of the Board Edmond Cheng 62 Chief Financial Officer Marianne McInerney 59 Chief Marketing Officer Wei Zhong 45 Chief Technology Officer Tony W. Tsai 50 Vice President, Corporate Affairs and Corporate Secretary Ming He 52 Treasurer Mathew S. Zauner 50 Corporate Secretary Non-Executive Directors: Yi Zeng 67 Director Christopher Thorne (1)(2)(3) 55 Director Jiawei “Joe” Tong (1)(2)(3) 59 Director Benjamin B. Ge (1)(2)(3) 55 Director (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating Committee Peter Z. Wang, founded CAG, the former parent company of Cenntro, and served as its Chairman and Chief Executive Officer since 2013. Mr. Wang began serving as Managing Director, Chairman of the Board, and Chief Executive Officer of the Company immediately following the closing of the Combination in December 2021. Mr. Wang is an entrepreneur and investor in the electric vehicle and technology industries, and has founded or co-founded a number of companies in his career, including UTStarcom (a global telecom infrastructure provider), which went public in 2000, World Communication Group, an international telecommunication company, and Sinomachinery Group, a diesel power system (engine and transmission) manufacturer. Mr. Wang was named one of the Outstanding 50 Asian Americans in Business by Asian American Business Development Center in 2004, one of China’s 100 Most Innovative Businessmen by Fast Company Magazine in 2017, and one of the Most Intriguing Entrepreneurs by Goldman Sachs in 2019. Mr. Wang is also the chairman of the board of directors of Cenntro Enterprise Limited, a principal stockholder of the Company, and Greenland Technologies Holding Corp. (NASDAQ: GTEC), a transmission products manufacturing company. Mr. Wang holds Bachelor of Science degrees in Computer Science and Math, as well as a Master of Science degree in Electrical Engineering, from the University of Illinois at Chicago. Mr. Wang also holds a Master of Business Administration from Nova Southeastern University. We believe Mr. Wang is qualified to serve on our Board due to his extensive leadership and management experience, including his experience serving as founder and Chairman and Chief Executive Officer of CAG. Edmond Cheng, has served as Cenntro’s President and Chief Financial Officer since April 2021 and became Chief Financial Officer of the Company immediately following the closing of the Combination in December 2021. Prior to joining Cenntro, Mr. Cheng served as the Chief Financial Officer and a Partner of Mithera Capital Management LLC from August 2017 to March 2021. Mr. Cheng was the Chief Financial Officer (Worldwide) of Pactera Technology International Ltd., a leading global IT software and services company, from January 2015 to July 2017. From 2009 to 2015, Mr. Cheng served as the Chief Financial Officer for publicly listed companies including Zoomlion, a Chinese manufacturer of construction machinery and sanitation equipment, UTStarcom, Inc., a global telecom infrastructure provider, and TCL Multimedia Technology Holdings Ltd, a Chinese manufacturer of televisions and other consumer electronics. Mr. Cheng previously served as the Chief Financial Officer of portfolio companies owned by private equity companies including Temasek Holdings, Hony Capital/Goldman Sachs, and Blackstone Group. Mr. Cheng brings to the Company extensive financial management expertise in East Asian and U.S. capital markets, corporate development, cross-border mergers & acquisitions, corporate governance, treasury, and investors relations. Mr. Cheng received his Executive Master of Business Administration jointly offered by Columbia University, London Business School, and University of Hong Kong in May 2012. He received a Master of Accounting and a Bachelor of Business Administration from the University of Hawaii. Mr. Cheng is a member of the American Institute of Certified Public Accountants. 92 Table of Contents Marianne McInerney, has served as Cenntro’s Executive Vice President and Chief Marketing Officer since June 2021 and became Chief Marketing Officer of the Company immediately following the closing of the Combination in December 2021. From 2017 to 2020, Ms. McInerney was the Assistant Secretary and Director of Public Relations for the U.S. Department of Transportation and served under Secretary of Transportation Elaine Chao. Ms. McInerney served as Executive Vice President of CAC, a wholly owned subsidiary, from October 2013 to October 2015. Ms. McInerney was Executive Vice President of GreenTech Automotive, a subsidiary of WM Industries Corp., from March 2012 to October 2013 and from October 2010 through March 2012, Ms. McInerney served as Chief Operating Officer at PHC, a North American distribution company focused on bringing Chinese vehicles to market. In 2010, Ms. McInerney served as a strategic consultant to Azure Dynamics to support the relaunch of the Ford Transit Connect EV, where she was responsible for market positioning, product strategy, and aligning sales strategies with corporate revenue goals. Ms. McInerney has been immersed in the Automotive and Transportation industry for almost two decades, during which time she has advised multiple original equipment manufacturers on go-to-market strategies, pricing, marketing, branding and sales, product development and business development and operations. Ms. McInerney is a former President of the American International Automobile Dealers Association, which represents over 11,000 dealer organizations in the United States on matters ranging from trade, taxation, environment and operations. Ms. McInerney received her bachelor’s degree in Political Science from the University of Dayton. Wei Zhong, has been Cenntro’s Chief Technology Officer since 2013 and became our Chief Technology Officer immediately following the closing of the Combination in December 2021. Mr. Zhong has been instrumental in the development of our electric vehicle technologies and models, as well as the development of its supply chain. Prior to 2013, Mr. Zhong was employed with Hangzhou Jiuru Economic Information Consulting Co., Ltd., where he developed software for its enterprise information query platform. Prior to that time, Mr. Zhong served as a communication technology developer for Zhejiang Guangtong Network Technology Co., Ltd. Mr. Zhong holds a bachelor’s degree in Biotechnology from Zhejiang University. Tony W. Tsai, has served as Vice President, Corporate Affairs of CAC, a wholly owned subsidiary, since July 2013 and was appointed Vice President, Corporate Affairs and Company Secretary of CEG, a wholly owned subsidiary, in July 2021. Mr. Tsai was appointed our Vice President, Corporate Affairs and Company Secretary immediately following the closing of the Combination in December 2021. Since April 2007, Mr. Tsai has also been a real estate advisor at Winzone Realty, Inc. From 2007 to 2009, Mr. Tsai served as Compliance Director and an investment banker at CapLink Financial Group, LLC, where he managed broker dealer compliance, supervised sales teams and provided strategic advice. From 2006 to 2007, Mr. Tsai was an investment banker with Kuhns Brothers, Inc. Since joining CAC, Mr. Tsai has been involved in corporate and communications strategy and global regulatory matters. Mr. Tsai holds a bachelor’s degree in Business Administration, with a focus on International Sales Marketing, from Baruch College, City University of New York. Ming He, was appointed as Cenntro’s Treasurer in May 2022. Mr. He joined Cenntro Automotive Group, the predecessor of CEGL as Chief Financial Officer in February 2014. Before his role at CAG, he served as the Chief Financial Officer of Shengkai Innovations, Inc. from March 2010 through April 2012, which completed its Nasdaq listing and public offerings. Between January 2007 and February 2010, Mr. He served as Chief Financial Officer of Zhongchai Machinery, Inc. From October 2004 until January 2007, Mr. He served as Senior Director at SORL Auto Parts, Inc. (“SORL"), where he guided SORL’s progress in the US capital market and closed a public offering in November 2006. Mr. He holds designations of Chartered Financial Analyst and Certified Public Accountant. He received his Master of Science in Accountancy in 2004 and Master of Business Administration in 2003 from University of Illinois at Urbana-Champaign. He also received his bachelor’s degree from Shanghai University of International Business and Economics (f.k.a. Shanghai Institute of Foreign Trade) in 1992. 93 Table of Contents Mathew S. Zauner, was appointed as Corporate Secretary in December 2022. Mr. Zauner has over five years of experience in assuming numerous external board appointments across a wide range of industries, where he has advised international and domestic entities on Australian corporate law, governance, and tax compliance. Mr. Zauner is currently the sole trustee and fiduciary to a fund established by a large Australian mining company. Prior to working in governance and compliance, Mr. Zauner acted as a senior tax lawyer at MinterEllison from 2009 to 2016 and as a senior manager at KPMG from 2016 to 2017. Both positions were held in Australia. Mr. Zauner holds a Master of Taxation from the University of New South Wales, a Bachelor of Laws (Hons) from Bond University, and a Certificate in Applied Taxation from the Tax Institute of Australia. Mr. Zauner is also a solicitor of the High Court of Australia, an Associate of the Governance Institute of Australia, and a member of the Australian Institute of Company Directors. The Company believes Mr. Zauner’s extensive experience in management and corporate tax compliance with global and Australian-based companies makes him well-suited to serve as an officer of the Company. Non-Employee Directors Yi Zeng, became a member of our Board on September 16, 2022 after the resignation of a former board member. Dr. Zeng has over 30 years’ experience in the energy industry, management, marketing and research. From 2016 to 2017, Dr. Zeng served as a non-executive Director of an energy company Range Resources Pty. Ltd, a former public company that was listed on both the London and Australian Stock Exchanges. He retired thereafter to enjoy family life. From 2011 to 2016, Dr. Zeng served as an independent consultant for Kori Ltd. From 2011 to 2012, he was the managing director of Lomon Pty. Ltd. a former public company that was listed on the Australian Stock Exchange. From 2007-2009, Dr. Zeng was the Asia Pacific Regional Marketing Manager of Titanium, BHP Billiton Shanghai, a global energy and mining company. Prior to that Dr. Zeng served as a Principle and Senior Scientist at BHP Exploration & Mining Technology in Melbourne, Australia from 2000 to 2007. Dr. Yi Zeng holds a Ph.D. in Geophysics from Victoria University of Wellington, New Zealand; an MSc in Applied Geophysics Exploration from Chengdu College of Geology, China; and a BSc in Geophysical Exploration from Chengdu University of Technology, China. The Company believes Dr. Zeng’s extensive experience in management, technical, and research with global and Australian-based companies makes him well suited to serve as a member of the Board. Christopher Thorne, became a member of our Board following the closing of the Combination on December 30, 2021, and serves on each of our audit committee, compensation committee and nominating committee. Mr. Thorne has served as Chairman of the Board of Broadline Capital, a global private equity firm focused on growth capital and impact investments primarily in Asia and North America, since 2005. Mr. Thorne has been the Chairman of the Board for Cytonus Therapeutics since November 2019, Endosphere, Inc. since December 2010 and has been the Chairman of the Board of Powermers, Inc. since January 2010. Mr. Thorne received his Juris Doctor from Harvard Law School with honors, Master of Business Administration from Harvard Business School with final year honors, and a bachelor’s degree from Harvard University, magna cum laude , where he founded the Harvard Negotiation Law Review and served as president of the university-wide student government. We believe Mr. Thorne is qualified to serve on our Board due to his substantial private equity and board of directors experience. Jiawei “Joe” Tong, became a member of our Board following the closing of the Combination on December 30, 2021, and serves on each of our audit committee, compensation committee and nominating committee. Mr. Tong co-founded MeetChina, a leading B2B e-commerce website for China in 1998 and served as its Chief Executive Officer and Director from 1998 to 2003. In 2007, Mr. Tong joined Telstra Sensis as its President of China, and helped build Fang.com (NASDAQ: SFUN), a leading real-estate company website in China, and Autohome Inc. (NYSE: ATHM), a leading automotive company website. In 2016, Mr. Tong joined Ford Motor Company as its Head of Smart Mobility, China. Mr. Tong holds a bachelor’s degree in Computational Mathematics from Nanjing University, and a Master of Business Administration in Finance and Strategic Marketing from the University of Pennsylvania’s Wharton School of Business. We believe Mr. Tong is qualified to serve on our Board due to his past experience with business-to-business enterprises and in the automotive industry. Benjamin B. Ge, became a member of our board following his election at the Company’s annual general meeting on May 31, 2022. Since February 2019, Mr. Ge has been the Chief Financial Officer of New Century Science & Technology Limited. Mr. Ge was a Managing Director at Citic Capital Holdings Limited, an alternative investment management and advisory company, from 2016 to 2019. Prior to joining Citic Capital, Mr. Ge was Regional Head (China) at Sequoia Capital Operations LLC, a venture capital firm focused on seed stage, mid stage, late stage, and growth investments in the fintech sector, from 2010 to 2016. Mr. Ge was Vice President of JP Morgan’s Global Special Opportunity Group from 2007 to 2009 and Vice President of UniCredit China Capital Ltd. from 2005 to 2007. Mr. Ge received a Bachelor of Economics degree from Southern China Normal University in 1989, as well as an Associate Diploma of Business in International Trade in 1991, a Post-Graduate Diploma of Finance in 1994, and a Master of Finance degree in 2001 from Royal Melbourne Institute of Technology. He is member of the Securities Institute of Australia. The Company believes Mr. Ge is qualified to serve on our Board due to his extensive experience in private equity and corporate finance matters. 94 Table of Contents Term of Office Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. Board Committees We have established three committees under the board of directors: an audit committee, a compensation committee and a nominating committee. We have adopted a charter for each of the three committees. Copies of our committee charters are posted on our corporate investor relations website. Each committee’s members and functions are described below. Audit Committee. Our Audit Committee consists of Christopher Thorne, Jiawei “Joe” Tong and Benjamin B. Ge. Mr. Thorne is the chairman of our audit committee. We have determined that these directors satisfy the “independence” requirements of NASDAQ Rule 5605 and Rule 10A-3 under the Securities Exchange Act of 1934. Our board of directors has determined that Mr. Thorne qualifies as an audit committee financial expert and has the accounting or financial management expertise as required under Item 407(d)(5)(ii) and (iii) of Regulation S-K. The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. Compensation Committee. Our Compensation Committee consists of Christopher Thorne, Jiawei “Joe” Tong and Benjamin B. Ge. Mr. Tong is the chairman of our compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things: ● reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; ● reviewing and recommending to the shareholders for determination with respect to the compensation of our directors; 95 Table of Contents ● reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management. Nomination Committee. Our Nomination Committee consists of Christopher Thorne, Jiawei “Joe” Tong and Benjamin B. Ge. Mr. Tong is the chairman of our nomination committee. The nomination committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nomination committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and ● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. Family Relationships There are no family relationships between any of our directors or executive officers. Certain Legal Proceedings To our knowledge, no director, nominee for director, or executive officer of the Company has been a party in any legal proceeding material to an evaluation of his ability or integrity during the past ten years. Code of Ethics The Company adopted a Code of Ethics applicable to its directors, officers, and employees. This includes our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. The full text of our Code of Ethics is posted on our website at https://ir.cenntroauto.com/static-files/fd697ea5-17b6-4536-bfe2-5539e84305f3 . Item 11. Executive Compensation. Introduction We are an emerging growth company, as defined in the JOBS Act. As an emerging growth company, we will be exempt from certain requirements related to executive compensation, including, but not limited to, the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of our Chief Executive Officer to the median of the annual total compensation of all of our employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This section provides an overview of CEG’s executive compensation programs, including a narrative description of the material factors necessary to understand the information disclosed in the summary compensation table below. 96 Table of Contents For the year ended December 31, 2022, CEG’s named executive officers (“Named Executive Officers” or “NEOs”) were: • Peter Z. Wang, Chief Executive Officer; • Wei Zhong, Chief Technology Officer; • Edmond Cheng, Chief Financial Officer; The objective of CEG’s compensation program is to provide a total compensation package to each NEO that will enable CEG to attract, motivate and retain outstanding individuals, align the interests of our executive team with those of our equity holders, encourage individual and collective contributions to the successful execution of our short- and long-term business strategies and reward NEOs for performance. Name and Principal Position Fiscal Year Salary ($) Bonus ($) Stock Awards ($) All Other Compensation ($) Total($) Peter Z. Wang 2022 350,000 (2) 0 920,165 (3) 0 1,270,165 Chief Executive Officer 2021 235,000 (1) 0 0 0 235,000 Edmond Cheng 2022 300,000 (5) 0 464,022 (6) 0 764,022 Chief Financial Officer 2021 225,000 (4) 100,000 0 0 325,000 (3) Marianne McInerney 2022 250,000 0 160,988 (7) 0 410,988 Chief Marketing Officer 2021 250,000 0 0 0 250,000 (1) Represents the amount paid to Mr. Wang during the year ended December 31, 2021. Mr. Wang was entitled to receive $10,000 per month from January 1, 2021 until July 1, 2021. On July 1, 2021, Mr. Wang’s compensation was increased to $350,000 per year and was paid $29,167 per month through the end of the year. (2) Represents the amount paid to Mr. Wang during the year ended December 31, 2022. (3) On May 3, 2022, Mr. Wang was granted an option to purchase 3,500,000 Ordinary Shares of the Company under the its 2022 Stock Incentive Plan (the “2022 Plan”), with an exercise price per share equal to $1.8480 per share of incentive stock options and $1.6800 per share of non-statutory stock options, which is equal to the price per Ordinary Share of the Company on the date of grant of the option, out of which 656,250 options have been vested during the year ended December 31, 2022, fair value of which is represented here. (4) Represents the amount paid to Mr. Cheng for services rendered as Chief Financial Officer between April and December 2021. (5) Represents the amount paid to Mr. Cheng during the year ended December 31, 2022 (6) On December 30, 2021, Mr. Cheng was granted an option to purchase 1,297,063 Ordinary Shares under the 2022 Plan, with an exercise price per share equal to $5.74 per share, which is equal to the price per Ordinary Share of the Company on the date of grant of the option. The option grant, and adjustment of exercise price to $1.6800 per share, were approved by shareholders at the Annual General Meeting on May 31, 2022, out of which 324,264 options have been vested during the year ended December 31, 2022, fair value of which is represented here. (7) On May 3, 2022, Ms. McInerney was granted an option to purchase 600,000 Ordinary Shares under the 2022 Plan, with an exercise price per share equal to $1.6800 per share, which is equal to the price per Ordinary Share of the Company on the date of grant of the option. The option grant was approved by shareholders at the Annual General Meeting on May 31, 2022, out of which 112,500 options have been vested during the year ended December 31, 2022, fair value of which is represented here. 97 Table of Contents Compensation of Directors We review compensation annually for all employees, including our executives. In setting executive base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our shareholders, and a long-term commitment to us. Agreements with Our Named Executive Officers Below are descriptions of the material terms of the employment agreements and offer letters with Cenntro’s Named Executive Officers. Employment Agreement with Peter Z. Wang On August 20, 2017, CAG entered into an employment agreement with Mr. Wang to serve as Chief Executive Officer of CAG. The initial term of the employment agreement expires on August 19, 2022 and is automatically renewed for successive one-year periods unless terminated by either party prior to the expiration of any extended term. The employment agreement provides that Mr. Wang is entitled to an annual base salary (which is currently $350,000). Mr. Wang is not entitled to any cash severance under his employment agreement. Mr. Wang’s employment agreement contains customary restrictions on competition, solicitation and the disclosure of confidential information. In connection with the closing of the Combination, CAC assumed the rights and obligations of CAG under the employment agreement with Mr. Wang. Employment Agreement with Edmond Cheng On April 1, 2021, Edmond Cheng joined CAG as CEG’s President and Chief Financial Officer. In connection with Mr. Cheng’s appointment, CAG entered into an offer letter with Mr. Cheng, which was amended and restated as of June 28, 2021 and further amended on September 3, 2021. The initial term of Mr. Cheng’s employment expires on March 31, 2024 and is automatically renewed for successive one-year periods unless terminated by either party prior to the expiration of the initial term or any extension thereof. Pursuant to the amended and restated offer letter, Mr. Cheng will receive an annual base salary of $300,000 and received a one-time signing bonus of $100,000. Additionally, on December 30, 2021, Mr. Cheng was granted an option, subject to shareholder approval, to purchase 1,297,063 Ordinary Shares under the 2022 Plan with an exercise price per share equal to $5.74 per share, which is equal to the price per Ordinary Share of the Company on the date of grant of the option. Under the amended and restated offer letter, upon termination of his employment without “cause” or a resignation for “good reason” (as such terms are defined in the amended and restated offer letter), subject to his execution and non-revocation of a release of claims agreement, and his compliance with certain restrictive covenants as described below, Mr. Cheng will be eligible to receive six months of base salary (payable in accordance with our customary payroll practice), a prorated annual bonus for the year of termination and continuing COBRA coverage (but not for more than eighteen months, in accordance with applicable law). Mr. Cheng executed CAG’s standard Employee’s Proprietary Information and Inventions and Non-Competition Agreement (“PIIA”) which contains customary restrictions on competition, solicitation and disclosure of confidential information as well as provisions regarding the assignment of intellectual property. In connection with the closing of the Combination, CAC assumed the rights and obligations of CAG under the offer letter and PIIA with Mr. Cheng. 98 Table of Contents Employment Agreement with Marianne McInerney On June 1, 2021, Marianne McInerney joined CAG as its Executive Vice President and Chief Marketing Officer. In connection with Ms. McInerney’s appointment, CAG entered into an offer letter with Ms. McInerney. The initial term of Ms. McInerney’s employment expires on June 1, 2022 and is automatically renewed for successive one-year periods unless terminated by either party prior to the expiration of the initial term or any extension thereof. Pursuant to the offer letter, Ms. McInerney received an annual base salary of $250,000. Ms. McInerney executed an Employee’s PIIA which contains customary restrictions on disclosure of confidential information as well as provisions regarding the assignment of intellectual property. In connection with the closing of the Combination, CAC assumed the rights and obligations of CAG under the offer letter and PIIA with Ms. McInerney. Prior to June 1, 2021, Ms. McInerney provided consulting services to CEG and received fees at the annual rate of $250,000. On February 28, 2023, we informed Ms. McInerney that the Company would not renew her appointment prior to the automatic renewal of her June 1, 2021, offer letter and thus, Ms. McInerney’s appointment as Executive Vice President and Chief Marketing Officer will cease as of May 31, 2023. Prior to May 31, 2023, CEG and Ms. McInerney entered into an updated contract to rename her position as Chief Global Strategist and to redirect and focus her portfolio to include international and government relations and incentives. Health and Welfare Benefits and Perquisites All of Cenntro’s executive officers were eligible to participate in its employee benefit plans, including its medical, dental, vision, life and disability insurance plans, in each case on the same basis as all of its other employees. Cenntro does not maintain any retirement plans or executive-specific benefit or perquisite programs. Following the closing of the Combination, we provide employees, including our executive officers, the same benefits. Annual Cash Bonuses None of Cenntro’s executive officers were eligible to receive a cash bonus for the year ended December 31, 2022, except for Mr. Cheng who received a signing bonus of $100,000 in connection with his employment with the Company, which bonus was accrued during the year ended December 31, 2021 and paid in early 2022. Equity Incentive Awards Cenntro has historically granted stock options to its employees, including its executive officers, under the 2016 Plan and the 2022 Plan. Options were granted at a price not less than the fair market value on the date of grant and generally are exercisable within five years after the date of grant. Options generally expire eight to ten years from the date of grant. Pursuant to the Acquisition Agreement, at the closing of the Combination, NBG assumed the 2016 Plan and the options granted and outstanding thereunder and, as a result, options to purchase an aggregate of 9,225,271 Ordinary Shares under the 2016 Plan, out of which 9,173,803 are outstanding as of the date of this Annual Report. No new grants will be made under our 2016 Plan and all share awards will be granted to our employees, including our executive officers, under the 2022 Plan. Cenntro Electric Group Limited 2022 Stock Incentive Plan On December 30, 2021, in connection with the Combination, the Board adopted the 2022 Plan, which became effective on that date, and was later approved by shareholders at the Annual General Meeting on May 31, 2022. The following is a description of the material terms of the 2022 Plan. The summary below does not contain a complete description of all provisions of the 2022 Plan and is qualified in its entirety by reference to the 2022 Plan, a copy of which was filed as Exhibit 10.5 to our Report of Foreign Private Issuer on Form 6-K, filed with the SEC on January 5, 2022, and is incorporated herein by reference. 99 Table of Contents Share Awards. The 2022 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), restricted share awards, share unit awards, share appreciation rights, cash-based awards, and performance-based share awards, or collectively, share awards. ISOs may be granted only to our employees, including officers, and the employees of our subsidiaries. All other share awards may be granted to our employees, officers, our non-employee directors, and consultants and the employees and consultants of our subsidiaries and affiliates. Share Reserve. The aggregate number of Ordinary Shares that may be issued pursuant to share awards under the 2022 Plan will not exceed the sum of 25,965,234 shares, plus an annual increase on the first day of each fiscal year, for a period of not more than nine (9) years, beginning on January 1, 2023 and ending on (and including) January 1, 2031, in an amount equal to the lesser of (i) five percent (5%) of the outstanding shares on the last day of the immediately preceding fiscal year or (ii) such lesser amount (including zero) that the compensation committee (as defined below) determines for purposes of the annual increase for that fiscal year. If restricted securities or securities issued upon the exercise of options are forfeited, then such shares shall again become available for awards under the 2022 Plan. If share units, options or share appreciation rights are forfeited or terminate for any reason before being exercised or settled, or an award is settled in cash without the delivery of shares to the holder, then the corresponding shares will again become available for awards under the 2022 Plan. Any shares withheld to satisfy the exercise price or tax withholding obligation pursuant to any award of options or share appreciation rights shall again become available for awards under the 2022 Plan. If share units or share appreciation rights are settled, then only the number of shares (if any) actually issued in settlement of such share units or share appreciation rights shall reduce the number of shares available under the 2022 Plan, and the balance (including any shares withheld to cover taxes) shall again become available for awards under the 2022 Plan. As of the date of this Annual Report, options to purchase a total of 12,337,063 Ordinary Shares were outstanding under the 2022 Plan. As of the date of this Annual Report, options to purchase an aggregate of 12,797,063 Ordinary Shares have been granted and no Ordinary Shares have been issued under the 2022 Plan. Incentive Stock Option Limit . The maximum number of Ordinary Shares that may be issued upon the exercise of ISOs under the 2022 Plan is 25,965,234 shares. Grants to Outside Directors. The fair market value of any awards granted under the 2022 Plan to an outside director as compensation for services as an outside director during any twelve-month period may not exceed $500,000 on the date of grant, provided that any award granted to an outside director in lieu of an annual cash retainer payment and/or cash meeting fees (if any) will be excluded from such limit. An outside director may elect to receive his or her annual cash retainer payments and/or cash meeting fees (if any) in the form of cash, options, share appreciation rights, restricted securities, share units, or a combination thereof, as determined by our Board. Administration. The 2022 Plan will be administered by our Board or a committee appointed by our Board, or the compensation committee. Subject to the limitations set forth in the 2022 Plan, the compensation committee has the authority to determine, among other things, to whom awards will be granted, the number of shares subject to awards, the term during which an option or share appreciation right may be exercised and the rate at which the awards may vest or be earned, including any performance criteria to which they may be subject. The compensation committee also has the authority to determine the consideration and methodology of payment for awards. Repricing; Cancellation and Re-Grant of Share Awards. The compensation committee has the authority to modify outstanding awards under the 2022 Plan. Subject to the terms of the 2022 Plan, the compensation committee has the authority to cancel any outstanding share award in exchange for new share awards, cash, or other consideration, without shareholder approval but with the consent of any adversely affected participant. Stock Options. A stock option is the right to purchase a certain number of shares, at a certain exercise price, in the future. Under the 2022 Plan, ISOs and NSOs are granted pursuant to stock option agreements adopted by the compensation committee. The compensation committee determines the exercise price for a stock option, within the terms and conditions of the 2022 Plan, provided that the exercise price of a stock option generally cannot be less than one hundred percent (100%) of the fair market value of our Ordinary Shares on the date of grant. Options granted under the 2022 Plan vest at the rate specified by the compensation committee. Stock options granted to certain employees outside of the United States may be settled in cash. 100 Table of Contents Stock options granted under the 2022 Plan generally must be exercised by the optionee before the earlier of the expiration of such option or the expiration of a specified period following the optionee’s termination of employment. Each stock option agreement will set forth the extent to which the option recipient will have the right to exercise the option following the termination of the recipient’s service with us, and the right to exercise the option of any executors or administrators of the award recipient’s estate or any person who has acquired such options directly from the award recipient by bequest or inheritance. Payment of the exercise price may be made in cash or, if provided for in the stock option agreement evidencing the award, (1) by surrendering, or attesting to the ownership of, shares which have already been owned by the optionee, (2) future services or services rendered to us or our affiliates prior to the award, (3) by delivery of an irrevocable direction to a securities broker to sell shares and to deliver all or part of the sale proceeds to us in payment of the aggregate exercise price, (4) by delivery of an irrevocable direction to a securities broker or lender to pledge shares and to deliver all or part of the loan proceeds to us in payment of the aggregate exercise price, (5) by a “net exercise” arrangement, (6) by delivering a full-recourse promissory note, or (7) by any other form that is consistent with applicable laws, regulations, and rules. Tax Limitations on Incentive Stock Options . The aggregate fair market value, determined at the time of grant, of our Ordinary Shares with respect to ISOs that are exercisable for the first time by an option holder during any calendar year under all of our share plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own shares possessing more than ten percent (10%) of our total combined voting power or that of any of our affiliates unless (1) the option exercise price is at least one hundred ten percent (110%) of the fair market value of the shares subject to the option on the date of grant, and (2) the term of the ISO does not exceed five (5) years from the date of grant. Restricted Share Awards. The terms of any awards of restricted securities under the 2022 Plan will be set forth in a restricted share agreement to be entered into between us and the recipient. The compensation committee will determine the terms and conditions of the restricted share agreements, which need not be identical. A restricted share award may be subject to vesting requirements or transfer restrictions or both. Restricted securities may be issued for such consideration as the compensation committee may determine, including cash, cash equivalents, full recourse promissory notes, past services and future services. Award recipients who are granted restricted securities generally have all of the rights of a shareholder with respect to those shares, provided that dividends and other distributions will not be paid in respect of unvested shares unless and until the underlying shares vest. Share Unit Awards. Share unit awards give recipients the right to acquire a specified number of shares (or cash amount) at a future date upon the satisfaction of certain conditions, including any vesting arrangement, established by the compensation committee and as set forth in a share unit award agreement. A share unit award may be settled by cash, delivery of shares, a combination of cash and shares as deemed appropriate by the compensation committee. Recipients of share unit awards generally will have no voting or dividend rights prior to the time the vesting conditions are satisfied and the award is settled. At the compensation committee’s discretion and as set forth in the share unit award agreement, share units may provide for the right to dividend equivalents. Dividend equivalents may not be distributed prior to settlement of the share unit to which the dividend equivalents pertain and the value of any dividend equivalents payable or distributable with respect to any unvested share units that do not vest will be forfeited. Share Appreciation Rights. Share appreciation rights generally provide for payments to the recipient based upon increases in the price of our Ordinary Shares over the exercise price of the share appreciation right. The compensation committee determines the exercise price for a share appreciation right, which generally cannot be less than one hundred percent (100%) of the fair market value of our Ordinary Shares on the date of grant. A share appreciation right granted under the 2022 Plan vests at the rate specified in the share appreciation right agreement as determined by the compensation committee. The compensation committee determines the term of share appreciation rights granted under the 2022 Plan, up to a maximum of ten years. Upon the exercise of a share appreciation right, we will pay the participant an amount in shares, cash, or a combination of shares and cash as determined by the compensation committee, equal to the product of (1) the excess of the per share fair market value of our Ordinary Shares on the date of exercise over the exercise price, multiplied by (2) the number of Ordinary Shares with respect to which the share appreciation right is exercised. 101 Table of Contents Other Share Awards. The compensation committee may grant other awards based in whole or in part by reference to our Ordinary Shares. The compensation committee will set the number of shares under the share award and all other terms and conditions of such awards. Cash-Based Awards. A cash-based award is denominated in cash. The compensation committee may grant cash-based awards in such number and upon such terms as it shall determine. Payment, if any, will be made in accordance with the terms of the award, and may be made in cash or in Ordinary Shares, as determined by the compensation committee. Performance-Based Awards. The number of shares or other benefits granted, issued, retainable and/or vested under a share or share unit award may be made subject to the attainment of performance goals. The compensation committee may utilize any performance criteria selected by it in its sole discretion to establish performance goals. Changes to Capital Structure. In the event of a recapitalization, share split, or similar capital transaction, the compensation committee will make appropriate and equitable adjustments to the number of shares reserved for issuance under the 2022 Plan, the number of shares that can be issued as incentive stock options, the number of shares subject to outstanding awards and the exercise price under each outstanding option or share appreciation right. Transactions. If we are involved in a merger or other reorganization, outstanding awards will be subject to the agreement or merger or reorganization. Subject to compliance with applicable tax laws, such agreement will provide for (1) the continuation of the outstanding awards by us, if we are a surviving corporation, (2) the assumption or substitution of the outstanding awards by the surviving corporation or its parent or subsidiary, (3) immediate vesting, exercisability, and settlement of the outstanding awards followed by their cancellation, or (4) settlement of the intrinsic value of the outstanding awards (whether or not vested or exercisable) in cash, cash equivalents, or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such award or the underlying shares) followed by cancellation of such awards. Change of Control. The compensation committee may provide, in an individual award agreement or in any other written agreement between a participant and us, that the share award will be subject to acceleration of vesting and exercisability in the event of a change of control. Transferability. Unless the compensation committee provides otherwise, no award granted under the 2022 Plan may be transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to shares issued under such award), except by will, the laws of descent and distribution, or pursuant to a domestic relations order. Amendment and Termination. Our Board has the authority to amend, suspend, or terminate the 2022 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. No ISOs may be granted after the tenth anniversary of the date our Board adopted the 2022 Plan. Recoupment. In the event that we are required to prepare restated financial results owing to an executive officer’s intentional misconduct or grossly negligent conduct, the Board (or a designated committee) has the authority, to the extent permitted by applicable law, to require reimbursement or forfeiture to us of the amount of bonus or incentive compensation (whether cash-based or equity-based) such executive officer received during the three fiscal years preceding the year the restatement is determined to be required, to the extent that such bonus or incentive compensation exceeds what the officer would have received based on an applicable restated performance measure or target. We intend to recoup incentive-based compensation from executive officers to the extent required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules, regulations and listing standards that may be issued under that act. 102 Table of Contents 2022 Employee Stock Purchase Plan On December 30, 2021, in connection with the Combination, the Board adopted the Cenntro Electric Group Limited 2022 Employee Stock Purchase Plan (the “ESPP”), which became effective on that date, and was later approved by shareholders at the Annual General Meeting on May 31, 2022. The following is a description of the material terms of the ESPP. The summary below does not contain a complete description of all provisions of the ESPP and is qualified in its entirety by reference to the ESPP, a copy of which was filed as Exhibit 10.6 to our Report of Foreign Private Issuer on Form 6-K, filed with the SEC on January 5, 2022, and is incorporated herein by reference. General. The ESPP is intended to qualify as an “employee stock purchase plan” under Code Section 423, except as explained below under “International Participation.” During regularly scheduled “offerings” under the ESPP, participants will be able to request payroll deductions and then expend the accumulated deduction to purchase a number of Ordinary Shares at a discount and in an amount determined in accordance with the ESPP’s terms. Shares Available for Issuance. The aggregate number of Ordinary Shares that may be issued pursuant to the ESPP is equal to 7,789,571 Ordinary Shares. Administration. Except as noted below, the ESPP will be administered by our Board or a committee appointed by our Board, or the compensation committee. The compensation committee has the authority to construe, interpret and apply the terms of the ESPP, determine eligibility, establish such limitations and procedures as it determines are consistent with the ESPP and adjudicate any disputed claims under the ESPP. Eligibility. Each full-time and part-time employee, including our officers and employee directors and employees of participating subsidiaries, but excluding any employees who are located in China, who is employed by us on the day preceding the start of any offering period is eligible to participate in the ESPP. The ESPP requires that an employee customarily work more than 20 hours per week and more than five months per calendar year in order to be eligible to participate in the ESPP. The ESPP permits an eligible employee to purchase our Ordinary Shares through payroll deductions, which may not be more than fifteen percent (15%) of the employee’s compensation, or such lower limit as may be determined by the compensation committee from time to time. However, no employee is eligible to participate in the ESPP if, immediately after electing to participate, the employee would own shares (including shares such employee may purchase under this plan or other outstanding options) representing five percent (5%) or more of the total combined voting power or value of all classes of our Ordinary Shares. Unless provided otherwise by the compensation committee prior to commencement of an offering, the maximum number of Ordinary Shares which may be purchased by a participant during such offering is equal to (i) fifteen percent (15%) multiplied by (ii) $130,000 divided by the fair market value of an ordinary share on the first day of the offering period. In addition, no employee is permitted to accrue, under the ESPP and all similar purchase plans of us or its subsidiaries, a right to purchase shares of us having a value in excess of $25,000 of the fair market value of such shares (determined at the time the right is granted) for each calendar year. Employees will be able to withdraw their accumulated payroll deductions prior to the end of the offering period in accordance with the terms of the offering. Participation in the ESPP will end automatically on termination of employment. Offering Periods and Purchase Price. The ESPP will be implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, the compensation committee may specify offerings with a duration of not more than twenty-seven (27) months and may specify shorter purchase periods within each offering. During each purchase period, payroll deductions will accumulate, without interest. On the last day of the purchase period, accumulated payroll deductions will be used to purchase our Ordinary Shares for employees participating in the offering. The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than eighty-five percent (85%) of the fair market value per share of our Ordinary Shares on either the offering date or on the purchase date, whichever is less. The fair market value of our Ordinary Shares for this purpose will generally be the closing price on the Nasdaq Capital Market (or such other exchange as our Ordinary Shares may be traded at the relevant time) on the date in question, or if such date is not a trading day, on the last trading day before the date in question. Reset Feature. The compensation committee may specify that, if the fair market value of a share of our Ordinary Shares on any purchase date within a particular offering period is less than or equal to the fair market value on the start date of that offering period, then the offering period will automatically terminate and the employee in that offering period will automatically be transferred and enrolled in a new offering period which will begin on the next day following such purchase date. 103 Table of Contents Changes to Capital Structure. In the event that there is a specified type of change in our capital structure, such as a share split, appropriate adjustments will be made to (1) the number of shares reserved under the ESPP, (2) the individual and aggregate participant share limitations described in the plan and (3) the price of shares that any participant has elected to purchase. Corporate Reorganization. Immediately before a corporate reorganization, the offering period and purchase period then in progress shall terminate and either our Ordinary Shares will be purchased with the accumulated payroll deductions or the accumulated payroll deductions will be refunded without occurrence of any of our Ordinary Shares purchase, unless the surviving corporation (or its parent corporation) assumes the ESPP under the plan of merger or consolidation. International Participation. To provide us with greater flexibility in structuring our equity compensation programs for our non-U.S. employees, the ESPP also permits us to grant employees of our non-U.S. subsidiary entities rights to purchase Ordinary Shares pursuant to other offering rules or sub-plans adopted by the compensation committee in order to achieve tax, securities law or other compliance objectives. While the ESPP is intended to be a qualified “employee stock purchase plan” within the meaning of Code Section 423, any such international sub-plans or offerings are not required to satisfy those U.S. tax code requirements and therefore may have terms that differ from the ESPP terms applicable in the U.S. However, the international sub-plans or offerings are subject to the ESPP terms limiting the overall shares available for issuance, the maximum payroll deduction rate, maximum purchase price discount and maximum offering period length. Amendment and Termination. Our Board and the compensation committee each have the right to amend, suspend or terminate the ESPP at any time. Any increase in the aggregate number of Ordinary Shares to be issued under the ESPP is subject to shareholder approval. Any other amendment is subject to shareholder approval only to the extent required under applicable law or regulation. Amended and Restated 2016 Incentive Stock Option Plan In connection with the Combination, the Company assumed CAG’s obligations under the 2016 Plan. The following is a description of the material terms of the 2016 Plan. The summary below does not contain a complete description of all provisions of the 2016 Plan and is qualified in its entirety by reference to the 2016 Plan, a copy of which was filed as Exhibit 10.7 to our Report of Foreign Private Issuer on Form 6-K, filed with the SEC on January 5, 2022, and is incorporated herein by reference. General . CAG’s board of directors adopted the 2016 Plan, and CAG’s shareholders approved the 2016 Plan, on February 10, 2016. The 2016 Plan provides for the grant of NSOs, share awards, and restricted share purchase offer awards, or collectively, awards, to employees, officers and consultants. While we have granted NSOs under the 2016 Plan, we have not granted any share awards or restricted share purchase offer awards under the 2016 Plan. Administration . The 2016 Plan is administered by the Company’s Board, and may be amended, suspended or terminated by the Board, without shareholder approval, unless either (i) shareholder approval is required by applicable law, regulations or stock exchange listing standards or (ii) the revision or amendment increases the number of shares subject to the 2016 Plan, decreases the price at which grants may be granted, materially increases the benefits to participants, or changes the class of persons eligible to receive grants under the 2016 Plan. Authorized Shares . As of the date of this Annual Report, options to purchase a total of 9,173,803 Ordinary Shares were outstanding under the 2016 Plan. The weighted-average exercise price of the options outstanding under the 2016 Plan is $1.1007 per share. No additional awards and no additional shares are available for future issuance under the 2016 Plan. However, the 2016 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder. In the event of a share split, share dividend, combination or reclassification of the shares, recapitalization, merger or similar event, the 2016 Plan administrator may proportionately adjust the number of shares covered by outstanding awards, the number of shares available for issuance as future awards under the 2016 Plan, and the exercise or purchase price of outstanding awards. 104 Table of Contents Nonstatutory Stock Options . The 2016 Plan administrator determines the exercise price for each stock option and the term of an option may not exceed ten years. No option may be transferred by the optionholder other than by will or the laws of descent or distribution. Each option may be exercised during the optionholder’s lifetime solely by the optionholder. Options granted under the 2016 Plan generally vest at the rate of twenty percent each year commencing on the vesting commencement date over five years. Upon the termination of an optionholder’s service as an employee, non-employee director, or consultant for any reason other than death or disability, such optionholder may exercise his or her vested options for not less than thirty days and not more than three months after the date service terminates. In the case of the optionholder’s termination of service as a result of the optionholder’s death or disability, the option will remain exercisable for not less than six months nor more than one year following such termination. Notwithstanding the foregoing, no option may be exercised after the expiration of its term. Corporate Transactions . The 2016 Plan provides that, in the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or substantially all of the assets or capital stock of the Company, unless otherwise provided by the Board, all outstanding stock options will terminate if not assumed by the successor entity or new stock options of the successor entity are substituted therefore. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table provides information with respect to the beneficial ownership of our Ordinary Shares as of the date of this report, by: • each of our executive officers and directors; • all of our current directors and executive officers as a group; and • each person or entity, or group of persons or entities, known by us to own beneficially more than 5% of our Ordinary Shares. We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. In general, under these rules a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares voting power or investment power with respect to such security. A person is also deemed to be a beneficial owner of a security if that person has the right to acquire beneficial ownership of such security within 60 days. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares that they beneficially own, subject to applicable community property laws. Percentage ownership is based on 304,449,091 Ordinary Shares outstanding as of June 25, 2023. Name and Address of Beneficial Owner (1) Amount and Nature of Beneficial Ownership Percentage of Beneficial Ownership 5% Shareholders : China Leader Group Limited (2) 17,721,659 5.8 % Directors and Executive Officers : Peter Z. Wang (3) 72,638,092 23.9 % Edmond Cheng (4) 486,396 * % Marianne McInerney 187,500 * % Wei Zhong (5) 1,610,170 * % Tony Tsai (6) 476,253 * % Jiawei “Joe” Tong (7) 66,666 * % Christopher Thorne (8) 66,666 * % Ming He (9) 941,413 * % Mathew S. Zauner - - % Yi Zeng - - % Benjamin B. Ge (10) 362,584 * % % All current directors and executive officers as a group (eleven persons) (11) 76,835,740 25.2 % * Represents beneficial ownership of less than 1%. 105 Table of Contents 1) Unless otherwise indicated, the address for each beneficial owner listed in the table above is c/o Cenntro Electric Group Limited, 501 Okerson Road, Freehold, New Jersey 07728. 2) Represents the Acquisition Shares received by China Leader Group Limited (“CLGL”) following the closing of the Combination, pursuant to the Distribution. CLGL is wholly owned by Yeung Heung Yeung, one of the directors of CAG, the former parent company of Cenntro. Yeung Heung Yeung has sole voting and dispositive power with respect to the Ordinary Shares held by CLGL. Accordingly, Mr. Yeung may be deemed to beneficially own the 1,8458,659 Ordinary Shares directly held by CLGL. The address of China Leader is Flat B, 29 Floor, Tower 1, Starcrest, 9 Star Street, Wan Chai, Hong Kong. 3) Consists of (i) 65,399,935 Acquisition Shares held of record by Cenntro Enterprise Limited, (ii) 6,144,407 Acquisition Shares held of record by Trendway Capital Limited, each of which is wholly owned by Mr. Peter Wang, and (iii) 1,093,750 Ordinary Shares that Mr. Wang has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options granted under the 2022 Plan. Mr. Wang has voting and dispositive power over the securities held by each entity and as a result may be deemed to beneficially own the securities of such entities. Each of Cenntro Enterprise Limited and Trendway Capital Limited received such Acquisition Shares presented above following the closing of the Combination, pursuant to the Distribution. 4) Consists of 486,396 Ordinary Shares that Mr. Cheng has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options granted under the 2022 Plan. 5) Consists of 1,610,170 Ordinary Shares that Mr. Zhong has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options under the 2016 Plan. 6) Consists of 476,253 Ordinary Shares that Mr. Tsai has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options under the 2016 Plan and 2022 Plan. 7) Consists of 66,666 Ordinary Shares that Mr. Tong has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options granted under the 2022 Plan 8) Consists of 66,666 Ordinary Shares that Mr. Thorne has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options granted under the 2022 Plan. 9) Consists of 941,413 Ordinary Shares that Mr. He has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options granted under the 2016 Plan and 2022 Plan. 10) Consists of 295,918 ordinary shares beneficially owned by Mr. Ge, and 33,333 Ordinary Shares that Mr. Ge has the right to acquire from us within 60 days of June 25, 2023, pursuant to the exercise of stock options granted under the 2022 Plan. 11) Consists of (i) 71,840,260 Ordinary Shares beneficially owned by our directors and executive officers and (ii) 4,995,480 Ordinary Shares underlying outstanding options, exercisable within 60 days of June 25, 2023. 106 Table of Contents Item 13. Certain Relationships and Related Transactions, and Director Independence. Our audit committee, pursuant to its written charter, is responsible for reviewing and approving related party transactions to the extent we enter into such transactions. The audit committee will consider all relevant factors when determining whether to approve a related party transaction, including whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. We will require each of our directors and executive officers to complete an annual directors’ and officers’ questionnaire that elicits information about related party transactions. These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer. Since January 1, 2022, Cenntro has been party to the following material transactions and loans with (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, Cenntro; (b) associates; (c) individuals owning, directly or indirectly, an interest in voting power that gives them significant influence over Cenntro, and close members of any such individual’s family; (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling Cenntro’s activities, including directors and senior management and close members of such individuals’ families; and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. Commercial Transactions Purchased raw material from related parties During the year ended December 31, 2022, Cenntro purchased approximately $1.4 million of batteries for Metro® from Hangzhou Hezhe Energy Technology Co., Ltd., an entity significantly influenced by Hangzhou Ronda Tech Co., Limited, the subsidiary of the Company. Financings from related parties None Advances to related parties None Capital injection to a related party On December 16, 2022, the Company committed an investment of approximately $2.7 million in Antric GmbH to acquire 25% of its equity interest. During the year ended December 31, 2022, approximately $2 million was paid to Antric GmbH. Item 14. Principal Accounting Fees and Services. Dismissal of Marcum Asia CPAs LLP On April 14, 2023, the Audit Committee of the Company approved the dismissal of Marcum Asia CPAs LLP (“Marcum Asia”) as our independent registered public accounting firm effective April 17, 2023. During the fiscal years ended December 31, 2021 (i) there were no disagreements with Marcum Asia on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Marcum’s satisfaction, would have caused Marcum Asia to make reference to the subject matter of such disagreements in its reports on our financial statements for such year, and (ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K other than the following: (a) Material weaknesses in the Company’s internal control over financial reporting that was disclosed in the Company’s 20-F for the year ended December 31, 2021. 107 Table of Contents The Company provided the Marcum Asia with a copy of the foregoing disclosures and requested that the Marcum Asia furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made herein and, if not, stating the respects in which it does not agree. A copy of the letter provided by Marcum Asia , dated March 24, 2023, is filed as Exhibit 16.1 to our Form 8-K/A filed on April 26, 2023. Engagement of Guangzhou Good Faith CPA LTD On April 14, 2023, the Company, upon the Audit Committee’s approval, engaged the services of Guangzhou Good Faith CPA LTD ("Good Faith”) as the Company’s new independent registered public accounting firm to audit the Company’s financial statements for the two years ended December 31, 2021, and December 31, 2022. During each of the Company’s two most recent fiscal years and through the date of this report, the Company or someone on its behalf did not consult Good Faith with respect to (i) either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any other matter that was either the subject of a disagreement or a reportable event as set forth in Items 304(a)(1)(iv) and (v) of Regulation S-K. Cost of Fees and Services The following table sets forth fees billed to us by our former independent auditor Marcum Asia for the years ended December 31, 2022 and 2021 for (i) services rendered for the audit of our annual consolidated financial statements and the review of our quarterly consolidated financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our consolidated financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance. SERVICES 2022 2021 Audit fees $ 527,307 $ 370,295 Audit-related fees 51,500 - Tax fees - - All other fees - - Total fees $ 578,807 $ 370,295 Audit fees and audit related fees represent amounts billed for professional services rendered for the audit of our annual consolidated financial statements and the review of our interim consolidated financial statements. Prior to Marcum Asia’s dismissal, Marcum Asia’s engagement was approved by the audit committee of the Board and ratified by the Board. 108 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules. (a) The following documents are filed as part of this report: (1) Financial Statements: The audited balance sheet of the Company as of December 31, 2022, the related statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for the year then ended, the footnotes thereto, and the report of Good Faith, independent auditors, are filed herewith. (2) Financial Schedules: None Financial statement schedules have been omitted because they are either not applicable or the required information is included in the financial statements or notes hereto. (3) Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report. (b) The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included. Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties: ● may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements; ● may apply standards of materiality that differ from those of a reasonable investor; and ● were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact. 109 Table of Contents Exhibit Number Description 3.1 Constitution of Cenntro Electric Group Limited ACN 619 054 938 (incorporated by reference to Exhibit 3.1 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 4.1 Specimen Ordinary Share Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.1 Stock Purchase Agreement, dated November 5, 2021, by and among Naked Brand Group Limited ACN 619 054 938, Cenntro Automotive Group Limited (Cayman), Cenntro Automotive Group Limited (Hong Kong), Cenntro Automotive Corporation and Cenntro Electric Group, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on November 8, 2021). 10.2 Local Sale and Purchase Agreement, dated December 30, 2021, by and between Naked Brand Group Limited and Cenntro Automotive Group Limited (Cayman) (incorporated by reference to Exhibit 10.1 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.3 Registration Rights Agreement, dated December 30, 2021, by and among Naked Brand Group Limited and the parties thereto (incorporated by reference to Exhibit 10.2 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.4 Relationship Agreement, dated December 30, 2021, by and among Naked Brand Group Limited, Peter Z. Wang, Cenntro Enterprise Limited and Trendway Capital Limited (incorporated by reference to Exhibit 10.3 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.5 Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on November 8, 2021). 10.6+ Cenntro Electric Group Limited 2022 Stock Incentive Plan (and Forms of Stock Option Agreement, Cash-Settled Option Agreement, Restricted Stock Agreement and Restricted Stock Unit Agreement (and each agreement’s Notice of Exercise and Grant Notice, as applicable)) (incorporated by reference to Exhibit 10.5 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.7+ Cenntro Electric Group Limited 2022 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.8+ Cenntro Electric Group Limited Amended and Restated 2016 Incentive Stock Option Plan (incorporated by reference to Exhibit 10.7 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.9 Plant Lease Agreement, dated December 2020, by and between Administrative Commission of Changxing Branch, Huzhou Taihu South Industrial Zone and Cenntro Automotive Group Limited (Hong Kong) (English Translation) (incorporated by reference to Exhibit 10.8 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.10+ Employment Agreement, dated August 20, 2017, by and between Peter Z. Wang and Cenntro Automotive Group Limited (incorporated by reference to Exhibit 10.9 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.11+ Amended and Restated Offer Letter, dated June 28, 2021, by and between Edmond Cheng, Cenntro Automotive Group Limited and, for limited purposes, Cenntro Electric Group, Inc (incorporated by reference to Exhibit 10.10 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.12+ Addendum to Amended and Restated Offer Letter, dated October 1, 2021, by and between Edmond Cheng and Cenntro Automotive Group Limited (incorporated by reference to Exhibit 10.11 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.13+ Offer Letter, dated June 1, 2021, by and between Marianne McInerney and Cenntro Automotive Group Limited (incorporated by reference to Exhibit 10.12 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.14 Entrustment Agreement, dated December 4, 2021, by and between Cenntro Electric Group, Inc. and Cedar Europe GmbH (incorporated by reference to Exhibit 10.21 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 110 Table of Contents 10.15 Lease Agreement for Commercial Space, dated as of December 26, 2021, by and between Cedar Europe GmbH and Stefan Schoppmann (English Translation) (incorporated by reference to Exhibit 10.22 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.16 Term Sheet, dated December 30, 2021, by and among Naked Brand Group Limited, Bendon Limited and FOH Online Corp (incorporated by reference to Exhibit 10.23 to the Company’s Report of Foreign Private Issuer on Form 6-K, File No. 001-38544, filed with the SEC on January 5, 2022). 10.17+ Share and Loan Purchase Agreement, dated as of March 5, 2022, by and among Cenntro Electric Group, Inc. and Mosolf SE & Co. KG (incorporated by reference to Exhibit 10.1 to the Report of Foreign Private Issuer on Form 6-K filed with the SEC on March 9, 2022). 10.18 Lease Agreement, dated January 20, 2022, by and between Jax Industrial One, Ltd., as Landlord, and Cenntro Automotive Corporation, as Tenant, (incorporated by reference to Exhibit 4.26 to the Annual Report Form 20-F filed by the registrant on April 25, 2022). 10.19 First Lease Amendment, dated as of February 17, 2022, by and among Jax Industrial One, Ltd., as Landlord, Cenntro Automotive Corporation, as Tenant, and Cenntro Electric Group Limited, as Guarantor, (incorporated by reference to Exhibit 4.27 to the Annual Report Form 20-F filed by the registrant on April 25, 2022). 10.20 Share and Loan Purchase Agreement, dated as of December 13, 2022, by and among Cenntro Electric Group, Inc. and Mosolf SE & Co. KG (incorporated by reference to Exhibit 10.1 to the Report of Foreign Private Issuer on Form 6-K filed with the SEC on December 16, 2022). 10.21 Placement Agency Agreement, dated as of July 20, 2022 , by and between Cenntro Electric Group Limited and Univest Securities, LLC, as placement agent (incorporated by reference to Exhibit 10.1 to the Report of Foreign Private Issuer on Form 6-K filed with the SEC on July 21, 2022). 10.22 Securities Purchase Agreement, dated as dated as of July 20, 2022 , by and among Cenntro Electric Group Limited and certain accredited investors, (incorporated by reference to Exhibit 10.2 to the Report of Foreign Private Issuer on Form 6-K filed with the SEC on July 21, 2022). 10.23+ Share and Loan Purchase Agreement, dated as of March 5, 2022, by and among Cenntro Electric Group, Inc. and Mosolf SE & Co. KG (incorporated by reference to Exhibit 10.1 to the Report of Foreign Private Issuer on Form 6-K filed with the SEC on March 9, 2022). 14.1 Code of Ethics (incorporated by reference Exhibit 11.1 to the Annual Report on Form 20-F filed by the registrant on June 14, 2019). 21.1 List of Subsidiaries. 23.1 Consent of Guangzhou Good Faith CPA LTD 24.1 Powers of Attorney (the signature page to this registration statement) 31.1 Certification of Principal Executive Officer required by Rule 13a-14(a). 31.2 Certification of Principal Financial Officer required by Rule 13a-14(a). 32.1 Certification required by Section 1350 of Chapter 63 of Title 18 of the United States Code. 101. INS Inline XBRL Instance Document. 101. SCH Inline XBRL Taxonomy Extension Schema Document. 101. CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101. DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101. LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101. PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). † Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is both (i) not material and (ii) the type the Company treats as private or confidential. + Management contract or compensatory plan 111 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENNTRO ELECTRIC GROUP LIMITED By: /s/ Peter Z. Wang Peter Z. Wang Chief Executive Officer (Principal Executive Officer) By: /s/ Edmond Cheng Edmond Cheng Chief Financial Officer (Principal Accounting Officer) Each person whose signature appears below constitutes and appoints Peter Z. Wang and Edmond Cheng, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Capacity Date /s/ Peter Z. Wang Chairman of the Board and Chief Executive Officer June 30, 2023 Peter Z. Wang (Principal Executive Officer) /s/ Edmond Cheng Chief Financial Officer June 30, 2023 Edmond Cheng (Principal Accounting Officer) /s/ Benjamin B. Ge Director June 30, 2023 Benjamin B. Ge /s/ Jiawei “Joe” Tong Director June 30, 2023 Jiawei “Joe” Tong /s/ Christopher Thorne Director June 30, 2023 Christopher Thorne /s/ Yi Zeng Director June 30, 2023 Yi Zeng 112 Table of Contents INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 2729 ) F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3 Consolidated and Combined Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021 F-4 Consolidated and Combined Statements of Changes in Equity for the years ended December 31, 2022 and 2021 F-5 Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2022 and 2021 F-6 Notes to the Consolidated and Combined Financial Statements F-7 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Cenntro Electric Group Limited Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Cenntro Electric Group Limited (the “Company”) as of December 31, 2022, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on the entity’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Guangzhou Good Faith CPA LTD We have served as the Company’s auditor since 2023. Guangzhou, People's Republic of China June 30, 2023 F-2 Table of Contents CENNTRO ELECTRIC GROUP LIMITED CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars, except for the number of shares) Note December 31, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 153,966,777 $ 261,069,414 Restricted cash 130,024 595,548 Accounts receivable, net 4 565,398 2,047,560 Inventories 5 31,843,371 8,139,816 Prepayment and other current assets 6 16,138,330 7,989,607 Amounts due from related parties - current 20 366,936 1,232,634 Total current assets 203,010,836 281,074,579 Non-current assets: Equity method investments 7 5,325,741 329,197 Investment in equity securities 8 29,759,195 - Property, plant and equipment, net 9 14,962,591 1,301,226 Intangible assets, net 10 4,563,792 3,313 Right-of-use assets 14 8,187,149 1,669,381 Amount due from related parties - non-current 21 - 4,834,973 Other non-current assets, net 11 2,039,012 2,151,700 Total non-current assets 64,837,480 10,289,790 Total Assets $ 267,848,316 $ 291,364,369 LIABILITIES AND EQUITY LIABILITIES Current liabilities: Accounts payable $ 3,383,021 $ 3,678,823 Accrued expenses and other current liabilities 12 5,048,641 4,183,263 Contractual liabilities 2(n) 2,388,480 1,943,623 Operating lease liabilities, current 14 1,313,334 839,330 Convertible promissory notes 15 57,372,827 - Deferred government grant, current 26,533 - Amounts due to related parties 21 716,372 15,756,028 Total current liabilities 70,249,208 26,401,067 Non-current liabilities: Other non-current liabilities - 700,000 Deferred government grant, non-current 497,484 - Derivative liability - investor warrant 15 14,334,104 - Derivative liability - placement agent warrant 15 3,456,404 - Operating lease liabilities, non-current 14 7,421,582 489,997 Total non-current liabilities 25,709,574 1,189,997 Total Liabilities $ 95,958,782 $ 27,591,064 Commitments and contingencies 20 EQUITY Ordinary shares ( No par value; 300,841,995 and 261,256,254 shares issued and outstanding as of December 31, 2022 and 2021 , respectively) - - Additional paid in capital 397,497,817 374,901,939 Accumulated deficit ( 219,824,176 ) ( 109,735,935 ) Accumulated other comprehensive loss ( 5,306,972 ) ( 1,392,699 ) Total equity attributable to shareholders 172,366,669 263,773,305 Non-controlling interests ( 477,135 ) - Total Equity $ 171,889,534 $ 263,773,305 Total Liabilities and Equity $ 267,848,316 $ 291,364,369 The accompanying notes are an integral part of these consolidated and combined financial statements. F-3 Table of Contents CENNTRO ELECTRIC GROUP LIMITED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Expressed in U.S. dollars, except for number of shares) For the Years Ended December 31, Note 2022 2021 Consolidated Combined Net revenues 2(n) $ 8,941,835 $ 8,576,832 Cost of goods sold ( 9,455,805 ) ( 7,073,391 ) Gross (loss) profit ( 513,970 ) 1,503,441 OPERATING EXPENSES: Selling and marketing expenses ( 6,525,255 ) ( 1,034,242 ) General and administrative expenses ( 32,822,709 ) ( 14,972,682 ) Research and development expenses ( 6,362,770 ) ( 1,478,256 ) Provision for doubtful accounts ( 5,986,308 ) ( 469,702 ) Impairment loss of right-of-use assets ( 371,695 ) - Impairment loss of intangible assets ( 2,995,440 ) - Reverse of deferred tax liabilities 898,632 - Impairment loss of property, plant and equipment ( 550,402 ) ( 6,215 ) Total operating expenses ( 54,715,947 ) ( 17,961,097 ) Loss from operations ( 55,229,917 ) ( 16,457,656 ) OTHER EXPENSE: Interest expense, net ( 844,231 ) ( 1,069,581 ) Loss on redemption of convertible promissory notes ( 7,435 ) - (Loss) income from equity method investments 7 ( 12,651 ) 15,167 Change in fair value of convertible promissory notes and derivative liability ( 37,774,928 ) - Change in fair value of equity securities ( 240,805 ) - Convertible bond issuance cost ( 5,589,336 ) - Foreign currency exchange loss, net ( 409,207 ) - Impairment loss of goodwill 3 ( 11,111,886 ) - Other (expense) income, net ( 924,867 ) 1,090,263 Loss before income taxes ( 112,145,263 ) ( 16,421,807 ) Income tax expense 13 - - Net loss ( 112,145,263 ) ( 16,421,807 ) Less: net loss attributable to non-controlling interests ( 2,057,022 ) - Net loss attributable to the Company’s shareholders $ ( 110,088,241 ) $ ( 16,421,807 ) OTHER COMPREHENSIVE LOSS Foreign currency translation adjustment ( 3,889,706 ) 512,140 Total comprehensive loss ( 116,034,969 ) ( 15,909,667 ) Less: total comprehensive loss attributable to non-controlling interests ( 2,032,455 ) - Total comprehensive loss to the Company’s shareholders $ ( 114,002,514 ) $ ( 15,909,667 ) Weighted average number of shares outstanding, basic and diluted * 263,323,238 175,090,266 Loss per share, basic and diluted * 18 ( 0.42 ) ( 0.09 ) * The share numbers are retroactively stated for purposes of calculating weighted average number of shares outstanding for loss per share to reflect the outstanding shares of CEGL as if the equity structure of Cenntro (the accounting acquirer) was stated to reflect the number of shares of CEGL (the accounting acquiree) issued in the Combination. The accompanying notes are an integral part of these consolidated and combined financial statements. F-4 Table of Contents CENNTRO ELECTRIC GROUP LIMITED CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN EQUITY (Expressed in U.S. dollars, except for number of shares) Ordinary shares Additional paid in capital Accumulated deficit Accumulated other comprehensive loss Total shareholders’ equity Non- controlling interest Total equity Shares * Amount Balance as of January 1, 2021 174,853,546 $ - $ 103,113,793 $ ( 93,314,128 ) $ ( 1,904,839 ) $ 7,894,826 $ ( 28,638 ) $ 7,866,188 Share-based compensation - - 1,128,325 - - 1,128,325 - 1,128,325 Exemption of debt due from shareholders - - ( 426,781 ) - - ( 426,781 ) - ( 426,781 ) Net loss - - - ( 16,421,807 ) - ( 16,421,807 ) - ( 16,421,807 ) Reduction of capital investment - - ( 13,930,000 ) - - ( 13,930,000 ) - ( 13,930,000 ) Reverse recapitalization transaction with Naked Brand Group Limited, net of transaction cost 86,402,708 - 285,016,602 - - 285,016,602 - 285,016,602 Liquidation of subsidiary - - - - - - 28,638 28,638 Foreign currency translation adjustment - - - - 512,140 512,140 - 512,140 Balance as of December 31, 2021 261,256,254 $ - $ 374,901,939 $ ( 109,735,935 ) $ ( 1,392,699 ) $ 263,773,305 $ - $ 263,773,305 Share-based compensation - - 4,031,629 - - 4,031,629 - 4,031,629 Exercise of warrants 39,534,273 - 18,549,864 - - 18,549,864 - 18,549,864 Exercise of share-based award 51,468 - 14,385 - - 14,385 - 14,385 Net loss - - - ( 110,088,241 ) - ( 110,088,241 ) ( 2,057,022 ) ( 112,145,263 ) Acquisition of 65 % of CAE’s equity interests - - - - - - 1,555,320 1,555,320 Foreign currency translation adjustment - - - - ( 3,914,273 ) ( 3,914,273 ) 24,567 ( 3,889,706 ) Balance as of December 31, 2022 300,841,995 $ - $ 397,497,817 $ ( 219,824,176 ) $ ( 5,306,972 ) $ 172,366,669 $ ( 477,135 ) $ 171,889,534 * The share numbers are retroactively stated to reflect the outstanding shares of CEGL issued in the Combination. The accompanying notes are an integral part of these consolidated and combined financial statements. F-5 Table of Contents CENNTRO ELECTRIC GROUP LIMITED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOW (Expressed in U.S. dollars, except for number of shares) For the Year Ended December 31, 2022 2021 Consolidated Combined CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 112,145,263 ) $ ( 16,421,807 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 953,872 632,256 Amortization of operating lease right-of-use asset 1,616,853 636,921 Impairment of property, plant and equipment 550,402 6,215 Impairment of intangible assets 2,995,440 - Reversal of deferred tax liabilities ( 898,632 ) - Impairment of right-of-use assets 371,695 - Impairment of goodwill 11,111,886 - Written-down of inventories 2,155,400 1,265,890 Provision for doubtful accounts 5,986,308 469,702 Convertible promissory notes issuance costs 5,589,336 - Loss on redemption of convertible promissory notes 7,435 - Changes in fair value of convertible promissory notes and derivative liabilities 37,774,928 - Changes in fair value of equity securities 240,805 - Foreign currency exchange loss, net 409,207 14,212 Share-based compensation expense 4,031,629 1,128,325 Government grants of federal loan forgiven - ( 53,619 ) Gain from disposal of plant and equipment ( 10,334 ) ( 55,087 ) Gain from disposal of long-term investment - ( 508,156 ) Equity pickup of the equity investment 12,651 ( 15,167 ) Changes in operating assets and liabilities: Accounts receivable 233,570 ( 2,002,919 ) Inventories ( 20,483,127 ) ( 5,087,563 ) Prepayment and other assets ( 6,753,851 ) ( 2,687,994 ) Amounts due from/to related parties ( 1,190,573 ) ( 128,640 ) Accounts payable ( 2,144,725 ) ( 128,508 ) Accrued expense and other current liabilities 1,358,858 1,376,950 Contractual liabilities 633,825 286,499 Long-term payable ( 700,000 ) 700,000 Operating lease liabilities ( 1,108,721 ) ( 903,096 ) Net cash used in operating activities ( 69,401,126 ) ( 21,475,586 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equity investment ( 4,256,276 ) ( 310,038 ) Proceeds from disposal of long-term investment - 465,941 Cash payment for long-term investment payable - ( 909,808 ) Purchase of plant and equipment ( 3,285,072 ) ( 756,269 ) Purchase of land use rights and property ( 16,456,355 ) - Acquisition of 65 % of CAE’s equity interests ( 3,612,717 ) - Payment of expense for acquisition of CAE’s equity interests ( 348,987 ) - Cash acquired from acquisition of CAE 1,118,700 - Purchase of equity securities ( 30,000,000 ) - Proceeds from disposal of land use rights and property - 7,812,967 Proceeds from disposal of property, plant and equipment 309 75,934 Loans provided to third parties ( 1,323,671 ) - Loans provided to related parties - ( 232,529 ) Repayment of loans from related parties 1,280,672 1,088,441 Net cash (used in) provided by investing activities ( 56,883,397 ) 7,234,639 CASH FLOWS FROM FINANCING ACTIVITIES: Loans proceeds from related parties - 5,020,218 Repayment of loans to related parties ( 1,726,614 ) ( 6,493,707 ) Repayment of loans to third parties ( 1,113,692 ) ( 3,928,380 ) Proceeds from bank loans - 53,619 Purchase of CAE’s loan ( 13,228,101 ) - Reduction of capital ( 13,930,000 ) - Cash proceed from reversed recapitalization - 247,382,859 Loan proceeds from Naked Brand Group Limited - 30,000,000 Proceed from issuance of convertible promissory notes 54,069,000 - Redemption of convertible promissory notes ( 3,727,500 ) - Proceed from exercise of share-based awards 14,386 - Payment of expense for the reverse recapitalization ( 904,843 ) ( 883,300 ) Net cash provided by financing activities 19,452,636 271,151,309 Effect of exchange rate changes on cash ( 736,274 ) 205,566 Net (decrease)increase in cash, cash equivalents and restricted cash ( 107,568,161 ) 257,115,928 Cash, cash equivalents and restricted cash at beginning of year 261,664,962 4,549,034 Cash, cash equivalents and restricted cash at end of year $ 154,096,801 $ 261,664,962 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ ( 369,410 ) $ ( 830,837 ) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Cashless exercise of warrants $ 18,549,864 $ - Right of use asset financed by lease liabilities $ - $ 1,206,244 Exemption of debt due from shareholders $ - $ 426,781 Direct cost related to reverse recapitalization payable $ - $ 904,843 Reduction of capital investment recorded as due to related parties $ - $ 13,930,000 The accompanying notes are an integral part of these consolidated and combined financial statements. F-6 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES Historical and principal activities Cenntro Automotive Group Limited (“CAG Cayman”) was formed in the Cayman Islands on August 22, 2014. CAG Cayman was the former parent of Cenntro (as defined below), prior to the closing of the Combination (as defined below). Cenntro Automotive Corporation (“CAC”) was incorporated in the state of Delaware on March 22, 2013. CAC became CAG Cayman’s wholly owned company on May 26, 2016. CAC’s operations include corporate affairs, administrative, human resources, global marketing and sales, after-market support, homologation, and quality assurance. CAC also leases and operates facilities in Freehold, New Jersey, including the Company’s corporate headquarters, and Jacksonville, Florida facility. Cenntro Automotive Group Limited (“CAG HK”) was established by CAG Cayman on February 15, 2016 in Hong Kong. CAG HK is a non-operating, investment holding company, which conducts business through its subsidiaries in mainland China and Hong Kong. Cenntro Electric Group, Inc. (“CEG”) was incorporated in the state of Delaware by CAG Cayman on March 9, 2020. Cenntro Electric Group Limited ACN 619 054 938, formerly known as Naked Brand Group Limited (“NBG”), was incorporated in Australia on May 11, 2017, and is the parent company of Cenntro. NBG changed its name to Cenntro Electric Group Limited (“CEGL”) on December 30, 2021, in connection with the closing of the Combination. CAC, CEG and CAG HK and its consolidated subsidiaries are collectively known as “Cenntro”; CEGL and Cenntro are collectively known as the “Company”. The Company designs and manufactures purpose–built, electric commercial vehicles (“ECVs”) used primarily in last mile delivery and industrial applications. On March 25, 2022 and January 31, 2023,the Company entered into Share Purchase Agreements to acquire 65 % and 35 % of the issued and outstanding shares in Cenntro Automotive Europe GmbH (“CAE”), formerly known as Tropos Motors Europe GmbH. For information of the Share Purchase Agreements, see Note 3 of this Annual Report, “Business Combination”. Reverse recapitalization On December 30, 2021, the Company consummated a stock purchase transaction (the “Combination”) pursuant to that certain stock purchase agreement, dated as of November 5, 2021 (the “Acquisition Agreement”) by and among CEGL (at the time, NBG), CAG Cayman, CAC, CEG and CAG HK, whereby CEGL purchased from CAG Cayman (i) all of the issued and outstanding ordinary shares of CAG HK, (ii) all of the issued and outstanding shares of common stock, par value $ 0.001 per share, of CAC, and (iii) all of the issued and outstanding shares of common stock, par value $ 0.01 per share, of CEG, in exchange for an aggregate purchase price of (i) 174,853,546 newly issuing ordinary shares of CEGL and (ii) the assumption of options to purchase an aggregate of 9,225,271 ordinary shares under the Cenntro Electric Group Limited Amended & Restated 2016 Incentive Stock Option Plan (the “Amended 2016 Plan”). The Combination closed on December 30, 2021. Immediately prior to the consummation of the Combination, there were 86,402,708 ordinary shares of NBG issued and outstanding. In connection with the closing of the Combination, CEGL changed its name from “Naked Brand Group Limited” to “Cenntro Electric Group Limited”. Promptly following the closing of the Combination, CAG Cayman distributed the Acquisition Shares to the holders of its capital stock in accordance with (i) the distribution described in the Acquisition Agreement and (ii) CAG Cayman’s Third Amended and Restated Memorandum and Articles of Association. Pursuant to the Acquisition Agreement, at the closing of the Combination, NBG assumed the Amended 2016 Plan and each CAG Cayman employee stock option outstanding immediately prior to the closing of the Combination under the Amended 2016 Plan was converted into an option to purchase a number of ordinary shares equal to the aggregate number of CAG Cayman shares for which such stock option was exercisable immediately prior to the closing of the Combination multiplied by the exchange ratio of 0.71536 (the “Exchange Ratio”), as determined in accordance with the Acquisition Agreement, at an option exercise price equal to the exercise price per share of such stock option immediately prior to the closing of the Combination divided by the Exchange Ratio. Cenntro was deemed to be the accounting acquirer given Cenntro effectively controlled the consolidated entity after the Combination. Under U.S. generally accepted accounting principles, the Combination is accounted for as a reverse recapitalization, which is equivalent to the issuance of shares by Cenntro for the net monetary assets of CEGL, accompanied by a recapitalization. Cenntro is deemed to be the predecessor for accounting purposes and the historical financial statements of Cenntro became CEGL’s historical financial statements, with retrospective adjustments to give effect to the reverse recapitalization. The financial statements for periods prior to the consummation of the reverse recapitalization are the combined financial statements of CAC, CEG and CAG HK and its consolidated subsidiaries. The following table shows the net cash proceeds from the reverse recapitalization: Reverse recapitalization Cash – NBG $ 247,382,859 Less: transaction costs - paid in FY2021 ( 883,300 ) transaction costs - paid in FY2022 ( 904,843 ) Net cash contributions from reverse recapitalization $ 245,594,716 As of December 31, 2022, CEGL’s subsidiaries are as follows: Name Date of Incorporation Place of Incorporation Percentage of direct or indirect economic interest Cenntro Electric CICS, SRL November 30, 2022 Santo Domingo, Dominican Republic 100 % owned by CEGL Cennatic Power, Inc. (“Cennatic Power”) June 8, 2022 Delaware, U.S. 100 % owned by CEGL Cenntro Automotive Europe GmbH (“CAE”) May 21, 2019 Herne, Germany 65 % owned by CEGL Cenntro Electric Group (Europe) GmbH (“Cenntro Electric”) January 13, 2022 Düsseldorf, Germany 100 % owned by CEGL Cennatic Energy S. de R.L. de C.V. August 24, 2022 Monterrey, Mexico 99 % and 1 % owned by Cennatic Power and CAC, respectively Cenntro Electric B.V. December 12, 2022 Amsterdam, Netherlands 100 % owned by CEGL Cenntro Automotive Corporation (“CAC”) March 22, 2013 Delaware, U.S. 100 % owned by CEGL Cenntro Electric Group, Inc. (“CEG”) March 9, 2020 Delaware, U.S. 100 % owned by CEGL Cenntro Automotive Group Limited (“CAG HK”) February 15, 2016 Hong Kong 100 % owned by CEGL Simachinery Equipment Limited (“Simachinery HK”) June 2, 2011 Hong Kong 100 % owned by CAG HK Zhejiang Cenntro Machinery Co., Limited January 20, 2021 PRC 100 % owned by CAG HK Jiangsu Tooniu Tech Co., Limited December 19, 2018 PRC 100 % owned by CAG HK Hangzhou Ronda Tech Co., Limited (“Hangzhou Ronda”) June 5, 2017 PRC 100 % owned by CAG HK Hangzhou Cenntro Autotech Co., Limited (“Cenntro Hangzhou”) May 6, 2016 PRC 100 % owned by CAG HK Zhejiang Sinomachinery Co., Limited (“Sinomachinery Zhejiang”) June 16, 2011 PRC 100 % owned by Simachinery HK Shengzhou Cenntro Machinery Co., Limited (“Cenntro Machinery”) July 12, 2012 PRC 100 % owned by Cenntro Hangzhou Hangzhou Hengzhong Tech Co., Limited December 16, 2014 PRC 100 % owned by Cenntro Hangzhou Zhejiang Xbean Tech Co., Limited* December 28, 2016 PRC 100 % owned by Sinomachinery Zhejiang * Zhejiang Xbean Tech Co., Limited was in the liquidation process as of December 31, 2022. F-7 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of presentation The consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). As an Australian public limited company, the Company is subject to the Corporations Act 2001 (the “Corporations Act”), which requires financial statements be prepared and audited in accordance with Australian Auditing Standards (“AAS”) and International Financial Reporting Standards (“IFRS”). The consolidated and combined financial statements are not financial statements for the purposes of the Corporations Act and are considered “non-IFRS financial information” under the Australian Securities and Investment Commission’s Regulatory guide 230: ‘Disclosing non-IFRS financial information.’ Such non-IFRS financial information may not be comparable to similarly titled information presented by other entities and should not be construed as an alternative to other financial information prepared in accordance with AAS or IFRS. The combined financial statements include the combined financial statements of Cenntro from the dates they were acquired or incorporated, which includes (a) the combined statements of operations and comprehensive loss, changes in equity and cash flows for the periods from January 1, 2021 to December 30, 2021. The consolidated financial statements include (a) the consolidated balance sheet as of December 31, 2022 and 2021; and (b) consolidated statements of operations and comprehensive loss, changes in equity and cash flows for the period from December 31, 2021 to December 31, 2022. All intercompany balances and transactions have been eliminated in consolidation and combination. (b) Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated and combined financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company continually evaluates these estimates and assumptions based on the most recently available information, historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Significant accounting estimates reflected in the Company’s consolidated and combined financial statements include, but are not limited to, estimates and judgments applied in determination of provision for doubtful accounts, lower of cost and net realizable value of inventories, impairment losses for long-lived assets and investments, valuation allowance for deferred tax assets and fair value measurement for share-based compensation expense, convertible promissory notes and warrants. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. (c) Fair value measurement ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. These tiers include: Level 1—defined as observable inputs such as quoted prices in active markets; Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3—defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company’s financial instruments not reported at fair value primarily consist of cash and cash equivalents, restricted cash, accounts receivable, prepayments and other current assets, amount due from and due to related parties, accounts payable and accrued expenses and other current liabilities. The carrying value of cash and cash equivalents, restricted cash, accounts receivable, prepayment and other current assets, accounts payable, accrued expenses and other current liabilities and amount due from and due to related party, current approximate fair value because of the short-term nature of these items. The estimated fair values of loan from third party, and amount due from related party, non-current were not materially different from their carrying value as presented due to the brief maturities and because the interest rates on these borrowings approximate those that would have been available for loans of similar remaining maturities and risk profiles. The fair value option provides an election that allows a company to irrevocably elect to record certain financial assets and liabilities at fair value on an instrument-by-instrument basis at initial recognition. The Company has elected to apply the fair value option to convertible promissory notes due to the complexity of the various conversion and settlement options available to notes holders. The convertible promissory notes accounted for under the fair value option election are each a debt host financial instrument containing embedded features that would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements in accordance with GAAP. Notwithstanding, when the fair value option election is applied to financial liabilities, bifurcation of an embedded derivative is not required, and the financial liability is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis as of each reporting period date. The portion of the change in fair value attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive income and the remaining amount of the fair value adjustment is recognized as changes in fair value of convertible promissory notes and derivative liabilities in the Company’s consolidated statement of operations. The estimated fair value adjustment is presented in a respective single line item within other income (expense) in the consolidated statement of operations because the change in fair value of the convertible notes was not attributable to instrument-specific credit risk. In connection with the issuances of convertible promissory notes, the Company issued investor warrants and placement agent warrants to purchase ordinary shares of the Company. The Company utilizes a Binomial model to estimate the fair value of the warrants and are considered a Level 3 fair value measurement. The warrants are measured at each reporting period, with changes in fair value recognized in the statement of operations. As a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. The Company’s investments valued at NAV as a practical expedient are private equity funds, which represent the investment in equity securities on the consolidated balance sheet. (d) Business combination The Company accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “Business Combinations.” The cost of an acquisition is measured as the aggregate of the acquisition date fair value of the assets transferred to the sellers, liabilities incurred by the Company and equity instruments issued by the Company. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the acquisition date amounts of the identifiable net assets of the acquiree is recorded as goodwill. F-8 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Cash and cash equivalents and restricted cash The Company considers highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Restricted cash consists of cash restricted as to withdrawal or use. Such restricted cash relates to certain credit card and lease guarantees. (f) Accounts receivable and provision for doubtful accounts Accounts receivable are recognized and carried at net realizable value. Provision for doubtful accounts is recorded for periods in which the Company determines a loss is probable, based on its assessment of specific factors, such as troubled collections, historical experience, accounts aging, ongoing business relations and other factors. Account balances are charged off against the provision after all means of collection have been exhausted and the potential for recovery is considered remote. (g) Inventories Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the basis of weighted average and comprises direct materials, direct labor cost and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less selling expenses and any further costs of completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances. Write-downs are recorded in the consolidated and combined statements of operations and comprehensive loss. (h) Investment in equity securities For investments in equity securities with a variable interest rate indexed to the performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments subsequently at fair value. Changes in fair values are reflected in the consolidated statements of operations and comprehensive loss. The Company determines the appropriate classification of its investments in equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. The private equity funds are measured at fair value with gains and losses recognized in earnings. As a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of the Fund. The Company evaluates whether an investment is other-than-temporarily impaired based on the specific facts and circumstances. Factors that are considered in determining whether an other-than-temporary decline in value has occurred include the market value of the security in relation to its cost basis, the financial condition of the investee, and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment. (i) Property, plant and equipment, net Property, plant and equipment are carried at cost less accumulated depreciation and any impairment. Depreciation is calculated over the asset’s estimated useful life, using the straight-line method. Leasehold improvements are amortized over the life of the asset or the term of the lease, whichever is shorter. Estimated useful lives are as follows: Buildings 20 years Machinery and equipment 5 - 10 years Office equipment 5 years Motor vehicles 3 - 5 years Leasehold improvement 3 - 10 years Others 3 years The Company reassesses the reasonableness of the estimates of useful lives and residual values of long-lived assets when events or changes in circumstances indicate that the useful lives and residual values of a major asset or a major category of assets may not be reasonable. Factors that the Company considers in deciding when to perform an analysis of useful lives and residual values of long-lived assets include, but are not limited to, significant variance of a business or product line in relation to expectations, significant deviation from industry or economic trends, and significant changes or planned changes in the use of the assets. The analysis will be performed at the asset or asset category with the reference to the assets’ conditions, current technologies, market, and future plan of usage and the useful lives of major competitors. The costs and related accumulated depreciation of assets sold or otherwise retired are eliminated from the Company’s accounts and any gain or loss is included in the consolidated and combined statements of operations and comprehensive loss. The cost of maintenance and repair is charged to expenses as incurred, whereas significant renewals and betterments are capitalized. The Company constructs certain of its property including recodifications and improvement of its office buildings and plant. Depreciation is recorded at the time assets are ready for the intended use. (j) Intangible assets, net Intangible assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets are amortized using the straight-line approach over the estimated economic useful lives of the assets as follows: Category Estimated useful life Land use rights 45.75 years Software 3 years (k) Impairment of long-lived assets The Company evaluates the recoverability of long-lived assets or asset group with determinable useful lives whenever events or changes in circumstances indicate that an asset or a group of assets’ carrying amount may not be recoverable. The Company measures the carrying amount of long-lived asset against the estimated undiscounted future cash flows expected to result from the use of the assets or asset group and their eventual disposition. The carrying amount of the long-lived asset or asset group is not recoverable when the sum of the undiscounted expected future net cash flows is less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets or asset group, when the market prices are not readily available. The adjusted carrying amount of the assets become new cost basis and are depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The impairment test is performed at the asset group level. Impairment loss for long-lived assets of $ 3,917,537 and $ 6,215 were recorded in the Company’s consolidated and combined statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021, respectively. F-9 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination. Goodwill acquired in a business combination is tested for impairment at least annually or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The Company performs impairment analysis on goodwill as of December 31 every year either beginning with a qualitative assessment, or starting with the quantitative assessment instead. The quantitative goodwill impairment test compares the fair values of each reporting unit to its carrying amount, including goodwill. A reporting unit constitutes a business for which discrete profit and loss financial information is available. The fair value of each reporting unit is established using a combination of expected present value of future cash flows. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company adopted ASU No. 2017-14, simplifying the Test for Goodwill Impairment on January 1, 2022. The Company has the option to choose whether it will apply the qualitative assessment first and then the quantitative assessment, if necessary, or to apply the quantitative assessment directly. If the Company chooses to apply a qualitative assessment first, it starts the goodwill impairment test by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of comparison of the fair value of a reporting unit to its carrying amount. Application of a goodwill impairment test requires significant management judgments, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. Impairment loss for goodwill of $ 11,111,886 and nil were recorded for the years ended December 31, 2022 and 2021, respectively. (m) Investment in equity investees Investee companies over which the Company has the ability to exercise significant influence but does not have a controlling interest through investment in common shares or in substance common shares are accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock of the investee between 20 % and 50 %, and other factors, such as representation on the investee’s board of directors, voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is appropriate. Under the equity method, the Company initially records its investment at cost and subsequently recognizes the Company’s proportionate share of each equity investee’s net income or loss after the date of investment into the consolidated and combined statements of operations and comprehensive loss and accordingly adjusts the carrying amount of the investment. When the Company’s share of losses in the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee. The Company reviews its equity method investments for impairment whenever an event or circumstance indicates that other-than-temporary impairment has occurred. The Company considers available quantitative and qualitative evidence in evaluating potential impairment of its equity method investments. An impairment charge is recorded when the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than-temporary. The adjusted carrying amount of the assets become new cost basis. F-10 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) Revenue recognition The Company adopted ASC Topic 606 Revenue from Contracts with Customers with a date of the initial application of January 1, 2018 using the modified retrospective method. The Company recognizes revenue when goods or services are transferred to customers in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. In determining when and how revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of a contract with the customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company generates revenue primarily through sales of light-duty ECVs, sales of ECV parts, and sales of off-road electric vehicles. Revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Revenue is recognized net of return allowance and any taxes collected from customers, which are subsequently remitted to governmental authorities. Significant judgement is required to estimate return allowances. The Company reasonably estimate the possibility of return based on the historical experience, changes in judgments on these assumptions and estimates could materially impact the amount of net revenues recognized. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods are accounted for as fulfilment costs rather than separate performance obligations and recorded as sales and marketing expenses. The following table disaggregates the Company’s revenues by product line for the years ended December 31, 2022 and 2021: For the Years Ended December 31, 2022 2021 Vehicles sales 　 $ 8,235,053 　 　 $ 7,287,478 　 Spare-parts sales 　 　 304,506 　 　 　 195,350 　 Other service income 　 　 402,276 　 　 　 1,094,004 　 Net revenues 　 $ 8,941,835 　 　 $ 8,576,832 　 The Company’s revenues are primarily derived from Europe, America and Asia. The following table sets forth disaggregation of revenue by customer location. For the Years Ended December 31, 2022 2021 Primary geographical markets 　 　 　 　 Europe $ 7,052,452 $ 4,380,752 America 　 　 697,452 　 　 　 3,420,636 　 Asia 1,191,931 729,868 Oceania 　 - 　 45,576 Total 　 $ 8,941,835 　 　 $ 8,576,832 　 Contract Balances Timing of revenue recognition was once the Company has determined that the customer has obtained control over the product. Accounts receivable represent revenue recognized for the amounts invoiced and/or prior to invoicing when the Company has satisfied its performance obligation and has an unconditional right to the payment. Contractual liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration. The consideration received remains a contractual liability until goods or services have been provided to the customer. For the years ended December 31, 2022 and 2021, the Company recognized $ 1,105,076 and $ 1,051,832 revenue that was included in contractual liabilities as of January 1, 2022 and 2021, respectively. The following table provides information about receivables and contractual liabilities from contracts with customers: December 31, 2022 December 31, 2021 Accounts receivable, net $ 565,398 $ 2,047,560 Contractual liabilities $ 2,388,480 $ 1,943,623 F-11 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (o) Cost of goods sold Cost of goods sold mainly consists of production related costs including costs of raw materials, consumables, direct labor, overhead costs, depreciation of property, plant and equipment, manufacturing waste treatment processing fees and inventory write-downs. (p) Government grants The Company’s PRC based subsidiaries received government subsidies from certain local governments. The Company’s government subsidies consist of specific subsidies and other subsidies. Specific subsidies are subsidies that the local government has provided for a specific purpose, such as land fulfillment costs. Other subsidies are the subsidies that the local government has not specified its purpose for and are not tied to future trends or performance of the Company, receipt of such subsidy income is not contingent upon any further actions or performance of the Company and the amounts do not have to be refunded under any circumstances. Specific subsidies relating to land use rights are accounted for as an income with the subsidy benefit reflected over the related asset useful life. Other subsidies are recognized as other income upon receipt as further performance by the Company is not required. (q) Income taxes The Company accounts for income tax using an asset and liability approach, which allows for the recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted tax rates in effect for the years in which the differences are expected to reverse. The accounting for deferred tax calculation represents management’s best estimate of the most likely future tax consequences of events that have been recognized in our financial statements or tax returns and related future anticipation. A valuation allowance is recorded to reduce the deferred tax assets to an amount that is more likely than not to be realized after considering all available evidence, both positive and negative. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts for income taxes using the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Net operating losses are carried forward and credited by applying enacted statutory tax rates applicable to future years when the reported amounts of the asset or liability are expected to be recovered or settled, respectively. Deferred tax assets are reduced by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as non-current. The Company recognizes the tax benefit from an uncertain tax position only if 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. As required by applicable tax law, interest on non-payment of income taxes and penalties associated with tax positions when a tax position does not meet the minimum statutory threshold to avoid payment of penalties recognized, if any, will be classified as a component of the provisions for income taxes. The tax returns of the Company and its Germany, Hong Kong and PRC subsidiaries are subject to examination by the relevant local tax authorities. The standard period in which Australian Taxation Office can amend an assessment is four years and there is no statute of limitation in the case of fraud or evasion. The statutory limitation period in Germany for the issue or correction of assessments is four years from the end of the year in which the return was filed. In the case of fraud and willful evasion, the investigation is extended to cover ten years of assessment. According to the Departmental Interpretation and Practice Notes No.11 (Revised) of the Hong Kong Inland Revenue Ordinance (the “HK tax laws”), an investigation normally covers the six years of the assessment prior to the year of the assessment in which the investigation commences. In the case of fraud and willful evasion, the investigation is extended to cover ten years of assessment. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than RMB 100,000 . In the case of transfer pricing issues, the statute of limitation is ten years . There is no statute of limitation in the case of tax evasion. U.S. federal tax matters are open to examination for years 2014 through 2022 . For the years ended December 31, 2022 and 2021, the Company did not have any material interest or penalties associated with tax positions. The Company did no t have any significant unrecognized uncertain tax positions as of Decem ber 31, 2022 or 2021. The Company does no t expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months. (r) Foreign currency translation and transaction The consolidated and combined financial statements are presented in United States dollars (“USD” or “$”). The functional currency of certain of CEGL’s PRC subsidiaries is the Renminbi (“RMB”). The functional currency of CEA is the EUR, and CEGL and its other subsidiaries outside of PRC is the USD. Assets and liabilities are translated at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the reporting period. Capital accounts of the consolidated and combined financial statements are translated into USD from RMB at their historical exchange rates when the capital transactions occurred. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of accumulated other comprehensive loss in the balance sheets. The rates are obtained from H.10 statistical release of the U.S. Federal Reserve Board. For the Years Ended December 31, 2022 2021 Period end USD: RMB exchange rate 　 　 6.8972 　 　 　 6.3726 　 Average USD: RMB exchange rate 　 　 6.7290 　 　 　 6.4508 　 Period end USD: EUR exchange rate 0.9348 0.8835 Average USD: EUR exchange rate 0.9493 0.8453 Foreign currency transactions denominated in currencies other than functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re-measured at the applicable rates of exchange in effect at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from re-measurement at year-end are recognized in foreign currency exchange gain/loss, net on the consolidated and combined statement of operations. F-12 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (s) Comprehensive loss Comprehensive loss includes all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive loss are required to be reported in a financial statement that is presented with the same prominence as other financial statements. For the years presented, comprehensive loss includes net loss and the foreign currency translation changes. (t) Segments In accordance with ASC 280-10, Segment Reporting, the Company’s chief operating decision maker (“CODM”), identified as the Company’s Chief Executive Officer, relies upon the consolidated and combined results of operations as a whole when making decisions about allocating resources and assessing the performance of the Company. As a result of the assessment made by CODM, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are substantially located in the PRC and United States. The following table presents long-lived assets by geographic segment as of December 31, 2022 and 2021. Long-lived assets December 31, 2022 2021 PRC $ 18,018,954 $ 2,177,091 US 9,125,535 527,469 Dominican 469,740 - Others 99,303 269,360 Total $ 27,713,532 $ 2,973,920 (u) Share-based compensation expenses The Company’s share-based compensation expenses are recorded in accordance with ASC 718 and ASC 710. Share-based awards to employees are measured based on the grant date fair value of the equity instrument issued and recognized as compensation expense net of a forfeiture rate on a straight-line basis, over the requisite service period, with a corresponding impact reflected in additional paid-in capital. The estimate of forfeiture rate will be adjusted over the requisite service period to the extent that the actual forfeiture rate differs, or is expected to differ, from such estimates. Changes in estimated forfeiture rate will be recognized through a cumulative catch-up adjustment in the period of change. (v) Convertible promissory notes The Company has elected the fair value option to account for its convertible promissory notes issued during 2022. In accordance with ASC 825, the convertible promissory notes are marked-to-market at each reporting date with changes in fair value recorded as a component of other income (expense), in the consolidated statements of operations and comprehensive loss. We disclose the nature and terms, the income statement effects, the valuation methods and assumptions of the convertible promissory notes in Note 15 to our consolidated financial statements. (w) Derivative liability Warrants recorded as liabilities at fair value in accordance with ASC 480 “Distinguishing Liabilities from Equity”. The liability remeasured every reporting period with any change to fair value recorded in the consolidated and combined statements of operations. (x) Operating lease The Company adopted the new lease accounting standard, ASC Topic 842, Leases (“ASC 842”) as of January 1, 2019, using the non-comparative transition option pursuant to ASU 2018-11. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things (i) allowed the Company to carry forward the historical lease classification; (ii) did not require the Company to reassess whether any expired or existing contracts are or contain leases and (iii) did not require the Company to reassess initial direct costs for any existing leases. Therefore, the Company did not consider its existing land use right that was not previously accounted for as leases under Topic 840. For all operating leases except for short-term leases, the Company recognized operating right-of-use assets and operating lease liabilities. Leases with an initial term of 12 months or less were short-term leases and not recognized as right-of-use assets and lease liabilities on the consolidated and combined balance sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and exclude lease incentives. Some of the Company’s lease agreements contained renewal options; however, the Company did not recognize right-of-use assets or lease liabilities for renewal periods unless it was determined that the Company was reasonably certain of renewing the lease at inception or when a triggering event occurred. The Company’s lease agreements did not contain any material residual value guarantees or material restrictive covenants. (y) Non-controlling Interest A non-controlling interest in subsidiaries represents the portion of the equity (net assets) in the subsidiaries not directly or indirectly attributable to the Company’s shareholders. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheets and consolidated and combined statements of operations and other comprehensive loss are attributed to controlling and non-controlling interests. F-13 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (z) Recently issued accounting standards pronouncements The Group is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses”, which will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Subsequently, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards. Further, the FASB issued ASU No. 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11 and ASU 2020-02 to provide additional guidance on the credit losses standard. For all other entities, the amendments for ASU 2016-13 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASUs is on a modified retrospective basis. The Group will adopt ASU 2016-13 from January 1, 2023. The Group expects the adoption of this guidance does not have a material impact on the consolidated financial statements. Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures. F-14 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 3 – BUSINESS COMBINATION On March 5, 2022, the Company entered into a Share and Loan Purchase Agreement (the “Purchase Agreement I”) with Mosolf SE & Co. KG, a limited liability partnership incorporated under the laws of Germany (“Seller” or “Mosolf” and, together with CEGL and CEG, the “Parties”), pursuant to which Mosolf agreed to sell to the Company (i) 65 % of the issued and outstanding shares (the “TME Shares”) in Cenntro Automotive Europe GmbH, previously known as Tropos Motors Europe GmbH, a German limited liability company (“CAE”), and (ii) 100 % of the shareholder loan (the “Shareholder Loan”) which Mosolf previously provided to CAE (the “CAE Transaction”). CAE was one of Cenntro’s private label channel partners and has been one of Cenntro’s largest customers since 2019. The CAE Transaction closed on March 25, 2022. At closing of the CAE Transaction, the Company paid Mosolf EUR 3,250,000 (or approximately USD$ 3.6 million) for the purchase of the TME Shares and EUR 11,900,000 (or approximately USD$ 13.0 million) for the purchase of the Shareholder Loan, for total aggregate consideration of EUR 15,150,000 (or approximately USD$ 16.6 million). An aggregate of EUR 3,000,000 (or approximately USD$ 3.3 million) of the purchase price is held in escrow to satisfy amounts payable to any of the buyer indemnified parties in accordance with the terms of the Purchase Agreement I. The transaction constitutes a business combination for accounting purposes and is accounted for using the acquisition method under ASC 805. The Company is deemed to be the accounting acquirer and the assets and liabilities of CAE are recorded at the fair value as of the date of the closing. On the acquisition date March 25, 2022, the allocation of the consideration of the assets acquired and liabilities assumed based on their fair value was as follows: Amount Cash and cash equivalents $ 1,118,700 Inventories (1) 6,144,219 Other current assets 3,209,947 Intangible assets 3,075,800 Goodwill (2) 11,409,990 Other non-current assets 580,748 Total assets 25,539,404 Loan from CAE ( 13,072,150 ) Deferred tax liabilities (3) ( 922,740 ) Other liabilities ( 6,419,070 ) Total liabilities ( 20,413,960 ) Total net assets 5,125,444 Less: Non-controlling interest 1,555,320 Net assets acquired by the Company 3,570,124 (1) The inventories of $ 4,484,007 on the acquisition date was purchased from Cenntro. (2) Full impairment of goodwill has been provided as of December 31, 2022. (3) Deferred tax liabilities were calculated based on appreciation fair value of all intangible assets multiplied by income tax rate. On December 13, 2022, the Company entered into another Share Purchase Agreement (the “Purchase Agreement II”) with Mosolf, pursuant to which Mosolf agreed to sell to the Company its remaining 35 % of the issued and outstanding shares in CAE in exchange for a purchase price of EUR 1,750,000 (or approximately USD$ 1.86 million) (the “Transaction”). The Transaction was closed on January 31, 2023, as a result, CAE became a wholly-owned subsidiary of the Company. This transaction was accounted for as equity transactions, no gain or loss was recognized in consolidated statement of operations. The difference between the fair value of the consideration paid and the amount by which the noncontrolling interest was adjusted was recognized in equity attributable to the Company. NOTE 4 - ACCOUNTS RECEIVABLE, NET Accounts receivable, net is summarized as follows: December 31, 2022 December 31, 2021 Accounts receivable $ 2,526,432 $ 3,523,543 Less: provision for doubtful accounts ( 1,961,034 ) ( 1,475,983 ) Accounts receivable, net $ 565,398 $ 2,047,560 The changes in the provision for doubtful accounts are as follows: For the Years Ended December 31, 2022 2021 Balance at the beginning of the year $ 1,475,983 $ 1,121,115 Additions 1,394,591 391,189 Write-off ( 922,632 ) ( 86,170 ) Foreign exchange 13,092 49,849 Balance at the end of the year $ 1,961,034 $ 1,475,983 NOTE 5 - INVENTORIES Inventories are summarized as follows: December 31, 2022 December 31, 2021 Raw material $ 9,311,419 $ 2,055,844 Work-in-progress 290,220 1,110,469 Goods in transit 2,364,136 50,795 Finished goods 19,877,596 4,922,708 Inventories $ 31,843,371 $ 8,139,816 For the years ended December 31, 2022 and 2021, the impairment loss recognized by the Company for slow-moving inventory with cost lower than net realizable value was $ 2,155,400 and $ 1,265,890 , respectively. F-15 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 6 - PREPAYMENT AND OTHER CURRENT ASSETS Prepayment and other current assets consisted of the following: December 31, 2022 December 31, 2021 Advance to suppliers $ 9,877,337 $ 3,686,708 Deductible input value added tax 4,097,162 1,196,186 Loans to a third party (1) 1,044,181 - Receivable from third parties 678,887 348,773 Refund for goods and services tax (“GST”) (2) - 2,488,528 Others 440,763 269,412 Prepayment and other current assets $ 16,138,330 $ 7,989,607 (1) L oan s to a third party represented an interest-bearing loan to HW Electro Co., Ltd. with principal amount of $ 1,000,000 as of December 31, 2022, with the annual interest rate of 5.00 %, which will be due on February 7, 2023 . On January 31, 2023, the Company entered into a debt conversion agreement with HW Electro Co., Ltd., to convert the loan principal of $ 1,000,000 for 571,930 shares of HW Electro Co., Ltd.’s common stock totaling 3.59 % of its equity interest. The interest of the loan was repaid in February 2023 . (2) G ST is a value-added tax levied on goods and services sold for consumption in Australia. The balance as of December 31, 2021 was excess GST, which has been refunded in 2022. NOTE 7 – EQUITY METHOD INVESTMENTS December 31, 2022 December 31, 2021 Antric GmbH (1) $ 2,674,500 $ - Hangzhou Entropy Yu Equity Investment Partnership (Limited Partnership) (“Entropy Yu”) (2) 2,189,570 - Hangzhou Hezhe Energy Technology Co., Ltd. (“Hangzhou Hezhe”) (3) 367,272 329,197 Able 2rent GmbH (DEU) (4) 94,399 - Total $ 5,325,741 $ 329,197 (1) O n December 16, 2022, the Company invested EUR 2,500,000 (approximately $ 2,674,500 ) in Antric GmbH to acquire 25 % of its equity interest. As of December 31, 2022, capital investment of EUR 1,877,083 (approximately $ 2,008,103 ) had been paid to Antric GmbH . The Company accounts for the investment under the equity method because the Company controls 25 % of voting interests, and has the ability to exercise significant influence over Antric GmbH . (2) O n September 25, 2022, the Company invested RMB 15,400,000 (approximately $ 2,232,790 ) in Entropy Yu to acquire 99.355 % of the partnership entity’s equity interest. The Company accounts for the investment under the equity method because the Company controls 50 % of voting interests in partnership matters and material matters must be agreed upon by all partners. The Company has the ability to exercise significant influence over Entropy Yu . For the year ended December 31, 2022, the Company recognized investment loss of $ 44,301 , based on its proportionate share of equity interest . (3) O n June 23, 2021, the Company invested RMB 2,000,000 (approximately $ 308,990 ) in Hangzhou Hezhe to acquire 20 % of its equity interest. The Company accounts for the investment under the equity method because the Company controls 33 % of voting interests in board of directors, and has the ability to exercise significant influence over Hangzhou Hezhe. For the years ended December 31, 2022 and 2021, the Company recognized investment gain of $ 44,039 and $ 15,167 , respectively, based on its proportionate share of equity interest . (4) O n March 22, 2022, CAE invested EUR 100,000 (approximately $ 106,980 ) in Able 2rent GmbH (DEU) to acquire 50 % of its equity interest. The Company accounts for the investment under the equity method because it does not have control over Able 2rent GmbH (DEU) as the Company does not participate in its operation and does not serve as member of board of director. For the year ended December 31, 2022, the Company recognized investment loss of $ 12,389 , based on its proportionate share of equity interest . F-16 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 8 – INVESTMENT IN EQUITY SECURITIES As of December 31, 2022, the balance consisted of the following two equity investments: Investment on partnership shares in MineOne Fix Income Investment I L.P On October 12, 2022, the Company entered into a subscription agreement with MineOne Partners Limited, a partnership incorporated in the British Virgin Islands, for purchase of $ 25 million partnership shares in MineOne Fix Income Investment I LP (“MineOne”), over which MineOne Partners Limited is the General Partner. The Company holds 100 % of the limited partnership equity of MineOne and is entitled to a fixed return of 5 % per annum on the investment amount, and has the rights to sell all or any portion of its partnership interest after the second anniversary of the investment if the Company gives at least ten business days’ prior notice to the General Partner and receives the consent of General Partner. MineOne focuses on private credit loans, convertible bridge, and personal factoring. The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. The private equity fund is measured at fair value with gains and losses recognized in earnings. As a practical expedient, the Company NAV or its equivalent to measure the fair value of the Fund. The NAV of the Fund was $ 25,128,833 as of December 31, 2022. Net assets of the Partnership were $ 25,019,244 . For the year ended December 31, 2022, the Company recorded upward adjustments for changes in fair value of this equity investment of $ 19,244 . Investment on participating shares in Micro Money Fund SPC On August 11, 2022, the Company invested $ 5 million in Micro Money Fund SPC, for purchase of 4,454.37 of participating, redeemable, non-voting shares attributable to Micro Money Fund SPII (“the Fund”), a segregated portfolio of Micro Money Fund SPC. The Company holds 59 % of the limited partnership equity of the Fund, and has the rights to redeem the investment at the option of the Company, but a redemption gate may be setup to limit the redemption amount if redemption on redemption day in excess of such percentage of the NAV of the relevant portfolio by Micro Money Fund SPC. The Fund focuses on investments in convertible securities, publicly traded debt and stock, and combination options and futures trading. The investment was classified as an equity security because the investment represented the ownership interest in the Fund. As of December 31, 2022, the investment consisted of 4,454.37 participating shares of the Fund. The private equity fund is measured at fair value with gains and losses recognized in earnings. As a practical expedient, the Company uses NAV to measure the fair value of the Fund. The NAV of the Fund was $ 4,869,908 as of December 31, 2022. Net assets of the Partnership was $ 8,033,816 by taking liabilities into consideration. For the year ended December 31, 2022, the Company recorded downward adjustments for changes in fair value of this equity investment of $ 260,049 . The Company has neither control nor significant influence over MineOne or Micro Money Fund, the Company does not have the power to direct the activities that most significantly affect the their economic performance, and there is no kick-off rights or right to dissolve the funds . NOTE 9 –PROPERTY, PLANT AND EQUIPMENT, NET P roperty, plant and equipment , net consisted of the following: December 31, 2022 December 31, 2021 At cost: Plant and building (1) $ 11,453,436 $ - Machinery and equipment 2,413,087 2,068,056 Leasehold improvement 2,956,515 899,538 Office equipment 1,192,443 818,703 Motor vehicles 352,972 301,079 Total 18,368,453 4,087,376 Less: accumulated depreciation ( 3,405,862 ) ( 2,786,150 ) Property, plant and equipment, net $ 14,962,591 $ 1,301,226 (1) O n April 4, 2022, the Company entered an agreement with Zhejiang HPWINNER Scientific Company Limited to acquire its factory, with an area of 44,451.54 square meters and the total consideration of RMB 78,968,319 (approximately $ 11,453,436 ) . Depreciation expenses for the years ended December 31, 2022 and 2021 were $ 907,739 and $ 589,576 , respectively. Impairment loss for the years ended December 31, 2022 and 2021 were $ 550,402 and $ 6,215 , respectively. F-17 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 10 –INTANGIBLE ASSETS, NET Intangible assets, net consisted of the following: December 31, 2022 December 31, 2021 At cost: Land use right (1) $ 4,605,738 $ - Software 119,550 129,392 Total 4,725,288 129,392 Less: accumulated amortization ( 161,496 ) ( 126,079 ) Intangible assets, net $ 4,563,792 $ 3,313 (1) On April 4, 2022, the Company entered an agreement with Zhejiang HPWINNER Scientific Company Limited to acquire its land use right, with an area of 56,302 square meters with a useful life of 45.75 years and the total consideration of RMB 31,766,697 (approximately $ 4,605,738 ). Amortization expenses for the years ended December 31, 2022 and 2021 were $ 46,133 and $ 42,679 , respectively. Impairment loss for the years ended December 31, 2022 and 2021 were $ 2,995,440 and nil , respectively. NOTE 11 – OTHER NON-CURRENT ASSETS, NET December 31, 2022 December 31, 2021 Loan to the third party (1) $ 4,591,717 $ - Receivable from a third party (2) - 2,353,827 Long-term prepayment (3) 1,280,974 1,587,693 Deposit 758,038 564,007 Total 6,630,729 4,505,527 Less: provision for loan to the third party and receivable from a third party (1) & (2) ( 4,591,717 ) ( 2,353,827 ) Other non-current assets, net $ 2,039,012 $ 2,151,700 (1) The balance represents a 5-year loan in the aggregate principal amount of $ 4,439,400 (New Zealand Dollar 7,000,000 ) to the related party, bearing interest of 2.5 % annually and maturing in August 2026. As for the resignation of Mr. Justin Davis-Rice in 2022, the controller of Bendon Limited and the former director of CEGL, Bendon Limited was not a related party as of December 31, 2022. The company believes that the possibility of the collection is remote and recorded full provision for the loan. (2) In 2018, the Company signed an agreement with Anhua Automotive Co. Ltd., (“Anhua”) and paid an initial non-refundable deposit to participate in Anhua’s bankruptcy recombination process to develop further production capacity in China. However, due to the irrecoverable deterioration of Anhua’s business and Cenntro’s focus on Europe and America markets, Cenntro declined to further participate in the recombination process. Therefore, Cenntro recorded full provision for the deposit. The balance was written off for the year ended December 31, 2022 . (3) T he balance mainly represented a six-year period liability insurance for the existing officers and directors in connection with the closing of the Combination . NOTE 12 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities are summarized as follow: December 31, 2022 December 31, 2021 Accrued litigation compensation $ 1,590,484 $ - Accrued professional fees 919,525 2,429,843 Accrued expenses 797,969 - Payable for purchasing the factory 588,645 - Employee payroll and welfare payables 452,904 561,469 Interest expense of convertible loans 383,250 - Other taxes payable 118,469 48,672 Credit card payable 22,908 510,151 Loans from third parties - 419,642 Others 174,487 213,486 Total $ 5,048,641 $ 4,183,263 F-18 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 13 - INCOME TAXES Australia CEGL is subject to a tax rate of 30 %. United States U.S. subsidiaries CEG, Cennatic Power Inc. and CAC are subject to a federal tax rate of 21 %. Germany CAE and Cenntro Electric is subject to a tax rate of 30 %. Hong Kong In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. Effective from April 1, 2018, a two-tier corporate income tax system was officially implemented in Hong Kong, which is 8.25 % for the first HK$2.0 million profits, and 16.5 % for the subsequent profits, it is exempted from the Hong Kong income tax on its foreign-derived income. CEG’s subsidiaries, CAG HK and Sinomachinery HK, are registered in Hong Kong as intermediate holding companies, subject to an income tax rate of 16.5 % for taxable income earned in Hong Kong. Payments of dividends from Hong Kong subsidiaries to CEG are not subject to any Hong Kong withholding tax. PRC Pursuant to the tax laws and regulations of the PRC, the Company’s applicable enterprise income tax (“EIT”) rate is 25 %. Zhejiang Tooniu Tech Co., Ltd, Hangzhou Hengzhong Tech Co., Ltd and. Zhejiang Xbean Tech Co., Ltd qualify as Small and micro enterprises in the PRC, and are entitled to pay a reduced income tax rate of 2.5 %, 2.5 % and 5 % in 2022. (1) Income taxes Income tax expenses for the years ended December 31, 2022 and 2021 are nil . The components of losses before income taxes are summarized as follows: For the Years Ended December 31, 2022 2021 PRC $ ( 7,386,251 ) $ ( 5,477,857 ) US ( 17,254,945 ) ( 9,234,455 ) Europe ( 20,130,854 ) - Australia ( 67,392,512 ) ( 1,128,325 ) Others 19,300 ( 581,170 ) Total $ ( 112,145,263 ) $ ( 16,421,807 ) As the main business operations were concentrated in China, and other losses except for PRC losses are caused by non-operating activities, PRC statutory income tax rate was applied. The actual income tax expense reported in the consolidated and combined statements of operations and comprehensive loss for years ended December 31, 2022 and 2021 differs from the amount computed by applying the PRC statutory income tax rate to income before income taxes due to the following: For the Years Ended December 31, 2022 2021 Loss before provision for income tax $ ( 112,145,263 ) $ ( 16,421,807 ) PRC statutory income tax rate 25 % 25 % Income tax expense at the PRC statutory rate ( 28,036,316 ) ( 4,105,452 ) Effect of preferential tax rate 161,592 279,886 Effect of international tax rates ( 2,255,963 ) 420,450 Effect of non-deductible expenses 1,069,009 396,826 Effect of research and development deduction ( 568,446 ) ( 204,807 ) Fair value change of warrant liability 3,912,074 - Impairment loss of goodwill 2,777,972 - Effect of valuation allowance 22,940,078 3,213,097 Total income tax expense - - Effective income tax rate 0 % 0 % F-19 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 13 - INCOME TAXES (CONTINUED) (2) Deferred taxes assets, net The tax effects of temporary differences that give rise to the deferred income tax assets balances as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 Deferred income tax assets: Impairment loss $ 3,532,162 $ 2,013,232 Change in fair value of financial instrument 912,340 - Capitalization of research and experimental costs 369,687 - Net operating loss carry forwards 28,818,841 12,646,183 Total deferred income tax assets 33,633,030 14,659,415 Valuation allowance ( 33,633,030 ) ( 14,659,415 ) Deferred income tax assets, net $ - $ - The changes related to valuation allowance are as follows: For the Years Ended December 31, 2022 2021 Balance at the beginning of the year $ 14,659,415 $ 19,072,736 Additions during the year 22,940,078 3,213,097 Expire of NOL ( 1,318,979 ) ( 1,243,653 ) Write-off of employee stock ownership plans deferred tax asset - ( 4,981,854 ) Change in tax rate ( 91,423 ) ( 959,106 ) Company deregistration - ( 708,266 ) Exchange rate effect ( 2,556,061 ) 266,461 Balance at the end of the year $ 33,633,030 $ 14,659,415 The valuation allowances as of December 31, 2022 and 2021 were provided for the deferred income tax assets of certain subsidiaries, which were at cumulative loss positions. In assessing the realization of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or utilizable. For entities incorporated in Hong Kong, net losses of $ 978,187 can be carried forward indefinitely. For entities incorporated in the U.S., federal net operating losses of $ 27,588,978 can be carried forward indefinitely subject to a limitation in utilization against 80 % of annual taxable income. Federal net operating losses of $ 3,740,668 , $ 1,430,246 and $ 744,848 will expire if unused by 2035, 2036 and 2037, respectively. For entities incorporated in the PRC, net losses can be carried forward for five years. PRC net losses of $ 39,109,412 were available to offset future taxable income. Net losses of $ 13,755,682 , $ 5,696,704 , $ 2,326,371 , $ 6,302,877 and $ 11,027,780 will expire, if unused, by 2023, 2024, 2025, 2026, and 2027, respectively. For entities incorporated in German, net losses of $ 14,748,048 can be carried forward indefinitely. For entities incorporated in Australia, net losses of $ 28,967,850 can be carried forward indefinitely. Internal Revenue Code of 1986, as amended (“IRC”), Section 382 provides that, after an ownership change, the amount of a loss corporation’s taxable income for any post-change year that may be offset by pre-change losses shall not exceed the IRC Section 382 limitation for that year. The IRC Section 382 limitation generally equals the fair market value of the old loss corporation multiplied by the long-term tax-exempt rate. A loss corporation is any corporation that has a net operating loss, a net operating loss carryforward, or a net unrealized built-in loss for the taxable year in which the ownership change occurs. An ownership change is a greater than 50-percentage point increase in ownership by five-percent shareholders. The Company has not yet performed an IRC Section 382 analysis to determine whether an ownership change has occurred and whether any tax attributes are limited. The Company has recorded a full valuation allowance against its deferred tax assets and does not expect to utilize its tax attributes. Once the Company utilizes its tax attributes, a complete IRC Section 382 analysis will be performed. Uncertain tax positions The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. CAE GmbH was not yet subject to a tax audit, but a tax audit for 2019 has been recently announced. As of December 31, 2022 and 2021, the Company did no t have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefits. The Company does not believe that its uncertain tax benefits position will materially change over the next twelve months. F-20 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 14 - LEASES The Company leases offices space under non-cancellable operating leases. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheets. The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. A summary of lease cost recognized in the Company’s consolidated and combined statements of operations and comprehensive loss is as follows: For the Years Ended December 31, 2022 2021 Operating leases cost excluding short-term rental expense $ 1,616,853 $ 682,616 Short-term lease cost 238,386 4,974 Total $ 1,855,239 $ 687,590 A summary of supplemental information related to operating leases is as follows: December 31, 2022 December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities $ 1,108,721 $ 879,788 Weighted average remaining lease term 8.36 years 2.00 years Weighted average discount rate 4.27 % 3.80 % The Company’s lease agreements do not have a discount rate that is readily determinable. The incremental borrowing rate is determined at lease commencement or lease modification and represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term and an amount equal to the lease payments in a similar economic environment. The following table summarizes the maturity of lease liabilities under operating leases as of December 31, 2022: For the year ending December 31, Operating Leases 2023 $ 1,341,954 2024 1,296,713 2025 1,043,197 2026 1,086,121 2027 1,119,334 2028 and thereafter 4,679,951 Total lease payments 10,567,270 Less: imputed interest 1,832,354 Total 8,734,916 Less: current portion 1,313,334 Non-current portion $ 7,421,582 F-21 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 15 - CONVERTIBLE PROMISSORY NOTE AND WARRANT Convertible Promissory Note On July 20, 2022, the Company issued to investors convertible promissory note (“Note”) in the aggregate principal amount of $ 61,215,000 due on July 19, 2023 , unless earlier repurchased, converted or redeemed. The Note bears interest at a rate of 8 % per annum, and the net proceed after deducting issuance expenses was $ 54,069,000 . The main terms of the Note are summarized as follows: Conversion feature At any time after the issue date until the Note is no longer outstanding, this Note shall be convertible, in whole or in part, into ordinary shares at the option of the holder, at any time and from time to time. Redemption feature If the Company shall carry out one or more subsequent financings in excess of US$ 25,000,000 in gross proceeds, the holder shall have the right to (i) require the Company to first use up to 10 % of the gross proceeds of such subsequent financing if the aggregate outstanding principal amount of the Note is in excess of US$ 30,000,000 and (ii) require the Company to first use up to 20 % of the gross proceeds of such subsequent financing if the outstanding principal amount of the Note is US$ 30,000,000 or less to redeem all or a portion of this Note for an amount in cash equal to the Mandatory Redemption Amount equal to 1.08 multiplied by the sum of principal amount subject to the mandatory redemption, plus accrued but unpaid interest, plus liquidated damages, if any, and any other amounts. In addition, if the closing price of the ordinary shares on the principal trading market is below the floor price of $ 1.00 per share for a period of ten consecutive trading days, the holder shall have the right to require the Company to redeem the sum of principal amount plus accrued but unpaid interest under the Note. Contingent interest feature The Note is subject to certain customary events of default. If any event of default occurs, the outstanding principal amount, plus accrued but unpaid interest, liquidated damages and other amounts owing, shall become immediately due and payable, and at the holder’s election, in cash at the mandatory default amount or in ordinary shares at the mandatory default amount at a conversion price equal to 85 % of the 10-day volume weighted average price. Commencing 5 days after the occurrence of any event of default, the interest shall accrue at an interest rate equal to the lesser of 10 % per annum or the maximum rate permitted under applicable law. The financial liability was initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The remaining estimated fair value adjustment is presented as other income (expense) in the consolidated and combined statement of operations, change in fair value of convertible notes. The movement of Note during the year ended December 31, 2022 are as follows: Liability component As of December 31, 2021 $ - Convertible promissory notes issued during the year 38,966,261 Redemption of convertible promissory notes ( 3,720,064 ) Fair value change recognized 22,126,630 As of December 31, 2022 $ 57,372,827 The estimated fair value of the Note upon issuance date July 20, 2022 and as of December 31, 2022 was computed using a Monte Carlo Simulation Model, which incorporates significant inputs that are not observable in the market, and thus represents a Level 3 measurement. The unobservable inputs utilized for measuring the fair value of the Note reflects our assumptions about the assumptions that market participants would use in valuing the Note as of the issuance date and subsequent reporting period. We determined the fair value by using the following key inputs to the Monte Carlo Simulation Model: Fair Value Assumptions - Convertible Promissory Note December 31, 2022 July 20, 2022 Face value principal payable 57,488,000 61,215,000 Original conversion price 1.2375 1.2375 Interest Rate 8.00 % 8.00 % Expected term (years) 0.55 1.00 Volatility 75.13 % 71.29 % Market yield (range) 18.02 % 18.02 % Risk free rate 4.69 % 2.96 % Issue date July 20, 2022 July 20, 2022 Maturity date July 19, 2023 July 19, 2023 Warrant Accompany with the Note, the Company issued to the same investor warrants to purchase up to 24,733,336 ordinary shares of the Company, with an exercise price of $ 1.61 per share, which may be exercised by the holders on a cashless basis by using Black-Scholes model to determine the net settlement shares . Additionally, after the Company completed the above Note financing, the Company issued to the placement agent warrants to purchase 2,473,334 ordinary shares of the Company at a same day, as part of the underwriter’s commission . The warrants were issued with an exercise price of $ 1.77 per share. Both warrants are exercisable from the date of issuance and have a term of five years from the date of issuance. They were presented as liabilities on the consolidated balance sheet at fair value in accordance with ASC 480 “Distinguishing Liabilities from Equity”. The liabilities then, will be remeasured every reporting period with any change to fair value recorded as other income (expense) in the consolidated and combined statement of operations. The movement of warrants during the year ended December 31, 2022 are as follows: Investor warrants component Placement agent warrants component As of December 31, 2021 $ - $ - Warrants issued during the year 19,333,739 1,358,336 Exercise of warrants ( 18,549,865 ) - Fair value change recognized 13,550,230 2,098,068 As of December 31, 2022 14,334,104 3,456,404 The fair value for these two warrants were computed using the Binomial model with the following assumptions: Fair Value Assumptions – Warrants December 31, 2022 July 20, 2022 Expected term (years) 4.55 5.00 Volatility 77.72 % 75.85 % Risk free rate 4.13 % 3.24 % F-22 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 16 - SHARE-BASED COMPENSATION Share based compensation expenses for periods prior to the consummation of the Combination relate to the share options granted by CAG Cayman to the employees and directors of Cenntro. Share options granted by CAG Cayman to employees of the Company On February 10, 2016, CAG Cayman adopted the 2016 Share Incentive Option Plan (the “2016 Plan”), which allowed CAG Cayman to grant options to the employees and directors of Cenntro to purchase up to 14,139,360 ordinary shares of CAG Cayman subject to vesting requirements. On April 17, 2018, CAG Cayman expanded the share reserve under the 2016 Plan, increasing the number of ordinary shares available for issuance under the 2016 Plan by an additional 10,484,797 ordinary shares for a total 24,624,157 ordinary shares. Generally, the options granted under the 2016 Plan became exercisable during the term of the optionee’s service with CAG Cayman in five equal annual instalments of 20 % each. The expiration dates of the options are between six and eight years from the respective grant dates as stated in the option grant letters. On March 7 and May 31, 2016, CAG Cayman granted 12,169,840 options and 650,000 options to the employees and directors of the Company to purchase CAG Cayman’s ordinary shares at exercise prices ranging from $ 0.2000 to $ 1.2092 per share. The options have a contractual term ranging from six years to eight years . On August 1 and December 31, 2017, CAG Cayman granted 6,300,000 options and 2,580,000 to the employees and directors of the Company to purchase CAG Cayman’s ordinary shares at exercise prices ranging from $ 1.6500 to $ 1.8792 per share. In connection with the Combination, CAG Cayman amended and restated the 2016 Plan, adopting the Amended 2016 Plan. In connection with the closing of the Combination, each employee stock option outstanding under the Amended 2016 Plan immediately prior to the closing of the Combination was converted into an option to purchase a number of ordinary shares equal to the aggregate number of shares for which such stock option was exercisable immediately prior to the closing of the Combination multiplied by the Exchange Ratio of 0.71563 . As a result, the 12,891,130 options granted by CAG Cayman prior to the closing of the Combination under the 2016 Plan were converted into 9,225,271 options of CEGL. The exercise price of such options modified to equal the exercise price per share of such stock option immediately prior to the closing of the Combination divided by the Exchange Ratio . The conversion of the incentive stock options of CAG Cayman under the Amended 2016 Plan into incentive stock options of CEGL was deemed a modification at closing of the Combination, which is the modification date. There were, no incremental fair value recorded immediately before and after the modification date. Share options granted by CEGL to employees of the Company On May 3, 2022, CEGL adopted the 2022 Share Incentive Plan (the “2022 Plan”), which allowed CEGL to grant options to the employees and directors of the Company to purchase up to 25,965,234 ordinary shares of CEGL subject to vesting requirement. On May 3, 2022, CEGL granted 12,797,063 options to the directors of the Company to purchase CEGL’s ordinary shares at exercise prices ranging from $ 1.680 to $ 1.848 per share. Among them, 297,615 options have a contractual term of five years , 12,499,448 options have a contractual term of ten years . The fair value of option per share grant on May 3, 2022 varied from $ 1.1130 to $ 1.4310 . The aggregate grant date fair value of the options grant was $ 18,217,956 . For the year ended December 31, 2022 and 2021, the total share-based compensation expenses were comprised of the following: For the Years Ended December 31, 2022 2021 Selling and marketing expenses 　 $ 504,199 　 　 $ - 　 Research and development expenses 284,805 152,694 General and administrative expenses 　 3,242,625 　 975,631 Total 　 $ 4,031,629 　 　 $ 1,128,325 　 A summary of share options activity for the years ended December 31, 2022 and 2021 is as follows: Number of Share Options Weighted Average Exercise Price US$ Weighted Average Remaining Contractual Years Aggregate Intrinsic Value US$ Outstanding at January 1, 2021 18,976,130 0.98 3.56 24,410,306 Granted - - Exercised - - Forfeited ( 5,492,000 ) 1.42 Expired ( 593,000 ) 1.19 Modification of option as of 30/12/2021 9,225,271 1.10 Outstanding at December 31, 2021 9,225,271 1.10 2.60 42,799,081 Granted 12,797,063 1.68 Exercised ( 51,468 ) 0.28 Forfeited ( 334,167 ) 1.68 Expired ( 33,333 ) 1.68 Outstanding at December 31, 2022 21,603,366 1.44 5.99 721,210 Expected to vest at December 31, 2022 10,130,075 1.71 9.16 - Exercisable as of December 31, 2022 11,473,291 1.20 3.19 721,210 F-23 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 16 - SHARE-BASED COMPENSATION (CONTINUED) The Company calculated the fair value of the share options on the grant date and modification date using the Black-Scholes option-pricing valuation model. The assumptions used in the valuation model are summarized in the following table. For the Years Ended December 31, 2022 2021 　Modification Before Modification Expected volatility 　 86.28 %~ 83.96 % 58.09 %- 91.85 % 82.33 %- 93.48 % Expected dividends yield 　 0 % 0 % 0 % Risk-free interest rate per annum 　 2.97 %~ 3.01 % 0.06 %- 1.36 % 1.84 %- 2.40 % The fair value of underlying ordinary shares (per share) $ 1.68 $ 5.74 $ 1.21 -$ 2.92 The expected volatility is calculated based on the annualized standard deviation of the daily return embedded in historical share prices of the Company. The risk-free interest rate is estimated based on the yield to maturity of US treasury bonds based on the expected term of the incentive shares. As of December 31, 2022, there was approximately $ 15,043,377 of total unrecognized compensation cost related to unvested share options. The unrecognized compensation costs are expected to be recognized over a weighted average period of approximately 3.15 years. F-24 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 17 - ORDINARY SHARES AND RESTRICTED NET ASSETS Ordinary shares Immediately prior to the consummation of the Combination, there were 86,402,708 ordinary shares of NBG issued and outstanding. In connection with the closing of the Combination, CEGL issued 174,853,546 shares to CAG Cayman as consideration for the Combination. In 2022, 51,468 ordinary shares were exercised under the 2016 Share Incentive Option Plan, and 39,534,273 ordinary shares were issued for exercise of the investor warrants. As of December 31, 2022, the issued and outstanding ordinary shares are 300,841,995 . The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of CEGL. Each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote. Restricted net assets A significant portion of the Company’s operations are conducted through its PRC (excluding Hong Kong) subsidiaries. Due to restrictions on the distribution of share capital from the Company’s subsidiaries in PRC, total restrictions placed on the distribution of the Company’s PRC subsidiaries’ net assets were $ 581,314 as of December 31, 2022. NOTE 18 - NET LOSS PER SHARE For the year ended December 31, 2021, for the purpose of calculating net loss per share as a result of the reverse recapitalization as described in Note 1, the weighted-average number of shares used in the calculation reflects the outstanding shares of CEGL as if the equity structure of Cenntro (the accounting acquirer) was retroactively stated to reflect the number of shares of CEGL (the accounting acquiree) issued in the Combination. Basic and diluted net loss per share for each of the year presented were calculated as follows: For the Years Ended December 31, 2022 2021 Numerator: Net loss attributable to the Company’s shareholders ( 110,088,241 ) ( 16,421,807 ) Denominator: Weighted average ordinary shares used in computing basic and diluted loss per share 263,323,238 175,090,266 Basic and diluted net loss per share ( 0.42 ) ( 0.09 ) The Company incurred losses for the years ended December 31, 2022 and 2021, no potential ordinary shares were anti-dilutive and excluded from the calculation of diluted net loss per share of the Company. F-25 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 19 - CONCENTRATIONS (a) Customers The following table sets forth information as to each customer that accounted for 10% or more of net revenue for the years ended December 31, 2022 and 2021. Year ended Year ended December 31, 2022, December 31, 2021, Customer Amount % of Total Amount % of Total A 1,304,969 15 % - - B - - 3,543,423 41 % C 419,928 * 2,556,537 30 % D 265,972 * 848,399 10 % Total $ 1,990,869 15 % $ 6,948,359 81 % * Indicates below 10%. The following table sets forth information as to each customer that accounted for 10% or more of total gross accounts receivable as of December 31, 2022 and 2021. As of December 31, 2022, As of December 31, 2021, Customer Amount % of Total Amount % of Total B $ 410,321 16 % $ 2,084,879 59 % E 1,197,023 47 % - - F 395,360 16 % - - G - - 864,106 25 % Total $ 2,002,704 79 % $ 2,948,985 84 % (b) Suppliers For the years ended December 31, 2022 and 2021, the Company’s material suppliers, each of whom accounted for more than 10% of the Company’s total purchases, were as follows: Year ended December 31, 2022, Year ended December 31, 2021, Supplier Amount % of Total Amount % of Total A $ 6,078,079 26 % $ 2,219,792 21 % B 2,885,202 12 % - - Total $ 8,963,281 38 % $ 2,219,792 21 % The following table sets forth information as to each supplier that accounted for 10% or more of total accounts payable as of December 31, 2022 and 2021. As of December 31, 2022, As of December 31, 2021, Supplier Amount % of Total Amount % of Total A $ 420,100 12 % $ - - C 577,621 17 % - - Total $ 997,721 29 % $ - - F-26 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 20 - 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. On July 12, 2020, Didier Verriest (“Didier”) filed a four-count complaint with the Superior Court of New Jersey seeking over $ 500,000 for alleged unpaid compensation expenses related to a breach of contract under the Magnum Agreement (the “Magnum Agreement”) Didier entered with Cenntro, and Magnum Korea Ltd. (“Magnum”). On March 5, 2021, Cenntro filed a motion to dismiss as to Didier’s breach of contract claim. Within its motion, Cenntro put before the Court a true and accurate copy of the Magnum Agreement, which revealed the payment obligation underlying Didier’s breach of contract claim against Cenntro, did not exist. Instead, the express terms of the Magnum Agreement confirmed that the payment obligation rested solely on Magnum. After briefing and oral argument, by court order dated April 30, 2021, the Court dismissed Plaintiff’s breach of contract claim against Cenntro, without prejudice. However, The Court is allowing a separate quantum meruit claim to proceed. Cenntro filed an answer to Didier’s amended complaint on August 11, 2021. After filing an answer, the parties conducted discovery, which included interrogatories, requests for production of documents, and depositions. On March 17, 2023, Cenntro filed a motion for summary judgment seeking dismissal of Plaintiff’s remaining quantum meruit claim. On May 12, 2023, the Judge granted Cenntro’s motion in its entirety, dismissing Plaintiff’s case with prejudice. Mr. Verriest will have until June 26, 2023 to file a Notice of Appeal, failing which the case will be over. In October 2021, Sevic Systems SE (“Sevic”), a former channel partner, commenced a lawsuit against Shengzhou 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 under its contract with Shengzhou Machinery 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 Company does not believe that Sevic’s claims have any merit and intends to vigorously defend against such claims. 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, Tropos Technologies, Inc. has not yet formally responded to the demand. On February 16, 2023, AAA appointed an arbitrator and both parties are waiting for further proceedings under the arbitration process. On April 25, 2023, Tropos Technologies, Inc. filed a motion to dismiss the arbitration demand and claimant intends to file a response in opposition to it by the current deadline of May 23, 2023. 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 EUR 20,000.00 per sold vehicle in Belgium and EUR 5,000.00 for each other infringement in Belgium after the judgement was served with a maximum fine of EUR 500,000.00 for LEIE and EUR 1,000,000.00 fine for CAE. Because CAE has not sold any METRO-models in Belgium, the Company believes the judgement is incorrect and intends to appeal it, however, the Company has accrued the related liability according to the judgement made. 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. The Defendants intend to file a motion directed to the dismissal of that amended complaint. F-27 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 21 - RELATED PARTY TRANSACTIONS The table below sets forth the major related parties and their relationships with the Company: Name of related parties: Relationship with the Company Mr. Peter Wang Chairman, Chief Executive Officer, and principal shareholder of the Company Mr. Yeung Heung Yeung A principal shareholder of the Company Bendon Limited Controlled by Mr. Justin Davis-Rice, a director of CEGL. As for the resignation of Mr. Justin Davis-Rice in 2022, it was not a related party as of December 31, 2022. Mr. Zhong Wei Chief Technology Officer of the Company Ms. Xu Cheng Immediate family of Mr. Chris Xiongjian Chen, former Chief Operating Officer of CAG Cayman CAG Cayman Mr. Peter Wang is a principal shareholder Devirra Corporation Limited and its subsidiaries (Collectively referred to the “Devirra Group”) Entities controlled by CAG Cayman Cenntro Holding Limited Ultimately controlled by Mr. Peter Wang Zhejiang Zhongchai Machinery Co., Ltd (“Zhejiang Zhongchai”) Ultimately controlled by Mr. Peter Wang Zhejiang RAP An entity significantly influenced by Hangzhou Ronda Tech Co., Limited Jiangsu Rongyuan An entity significantly influenced by Hangzhou Ronda Tech Co., Limited Hangzhou Hezhe Energy Technology Co., Ltd (“Hangzhou Hezhe”) An entity significantly influenced by Hangzhou Ronda Tech Co., Limited Zhuhai Hengzhong Industrial Investment Fund (Limited Partner) (“Zhuhai Hengzhong”) Mr. Peter Wang served as General Partner Shenzhen Yuanzheng Investment Development Co. Ltd (“Shenzhen Yuanzheng“) Controlled by Mr. Yeung Heung Yeung Shanghai Hengyu Enterprise Management Consulting Co., Ltd (“Shanghai Hengyu”) Ultimately controlled by Mr. Peter Wang Antric GmbH Invested by the Company F-28 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 21 - RELATED PARTY TRANSACTIONS (CONTINUED) Related party transactions During the years ended December 31, 2022 and 2021, the Company had the following material related party transactions. For the Years Ended December 31, 2022 2021 Interest income from a related party Zhejiang RAP $ 13,434 $ 23,114 Bendon Limited 113,021 39,296 Purchase of raw materials from related parties Jiangsu Rongyuan - 24,799 Hangzhou Hezhe Energy Technology Co., Ltd 1,413,262 1,219,621 Revenue from sales of equipment to a related party Zhejiang Zhongchai 119,963 - Payment on the purchase of the raw materials Hangzhou Hezhe 1,015,036 2,027,483 Repayment of the advance operating fund from a related party Zhejiang Zhongchai 276,266 - Consulting service provided by a related party Shanghai Hengyu 5,053 29,919 Repayment interest-bearing Loan from a related party Shenzhen Yuanzheng 395,523 - Mr. Yeung Heung Yeung 1,331,091 - Interest expense on loans provided by related parties Mr. Yeung Heung Yeung 2,532 132,000 Mr. Zhong Wei - 6,039 Others 1,075 40,005 F-29 Table of Contents CENNTRO ELECTRIC GROUP LIMITED NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Expressed in U.S. dollars, except for number of shares) NOTE 21 - RELATED PARTY TRANSACTIONS (CONTINUED) Amounts due from Related Parties – current The following table presents amounts due from related parties as of December 31, 2022 and 2021. As of December 31, 2022 2021 Hangzhou Hezhe (1) 366,936 817,640 Zhejiang Zhongchai (2) - 412,797 Shanghai Hengyu - 2,197 Jiangsu Rongyuan (3) - 166,911 Total 366,936 1,399,545 Less: provision for receivable from a related party (3) - ( 166,911 ) Amounts due from related parties, net $ 366,936 $ 1,232,634 (1) The balance mainly represents the prepayment for raw material to the related party. (2) The balances mainly represent accounts receivable relating to the sale of industrial equipment of $ 340,770 and advances to Zhejiang Zhongchai for daily operational purposes of $ 72,027 as of December 31, 2021. (3) The balances mainly represent advances to related parties for daily operational purposes. The business conditions of Jiangsu Rongyuan deteriorated and, as a result, the Company recognized provision for receivables of nil , $ 227,807 and $ 206,187 for the years ended December 31, 2021, 2020 and 2019, respectively. For the year ended December 31, 2020, the Company wrote off the balance of provision that it recognized in 2019. The Company reversed the provision of $ 78,931 for the year ended December 31, 2021 due to the repayment from the related party. The balance was written off during the year ended December 31, 2022. Amounts due from Related Parties – non-current As of December 31, 2022 2021 Bendon Limited (1) $ - $ 4,834,973 Total - 4,834,973 Less: provision for receivable from a related party - - Amounts due from related parties -non-current $ - $ 4,834,973 (1) The balance represents a 5-year loan in the aggregate principal amount of $ 4,439,400 (New Zealand Dollar 7,000,000 ) to the related party, bearing interest of 2.5 % annually and maturing in August 2026 . As for the resignation of Mr. Justin Davis-Rice in 2022, the controller of Bendon Limited and the former director of CEGL, Bendon Limited was not a related party as of December 31, 2022. Amounts due to Related Parties The following table presents amounts due to related parties as of December 31, 2022 and 2021. As of December 31, 2022 2021 CAG Cayman (1) $ - $ 13,945,823 Mr. Yeung Heung Yeung (2) - 1,328,559 Shenzhen Yuanzheng (2) - 416,509 Antric GmbH (3) 666,396 - Zhejiang RAP 23,882 40,034 Jiangsu Rongyuan 23,194 25,103 Shanghai Hengyu 2,900 - Total $ 716,372 $ 15,756,028 (1) CAG Cayman was the parent company of Cenntro before the closing of the Combination. The balance as of December 31, 2021 represented (i) the interest-free operating funds from CAG Cayman of $ 15,823 ; and (ii) a reduction of capital from Cenntro by CAG Cayman of $ 13,930,000 prior to the closing of the Combination. It was fully repaid to CAG Cayman in 2022. (2) The balance represented the interest-bearing loan provided by related parties to the Company. The weighted average annual interest rates for the loans was 17.31 % as of December 31, 2021. It was fully repaid in 2022. (3) The balance represented the capital injection payable to this related party. On December 16, 2022, the Company invested EUR 2,500,000 (approximately $ 2,674,500 ) in Antric GmbH to acquire 25 % of its equity interest. For the year ended December 31, 2022, capital investment of EUR 1,868,750 (approximately $ 1,977,380 ) was paid to Antric GmbH . NOTE 22 - SUBSEQUENT EVENT The Company entered into Share Purchase Agreement (the “Purchase Agreement II”) with Mosolf to sell to the Company its remaining 35 % of the issued and outstanding shares in CAE (Note 3). The Transaction was closed on January 31, 2023, as a result, CAE became a wholly-owned subsidiary of the Company. This transaction was accounted for as equity transactions, no gain or loss was recognized in consolidated statement of operations. The difference between the fair value of the consideration paid and the amount by which the noncontrolling interest was adjusted was recognized in equity attributable to the Company. On January 3 and April 26, 2023, $ 39,583,321 and $ 6,000,000 of convertible promissory notes were redeemed by the investors. On January 31, 2023, the Company entered into a debt conversion agreement with HW Electro Co., Ltd., to convert the loan principal of $ 1,000,000 for 571,930 shares of HW Electro Co., Ltd.’s common stock totaling 3.59 % of its equity interest. The interest of the loan was repaid in February 2023. On January and March, 2023, the Company entered into a series of agreement to purchase electric commercial vehicle components, which total contract amount of RMB 121,335,900 (approximately $ 17,592,052 ), as of the date of issuance of the consolidated and combined financial statements, the Company has paid RMB 26,785,950 (approximately $ 3,883,598 ) as delivery schedule of supplier. Cenntro Automotive Corporation and BAL Freeway Associates, LLC, a California Limited Liability Company have entered into a lease agreement for an approximate 64,000 square foot portion of a larger 124,850 square foot industrial building located within the Rancon Centre Ontario. The lease term is for five years , starting from April 1, 2023, and ending on March 31, 2028. The monthly rent is $ 115,200 . The Company has evaluated subsequent events through the date of issuance of the consolidated and combined financial statements, except for the events mentioned above, there were no other subsequent events with material financial impact on the consolidated and combined financial statements. F-30