BUSINESS COMBINATION

12 Months Ended

Dec. 31, 2023

NOTE 3 – BUSINESS COMBINATION

Acquisition of CAE’s equity interests

On March 5, 2022, CEGL 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 CEGL (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, CEGL paid Mosolf EUR3,250,000 (or approximately USD$3.6 million) for the purchase of the TME Shares and EUR11,900,000 (or approximately USD$13.0 million) for the purchase of the Shareholder Loan, for total aggregate consideration of EUR15,150,000 (or approximately USD$16.6 million). An aggregate of EUR3,000,000 (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. CEGL 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 December 13, 2022, CEGL entered into another Share Purchase Agreement (the “Purchase Agreement II”) with Mosolf, pursuant to which Mosolf agreed to sell to CEGL its remaining 35% of the issued and outstanding shares in CAE in exchange for a purchase price of EUR1,750,000 (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 CEGL. This transaction was accounted for as equity transactions, no gain or loss was recognized in the 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.

Acquisition of Antric GmbH’s equity interests

On December 16, 2022, the Company invested EUR2,500,000 (approximately $2,674,500) in Antric GmbH, a German company with limited liability, to acquire 25% of its equity interest, and the investment was accounted for under the equity method.

The Company entered into an agreement with Moritz Heibrock and Eric Diederich (the “Founder”) to acquire the remaining 75% equity interest of Antric GmbH (“Antric Transaction”), which was closed on August 31, 2023. The payment terms consisted of (i) purchasing 75% of the equity interest on the cash consideration of one euro (EUR 1); (ii) two hundred euros (EUR 200) for every Antric Unit (as defined by the agreement) sold by the Company for a period of ten years from August 31, 2023, subject to those terms and conditions under that Deed of Sale; (iii) a cash injection of five hundred thousand euros (EUR 500,000) into Antric GmbH by the Company; and (iv) a loan issued by the Company to Antric for seven hundred thousand euros (EUR 700,000) with interest payable to the Company at a rate of 6.5% per annum for a term of sixty (60) months.

After the transaction, Antric GmbH became a wholly-owned subsidiary of the Company. 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 Antric GmbH are recorded at the fair value as of the date of the closing.

On the acquisition date August 31, 2023, total consideration of the transaction was EUR1,278,327(approximately $1,385,578), which was consisted of: (1) 25% equity Interest of Antric previously held by the Company fair valued at EUR1,042,221 (approximately $1,129,663) (Loss associated with the "step-acquisition" was recognized in other expenses (see Note 8 (a) (1)), (2) a cash consideration amounted to EUR 1 (approximately $1), and (3) an earn-out consideration amounted to EUR 236,106 (approximately $255,319). The excess of the purchase price over the net assets acquired was recorded as goodwill, which was $223,494 as of December 31, 2023. Contingent liabilities of $256,732 for earn-out price was recognized as of December 31, 2023.

Fair value of net assets acquired and liabilities assumed

On the acquisition date August 31, 2023, the allocation of the consideration of the assets acquired and liabilities assumed based on their fair value was as follows (USD:EUR) exchange rate of 1.0839 as of August 31, 2023 was applied:

	Amount

Cash and Bank Balance	$	1,376
Accounts Receivable		54,606
Inventory		663,723
Fixed Assets		124,362
Intangible Assets		1,513,124
Other assets		72,825
Goodwill		218,991
Short Term Borrowing		(604,568	)
Trade and Service Liabilities		(319,472	)
Deferred Tax Liabilities		(239,452	)
Other Liabilities		(99,937	)
Net assets	$	1,385,578