Item 3. Legal Proceedings
Item 3.
Legal Proceedings.
From time to time, we may be subject to various legal claims and proceedings that arise from the normal course of business activities, including, third party intellectual property
infringement claims against us in the form of letters and other forms of communication. Litigation or any other legal or administrative proceeding, regardless of the outcome, could result in substantial cost, diversion of our resources,
including management’s time and attention, and, depending on the nature of the claims, reputational harm. In addition, if any litigation results in an unfavorable outcome, there exists the possibility of a material adverse impact on our
results of operations, prospects, cash flows, financial position and brand. Please refer to the description as contained in “Item 8 Financial Statements and Supplementary Data” on page F-1 of our Annual Report and the information described
below.
On March 25, 2022, Shengzhou Hengzhong Machinery Co., Ltd. (“Shengzhou”), an affiliate of Cenntro Automotive Corporation, filed a demand for arbitration against Tropos Technologies, Inc.
with the American Arbitration Association (“AAA”), asserting claims for breach of contract and unjust enrichment. Shengzhou is seeking payment of $1,126,640 (exclusive of interest, costs, and attorneys’ fees) for outstanding invoices owed
by Tropos Technologies, Inc. to Shengzhou. As of the date of this report, Tropos Technologies, Inc. has not yet formally responded to the demand. On February 16, 2023, AAA appointed an arbitrator and arbitrator and on April 25,2023, Tropos
Technologies, Inc. filed a motion to dismiss the arbitration demand. On May 23,2023, Shengzhou filed a response in opposition to the motion to dismiss the arbitration demand. A hearing on the motion to dismiss was held on November 7, 2023.
On January 29, 2024, the arbitrator issued his opinion and order denying Tropos Technologies, Inc.’s motion to dismiss.
52
Table of Contents
On July 22, 2022, Xiongjian Chen (the “Plaintiff") 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 July 20, 2023, the Defendants filed a motion seeking the
dismissal of that amended complaint. On July 20, 2023, the Defendants filed a motion seeking the dismissal of Plaintiff’s amended complaint. On September 22, 2023, the Plaintiff filed a motion to strike our motion to dismiss. The Defendants
filed reply briefs to Plaintiff’s motion to strike on November 9, 2023. On January 25, 2024, the Magistrate Judge entered an order granting Plaintiff’s Motion to Amend and denying our Motion to Strike as moot.
On February 6,
2023, Hangzhou Ronda Tech Co., Limited (“Ronda”), one of Cenntro’s wholly owned subsidiaries, Ronda commenced a lawsuit against Fujian Newlongma Automotive Co., Ltd. (“Newlongma”), one of Ronda’s suppliers in the Hangzhou Yuhang District
People's Court (the “Court”), under which Ronda pled for (i) the termination of the vehicle purchase orders that Ronda placed with Newlongma on February 26, 2022; (ii) recovery of advance payments for total amount of approximately $438,702;
and (iii) compensation for damages equal to approximately $453,290. The mediation date was set for March 3, 2023 and subsequently docketed on July 3, 2023. Since then, Newlongma filed a jurisdictional objection, and the Court dismissed that
jurisdictional objection. Subsequently Newlongma filed a counterclaim and the Court hosted an exchange of evidence between the parties on October 17, 2023. On March 5, 2024, the Court issued a judgment ruling: (1) Newlongma was to return
advance payments plus 100% damages totaling $869,702; (2) Ronda was to pay for outstanding invoices totaling $583,813; and (3) that all agreements between the parties were to be terminated, including the vehicle purchase orders which have
not been fulfilled. Newlongma is dissatisfied with this third judgment and filed an appeal on March 21, 2024. We will prepare relevant defense materials.
Item 4.
Mine Safety Disclosures.
Not Applicable.
PART II