UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the quarterly period ended: March 31, 2024
OR
|
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the transition period from ______ to _______.
Commission file number: 001-38544
|
|
|
(Exact name of registrant as specified in its charter)
|
|
|
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification Number)
|
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code (732 ) 820-6757
Securities registered under Section 12(b) of the Exchange Act:
|
Title of each class:
|
Trading Symbol(s)
|
Name of each exchange on which registered:
|
|
|
|
|
The
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
|
|
☒
|
Smaller reporting company
|
|
|
Emerging growth company
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
The registrant had 30,828,795 of the registrant’s common stock per value $0.0001 per share, issued and outstanding as of May 14, 2024.
|
1
|
|
| 1 | |
| 20 |
|
| 32 | |
| 32 |
|
| 33 |
|
| 33 |
|
| 34 |
|
| 34 |
|
| 34 |
|
| 34 |
|
| 35 |
|
| 35 |
|
| 36 |
Forward-Looking Statements
This Quarterly Report of Cenntro Inc. (“we,” “us,” “our,” “Cenntro” and the “Company”) contains statements that constitute “forward-looking statements” within the meaning of the safe harbor provisions
of the U.S. Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. These statements appear in several different places in this Quarterly Report
and, in some cases, can be identified by words such as “anticipates”, “estimates”, “projects”, “expects”, “contemplates”, “intends”, “believes”, “plans”, “may”, “will” or their negatives or other comparable words, although not all forward-looking
statements contain these identifying words. Forward-looking statements in this Quarterly Report may include, but are not limited to, statements and/or information related to: our financial performance and projections; our business prospects and
opportunities; our business strategy and future operations; the projection of timing and delivery of products in the future; projected costs; expected production capacity; expectations regarding demand and acceptance of our products; estimated
costs of machinery to equip a new production facility; trends in the market in which we operate; the plans and objectives of management; our liquidity and capital requirements, including cash flows and uses of cash; trends relating to our industry;
plans relating to our electric vehicles (“EVs”); and plans and intentions to regain compliance with the listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”), including, among other things, through a reverse stock split.
We have based these forward-looking statements on our current expectations about future events on information that is available as of the date of this Quarterly Report, and any forward-looking
statements made by us speak only as of the date on which they are made. While we believe these expectations are reasonable, such forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. Our
actual future results may differ materially from those discussed or implied in our forward-looking statements for various reasons, including, our ability to change the direction of the Company; our ability to keep pace with new technology and
changing market needs; our capital needs, and the competitive environment of our business. Additional Factors that could contribute to such differences include, but are not limited to:
| ● |
general economic and business conditions, including changes in interest rates;
|
| ● |
prices of other EVs, costs associated with manufacturing EVs and other economic conditions;
|
| ● |
the effect of an outbreak of disease or similar public health threat, such as the COVID-19 pandemic, on the Company’s business (natural phenomena, including the lingering effects of the COVID-19 pandemic);
|
| ● |
the impact of political unrest, natural disasters or other crises, terrorist acts, acts of war and/or military operations, and our ability to maintain or broaden our business relationships and develop new
relationships with strategic alliances, suppliers, customers, distributors or otherwise;
|
| ● |
breaches in data security, failure of information security systems, cyber-attacks or other security or privacy-related incidents affecting us or our suppliers;
|
| ● |
the ability of our information technology systems or information security systems to operate effectively;
|
| ● |
actions by government authorities, including changes in government regulation;
|
| ● |
uncertainties associated with legal proceedings;
|
| ● |
changes in the size of the EV market;
|
| ● |
future decisions by management in response to changing conditions;
|
| ● |
the Company’s ability to execute prospective business plans;
|
| ● |
misjudgments in the course of preparing forward-looking statements;
|
| ● |
the Company’s ability to raise sufficient funds to carry out its proposed business plan;
|
| ● |
inability to keep up with advances in EV and battery technology;
|
| ● |
inability to design, develop, market and sell new EVs and services that address additional market opportunities to generate revenue and positive cash flows;
|
| ● |
dependency on certain key personnel and any inability to retain and attract qualified personnel;
|
| ● |
inexperience in mass-producing EVs;
|
| ● |
inability to succeed in establishing, maintaining and strengthening the Cenntro brand;
|
| ● |
disruption of supply or shortage of raw materials;
|
| ● |
the unavailability, reduction or elimination of government and economic incentives;
|
| ● |
failure to manage future growth effectively; and
|
| ● |
the other risks and uncertainties detailed from time to time in our filings with the Security and Exchange Commission (“SEC”), including but not limited to those described under “Risk Factors” in Part I, Item
1A of the Company’s Annual Report on Form 10-K as amended for the year ended December 31, 2023, filed with the SEC on April 1, 2023 (the “Form 10-K”).
|
Although management has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors
that cause results not to be as anticipated, estimated or intended. There is no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such
forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. These cautionary remarks expressly qualify, in their entirety, all forward-looking statements attributable to our Company or persons
acting on our Company’s behalf. We do not undertake to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such statements, except as, and to the extent required by,
applicable securities laws.
INDEX
|
|
Page
|
|
Item 1. Interim Financial Statements
|
1 |
| 1 | |
| 2 |
|
| 3 |
|
| 4 |
|
| 5 |
CENNTRO INC.
(Expressed in U.S. dollars, except for number of shares)
|
For the Three Months Ended March 31,
|
||||||||||||
|
Note
|
2024
|
2023
|
||||||||||
|
Net revenues
|
2(d)
|
|
$
|
|
$
|
|
||||||
|
Cost of goods sold
|
(
|
)
|
(
|
)
|
||||||||
|
Gross profit
|
|
|
||||||||||
|
OPERATING EXPENSES:
|
||||||||||||
|
Selling and marketing expenses
|
(
|
)
|
(
|
)
|
||||||||
|
General and administrative expenses
|
(
|
)
|
(
|
)
|
||||||||
|
Research and development expenses
|
(
|
)
|
(
|
)
|
||||||||
|
Total operating expenses
|
(
|
)
|
(
|
)
|
||||||||
|
Loss from operations
|
(
|
)
|
(
|
)
|
||||||||
|
OTHER EXPENSE:
|
||||||||||||
|
Interest income (expense), net
|
|
(
|
)
|
|||||||||
|
(Loss) income from long-term investment
|
(
|
)
|
|
|||||||||
|
Impairment of long-term investment
|
|
(
|
)
|
|||||||||
|
Loss on redemption of convertible promissory notes
|
|
(
|
)
|
|||||||||
|
Loss on exercise of warrants
|
|
(
|
)
|
|||||||||
|
Change in fair value of convertible promissory notes and derivative liability
|
(
|
)
|
(
|
)
|
||||||||
|
Change in fair value of equity securities
|
|
|
||||||||||
| Foreign currency exchange loss, net | ( |
) | ||||||||||
| Gain from cross-currency swaps |
||||||||||||
|
Other income, net
|
|
|
||||||||||
|
Loss before income taxes
|
(
|
)
|
(
|
)
|
||||||||
|
Income tax benefit
|
11
|
|
|
|||||||||
|
Net loss
|
(
|
)
|
(
|
)
|
||||||||
|
Less: net loss attributable to non-controlling interests
|
(
|
)
|
(
|
)
|
||||||||
|
Net loss attributable to the Company’s shareholders
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||
|
OTHER COMPREHENSIVE LOSS
|
||||||||||||
|
Foreign currency translation adjustment
|
(
|
)
|
|
|||||||||
|
Total comprehensive loss
|
(
|
)
|
(
|
)
|
||||||||
|
Less: total comprehensive loss attributable to non-controlling interests
|
(
|
)
|
(
|
)
|
||||||||
|
Total comprehensive loss to the Company’s shareholders
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||
| Weighted average number of shares outstanding, basic and diluted * |
||||||||||||
| Loss per share, basic and diluted |
( |
) | ( |
) | ||||||||
* On September 1, 2023 the Company held its annual general meeting of shareholders where among other proposals, the
shareholders of the Company did approve the consolidation of the ordinary shares of the Company on a (1:10) basis with
effect from December 8, 2023. The reverse stock split decreased the number of outstanding shares and increased net loss
per common share. All per share and share amounts presented have been retroactively adjusted for the effect of this share consolidation for all periods presented.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
CENNTRO INC.
(Expressed in U.S. dollars, except for the number of shares)
|
Note
|
March 31,
2024
|
December 31,
2023
|
||||||||||
|
(Unaudited)
|
||||||||||||
|
ASSETS
|
||||||||||||
|
Current assets:
|
||||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
||||||||
|
Restricted cash
|
|
|
||||||||||
| Short-term investment |
3 | |
||||||||||
|
Accounts receivable, net
|
4
|
|
|
|||||||||
|
Inventories, net
|
5
|
|
|
|||||||||
|
Prepayment and other current assets
|
6
|
|
|
|||||||||
|
|
16
|
|
|
|||||||||
|
Total current assets
|
|
|
||||||||||
|
Non-current assets:
|
||||||||||||
|
Long-term investments
|
7
|
|
|
|||||||||
|
Investment in equity securities
|
8
|
|
|
|||||||||
|
Property, plant and equipment, net
|
9
|
|
|
|||||||||
| Goodwill |
||||||||||||
|
Intangible assets, net
|
10 |
|
|
|||||||||
|
Right-of-use assets, net
|
12
|
|
|
|||||||||
|
Other non-current assets
|
|
|
||||||||||
|
Total non-current assets
|
|
|
||||||||||
|
Total Assets
|
$
|
|
$
|
|
||||||||
|
LIABILITIES AND EQUITY
|
||||||||||||
|
LIABILITIES
|
||||||||||||
|
Current liabilities:
|
||||||||||||
|
Accounts payable
|
$
|
|
$
|
|
||||||||
|
Accrued expenses and other current liabilities
|
|
|
||||||||||
|
Contract liabilities
|
|
|
||||||||||
|
Operating lease liabilities, current
|
12
|
|
|
|||||||||
|
Convertible promissory notes
|
13
|
|
|
|||||||||
| Contingent liabilities, current |
||||||||||||
|
Deferred government grant, current
|
|
|
||||||||||
|
|
16
|
|
|
|||||||||
|
Total current liabilities
|
|
|
||||||||||
|
Non-current liabilities:
|
||||||||||||
| Contingent liabilities, non-current |
||||||||||||
| Deferred tax liabilities |
||||||||||||
|
Deferred government grant, non-current
|
|
|
||||||||||
|
Derivative liability - investor warrant
|
13
|
|
|
|||||||||
|
Derivative liability - placement agent warrant
|
13
|
|
|
|||||||||
|
Operating lease liabilities, non-current
|
12
|
|
|
|||||||||
|
Total non-current liabilities
|
|
|
||||||||||
|
Total Liabilities
|
$
|
|
$
|
|
||||||||
|
Commitments and contingencies
|
15
|
|
|
|||||||||
|
EQUITY
|
||||||||||||
|
Ordinary shares (
|
|
|
||||||||||
|
Additional paid in capital
|
|
|
||||||||||
|
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||||||
|
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||||||
|
Total equity attributable to shareholders
|
|
|
||||||||||
|
Non-controlling interests
|
(
|
)
|
(
|
)
|
||||||||
|
Total Equity
|
$
|
|
$
|
|
||||||||
|
Total Liabilities and Equity
|
$
|
|
$
|
|
||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CENNTRO INC.
(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 December 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||
|
Share-based compensation
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Net loss
|
-
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||||
|
Acquisition of
|
-
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||
|
Exercise of warrants
|
||||||||||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
-
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||
|
Balance as of March 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||
|
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 December 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||
|
Share-based compensation
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Net loss
|
-
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||||
|
Fractional shares issued due to reverse stock split
|
||||||||||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
-
|
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||||
|
Balance as of March 31, 2024
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||
* On September 1, 2023 the Company held its annual general
meeting of shareholders where among other proposals, the shareholders of the Company did approve the consolidation of the ordinary shares of the Company on a (1:10) basis with effect from December 8, 2023. The
reverse stock split decreased the number of outstanding shares and increased net loss per common share. All per share and share amounts presented have been retroactively adjusted for the effect of this share consolidation for all periods
presented.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
CENNTRO INC.
|
For the Three Months Ended March 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net cash used in operating activities
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchase of equity investment
|
|
(
|
)
|
|||||
|
Purchase of property, plant and equipment
|
(
|
)
|
(
|
)
|
||||
|
Purchase of land use right
|
|
(
|
)
|
|||||
|
Acquisition of CAE’s equity interests
|
|
(
|
)
|
|||||
| Cash dividend from long-term investment |
||||||||
|
Proceeds from disposal of property, plant and equipment
|
|
|
||||||
|
Loans provided to third parties
|
|
(
|
)
|
|||||
| Proceeds from interest and redemption of equity securities |
||||||||
|
Net cash provided by (used in) investing activities
|
|
(
|
)
|
|||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Redemption of convertible promissory notes
|
|
(
|
)
|
|||||
|
Net cash used in financing activities
|
|
(
|
)
|
|||||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(
|
)
|
|
|||||
|
Net decrease in cash, cash equivalents and restricted cash
|
(
|
)
|
(
|
)
|
||||
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
||||||
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
|
$
|
|
||||
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
|
Interest paid
|
$
|
|
$
|
|
||||
|
Income tax paid
|
$ | $ | ||||||
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
|
Cashless exercise of warrants
|
$
|
|
$
|
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CENNTRO INC.
(Unaudited)
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES
Historical and principal activities
Cenntro Inc.
was incorporated in the State of Nevada on March 9, 2023, under The Nevada Revised Statutes (the “NRS”). As a holding company with no material operations of its own, Cenntro Inc. conducts operations through its subsidiaries in the United States,
Australia, Europe, Mexico, Hong Kong, the Dominican Republic, and in the People’s Republic of China, which we refer to as the PRC or China.
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.
On March 25, 2022 and January 31, 2023, CEGL 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”.
CAC, CEG and CAG HK and its consolidated subsidiaries are collectively known as “Cenntro”; Cenntro
Inc., CEGL, Cenntro and its subsidiaries 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.
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.
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.
NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
As of March 31, 2024, Cenntro Inc’s subsidiaries are as follows:
|
Name
|
Date of
Incorporation
|
Place of
Incorporation
|
Percentage of direct or
indirect economic
interest
|
| Cenntro Electric Group Limited (“CEGL”) |
|||
|
Cenntro Automotive Corporation (“CAC”)
|
|
|
|
|
Cenntro Electric Group, Inc. (“CEG”)
|
|
|
|
|
Cennatic Power, Inc. (“Cennatic Power”)
|
|
|
|
|
Teemak Power Corporation
|
|
|
|
|
Avantier Motors Corporation
|
|
|
|
|
Cenntro Electric CICS, SRL
|
|
|
|
|
Cennatic Energy S. de R.L. de C.V.
|
|
|
|
|
Cenntro Automotive S.A.S.
|
|
|
|
|
Cenntro Electric Colombia S.A.S.
|
|
|
|
|
Cenntro Automotive Group Limited (“CAG HK”)
|
|
|
|
|
Hangzhou Ronda Tech Co., Limited (“Hangzhou Ronda”)
|
|
|
|
|
Hangzhou Cenntro Autotech Co., Limited (“Cenntro Hangzhou”)
|
|
|
|
|
Zhejiang Cenntro Machinery Co., Limited
|
|
|
|
|
Jiangsu Tooniu Tech Co., Limited
|
|
|
|
|
Hangzhou Hengzhong Tech Co., Limited
|
|
|
|
|
Teemak Power (Hong Kong) Limited (HK)
|
|
|
|
|
Avantier Motors (Hong Kong) Limited
|
|
|
|
|
Cenntro Automotive Europe GmbH (“CAE”)
|
|
|
|
|
Cenntro Electric B.V.
|
|
|
|
|
Cenntro Elektromobilite Araçlar A.Ş
|
|
|
|
|
Cenntro Elecautomotiv, S.L.
|
|
|
|
|
Cenntro Electric Group (Europe) GmbH (“CEGE”)
|
|
|
|
|
Simachinery Equipment Limited (“Simachinery HK”)
|
|
|
|
|
Zhejiang Sinomachinery Co., Limited (“Sinomachinery Zhejiang”)
|
|
|
|
|
Shengzhou Cenntro Machinery Co., Limited (“Cenntro Machinery”)
|
|
|
|
|
Cenntro EV Center Italy S.R.L.
|
|
|
|
|
Antric Gmbh
|
|
||
|
Pikka Electric Corporation
|
|
||
|
Centro Technology Corporation
|
|
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| (a) |
Basis of presentation
|
The accompanying consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and the unaudited condensed consolidated
financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Certain information and disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. Management believes that the disclosures made are adequate to provide a fair presentation. The interim financial information should be
read in conjunction with the financial statements and the notes for the fiscal year ended December 31, 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results for the full year or any
future periods.
| (b) |
Use of estimates
|
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include 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.
Changes in facts and circumstances may result in revised estimates. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.
| (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, goodwill and other current assets, accounts payable, accrued expenses and other current liabilities and amount due from and due to related party, current were 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.
Available-for-sale investments and currency-cross swap were classified within Level 1 of the fair value hierarchy because they were valued using quoted prices in active markets. Our debt security investments are classified within Level 3 of the fair value hierarchy. As the Issuer is not yet listed and there are no similar companies in the market at the same stage of development for comparison, the Issuer is difficult to value, and the valuation is not considered reliable. Therefore, the Company develop own assumption by future cash flow forecast, which contains principle paid and interests accrued.
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: i) convertible promissory notes payable due to the complexity of the various conversion and settlement options available to notes holders; ii) convertible loan receivable, which was recognized as debt security in long-term investments, and iii) currency-cross swap, which was recognized as derivative financial instruments in short-term investments.
The convertible promissory notes payable 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 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.
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, goodwill and other current assets, accounts payable, accrued expenses and other current liabilities and amount due from and due to related party, current were 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.
Available-for-sale investments and currency-cross swap were classified within Level 1 of the fair value hierarchy because they were valued using quoted prices in active markets. Our debt security investments are classified within Level 3 of the fair value hierarchy. As the Issuer is not yet listed and there are no similar companies in the market at the same stage of development for comparison, the Issuer is difficult to value, and the valuation is not considered reliable. Therefore, the Company develop own assumption by future cash flow forecast, which contains principle paid and interests accrued.
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: i) convertible promissory notes payable due to the complexity of the various conversion and settlement options available to notes holders; ii) convertible loan receivable, which was recognized as debt security in long-term investments, and iii) currency-cross swap, which was recognized as derivative financial instruments in short-term investments.
The convertible promissory notes payable 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 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: i) private equity funds, which represent the investment in equity securities on the consolidated balance sheet; ii) wealth management products purchased from banks, which represents the
available-for-sale investments in short-term investments on the consolidated balance sheet.
| (d) |
Revenue recognition
|
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 three months ended March 31, 2024 and 2023:
|
For the Three Months Ended
March 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Vehicles sales
|
$
|
|
$
|
|
||||
|
Spare-parts sales
|
|
|
||||||
|
Other service income
|
|
|
||||||
|
Net revenues
|
$
|
|
$
|
|
||||
The Company’s revenues are derived from Europe, Asia and America. The following table sets forth disaggregation of revenue by customer location.
|
For the Three Months Ended
March 31,
|
||||||||
|
2024
|
2023
|
|||||||
|
Primary geographical markets
|
|
|||||||
|
Europe
|
$
|
|
$
|
|
||||
|
Asia
|
|
|
||||||
|
America
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
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.
Contract 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 contract liability until goods or services have been provided to the customer. For the three months ended March 31, 2024 and 2023, the Company recognized $890,646 and $98,818 revenue that was included in contract
liabilities as of December 31, 2023 and 2022, respectively.
The following table provides information about receivables and contract liabilities from contracts with customers:
|
March 31,
2024
|
December 31,
2023
|
|||||||
|
Accounts receivable, net
|
$
|
|
$
|
|
||||
|
Contract liabilities
|
$
|
|
$
|
|
||||
| (e) |
Recently issued accounting standards pronouncement
|
Except for the ASUs (“Accounting Standards Updates”) issued but not yet adopted disclosed in “Note 2 (ab) Recently issued accounting standards pronouncements” of the
Company 2023 Form 10-K, there is no ASU issued by the FASB that is expected to have a material impact on the Company’s unaudited condensed consolidated results of operations or financial position.
NOTE 3 - SHORT-TERM INVESTMENTS
|
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
||||||
|
Available-for-sale investment (1)
|
$
|
|
$
|
|
||||
|
Cross-currency swap (2)
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
|
(1)
|
|
|
(2)
|
|
NOTE 4 - ACCOUNTS RECEIVABLE, NET
Accounts receivable, net is summarized as follows:
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
Accounts receivable
|
$
|
|
$
|
|
||||
|
Less: provision for doubtful accounts
|
(
|
)
|
(
|
)
|
||||
|
Accounts receivable, net
|
$
|
|
$
|
|
||||
The changes in the provision for doubtful accounts are as follows:
|
For the Three Months Ended
March 31,
|
||||||||
|
2024
|
2023
|
|||||||
| (Unaudited) |
(Unaudited) |
|||||||
|
Balance at the beginning of the period
|
$
|
|
$
|
|
||||
|
Write-off
|
(
|
)
|
(
|
)
|
||||
|
Foreign exchange
|
(
|
)
|
|
|||||
|
Balance at the end of the year
|
$
|
|
$
|
|
||||
NOTE 5 - INVENTORIES, NET
Inventories, net are summarized as follows:
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
Raw material
|
$
|
|
$
|
|
||||
|
Work-in-progress
|
|
|
||||||
|
Goods in transit
|
|
|
||||||
|
Finished goods
|
|
|
||||||
|
Inventories, gross
|
|
|
||||||
| Less: Inventory valuation allowance |
( |
) | ( |
) | ||||
| Inventories, net |
$ | $ | ||||||
The changes in inventory valuation allowance are as
follows:
|
For the Three Months Ended
March 31,
|
||||||||
|
2024
|
2023
|
|||||||
| (Unaudited) | (Unaudited) | |||||||
|
Balance at the beginning of the period
|
$
|
|
$
|
|
||||
|
Write-off
|
(
|
)
|
(
|
)
|
||||
| Foreign exchange |
(
|
)
|
|
|||||
|
Balance at the end of the year
|
$
|
|
$
|
|
||||
NOTE 6 - PREPAYMENT AND OTHER CURRENT
ASSETS
Prepayment and other current assets consisted of the following:
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
Advance to suppliers
|
$
|
|
$
|
|
||||
|
Deductible input value added tax
|
|
|
||||||
|
Receivable from third parties
|
|
|
||||||
|
Others
|
|
|
||||||
|
Prepayment and other current assets
|
$
|
|
$
|
|
||||
NOTE 7 - LONG-TERM INVESTMENT, NET
|
(a)
|
Equity method investments, net
|
The Company had the following equity method investments:
|
March 31, 2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
Hangzhou Entropy Yu Equity Investment Partnership (Limited Partnership) (“Entropy Yu”) (1)
|
$
|
|
$
|
|
||||
|
Hangzhou Hezhe Energy Technology Co., Ltd. (“Hangzhou Hezhe”) (2)
|
|
|
||||||
|
Able 2rent GmbH (DEU) (3)
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
| (1) |
|
| (2) |
|
| (3) |
|
|
(b)
|
Equity investment without readily determinable fair value
|
The Company had the following equity investment without readily determinable fair value:
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
HW Electro Co., Ltd. (1)
|
$
|
|
$
|
|
||||
|
Robostreet Inc. (2)
|
||||||||
|
Total
|
$
|
|
$
|
|
||||
| (1) |
|
| (2) |
|
(c)
|
Debt Security Investments
|
On July 24, 2023 the Company
purchased a $1,000,000 convertible note (the “Convertible Note”) from Acton (the “Issuer”). As of March 31, 2024, the Company has paid
$600,000 to the Issuer, the balance of debt investments was $619,212 . At any time on or after the maturity date, the convertible loan will convert into shares equal to the quotient obtained by dividing the outstanding principal balance
and unpaid accrued interest of the convertible loan as of the date of such conversion by the applicable conversion price.
NOTE 8 - INVESTMENT IN EQUITY SECURITIES
As of March 31, 2024, the balance consisted of the following two
equity investments:
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
MineOne Fix Income Investment I L.P
|
$
|
|
$
|
|
||||
|
Micro Money Fund SPC
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
For the three months ended March 31, 2024 and 2023, the Company made redemption of $73,441 and of both equity investments, respectively.
For the three months ended March
31, 2024 and 2023, the Company received interest of $500,000 and of both equity investments, respectively.
For the three months ended March
31, 2024 and 2023, the Company recorded upward adjustments of $234,887 and $653,016 for changes in fair value of equity investments, respectively.
NOTE 9 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
At cost:
|
||||||||
|
Plant and building
|
$
|
|
$
|
|
||||
| Land |
||||||||
|
Machinery and equipment
|
|
|
||||||
|
Leasehold improvement
|
|
|
||||||
|
Office equipment
|
|
|
||||||
|
Motor vehicles
|
|
|
||||||
| Construction in progress |
||||||||
|
Total
|
|
|
||||||
|
Less: accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Impairment
|
( |
) | ( |
) | ||||
|
Property, plant and equipment, net
|
$
|
|
$
|
|
||||
Depreciation expenses for the three months ended March 31, 2024 and 2023 were $385,144 and $305,262 , respectively.
Impairment loss for the three months ended March 31, 2024 and 2023 were
and $24,369 , respectively.
NOTE 10 - INTANGIBLE ASSETS, NET
Intangible assets, net consisted of the following:
|
March 31,
2024
(Unaudited)
|
December 31,
2023
|
|||||||
|
At cost:
|
||||||||
|
Land use right
|
$
|
|
$
|
|
||||
| Trademark |
||||||||
| Technology |
||||||||
|
Software
|
|
|
||||||
|
Total
|
|
|
||||||
|
Less: accumulated amortization
|
(
|
)
|
(
|
)
|
||||
|
Intangible assets, net
|
$
|
|
$
|
|
||||
Amortization expenses for the three months ended March 31, 2024 and 2023 were $105,397 and $25,370 , respectively.
NOTE 11 - INCOME TAXES
Australia
CEGL is subject to a tax rate of 25 %.
United States
U.S. subsidiaries are subject to a federal tax rate of 21 %
and respective state tax rate.
Europe
Subsidiaries in Germany, Spain, Italy, Netherlands and Turkey are subject to a tax rate of 15.8 %,
25 %, 24 %, 19 % and 25 %, respectively.
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 and Hangzhou Hengzhong Tech Co., Ltd qualify as Small and micro enterprises in the PRC, and are entitled to pay a reduced income tax rate of
5
Income tax benefit for the three months ended March 31, 2024 and 2023 are $30,032 and , respectively.
The components of losses before income taxes are summarized as follows:
|
For the Three Months Ended March 31,
|
||||||||
|
2024
|
2023
|
|||||||
| (Unaudited) |
(Unaudited) |
|||||||
| PRC |
$ | |||||||
|
US
|
|
|
||||||
| Europe |
|
|
||||||
|
Australia
|
|
|
||||||
|
Others
|
|
|
||||||
|
Total
|
$
|
|
|
|||||
NOTE 12 - 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 statements of operations and comprehensive loss is as follows:
|
For the Three Months Ended
March 31,
|
||||||||
|
2024
|
2023
|
|||||||
| (Unaudited) | (Unaudited) | |||||||
|
Operating leases cost excluding short-term rental expense
|
$
|
|
$
|
|
||||
|
Short-term lease cost
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
A summary of supplemental information related to operating leases is as follows:
|
March 31,
2024
|
March 31,
2023
|
|||||||
| (Unaudited) | ||||||||
|
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
|
$
|
|
||||
|
Weighted average remaining lease term
|
|
|
||||||
|
Weighted average discount rate
|
|
%
|
|
%
|
||||
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 March 31, 2024:
|
Operating
Leases
|
||||
|
For the remaining of 2024
|
$
|
|
||
|
Years ended December 31,
|
||||
|
2025
|
|
|||
|
2026
|
|
|||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029 and thereafter
|
|
|||
|
Total lease payments
|
|
|||
|
Less: imputed interest
|
(
|
)
|
||
|
Total
|
|
|||
| Less: |
|
|||
|
$
|
|
|||
NOTE 13 - 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 expense in the consolidated statement of operations, change in fair value of convertible notes.
The movement of Note during the three months ended March 31, 2024 are as follows:
|
Liability component
|
||||
|
As of December 31, 2023
|
$
|
|
||
|
Convertible promissory notes issued during the period
|
|
|||
|
Redemption of convertible promissory notes
|
|
|||
|
Fair value change recognized
|
|
|||
|
As of March 31, 2024 (Unaudited)
|
|
|||
The estimated fair value of the Note upon issuance date December 31, 2023 and as of March 31, 2024 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.
The Company determined the fair value by using the following key inputs to the Monte Carlo Simulation Model:
|
Fair Value Assumptions - Convertible Promissory Note
|
March 31,
2024
|
December 31,
2023
|
||||||
| (Unaudited) | ||||||||
|
Face value principal payable
|
|
|
||||||
|
Original conversion price
|
|
|
||||||
|
Interest Rate
|
|
%
|
|
%
|
||||
|
Expected term (years)
|
|
|
||||||
|
Volatility
|
||||||||