Cenntro Inc.: Form 10-Q for the period ended Jun 30, 2026

Introductory Note

Except as otherwise indicated by the context, references in this Quarterly Report on Form 10-Q (this “Form 10-Q”) to the “Company,” “Cenntro,” “we,” “us” or “our” are references to the consolidated business Cenntro Inc. and its subsidiaries. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) summarizes the significant factors affecting our results of operations, liquidity, capital resources and contractual obligations. The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes included elsewhere herein.

A. Key Components of Results of Operations

Net revenues

Up until December 31, 2021, we generate revenue primarily through the sale of ECVs to our channel partners. Beginning in 2022, we experimented with different go-to-market strategies across regions. In Europe, while we initially tested an EV center approach by acquiring CAE, a German manufacturer and ECV seller, we returned to our distributor-focused model in 2024 given its proven effectiveness. In North America, we implemented a hybrid approach that combines direct sales to end-customers with strategic distributor partnerships. Historically (i.e. up until end of 2021), these revenues were generated solely by the sale of the Metro®. Starting from the last quarter of 2021, we began generating revenue from the sales of the Logistar™ 200, Logistar™ 100, Logistar™ 260, Teemak™, Neibor® 150, Antric® and Avantier™ in Europe, Clubcar, Teemak™, Logistar™ 210, Logistar™ 260 and iChassis™ in Asia, and Avantier™, Logistar™ 210, Logistar™ 400 and Logistar™ 450 in the US, Avantier™ in Africa. We estimate that in late 2026, we will start generating revenue from Bison Motor™, hydrogen-powered heavy-duty vehicles to meet market demand and increased sales from iChassis™ that consists of a programmable “smart” chassis that is currently used by third-party integrated it with their controlling software for various autonomous driving commercial vehicle applications.

Net revenues during the six months ended 2026 and 2025 were generated from (a) vehicles sales, which primarily represent net revenues from sales of Metro® vehicles (including vehicle kits), Logistar™ 200, Logistar™ 210, Logistar™ 260, Logistar™ 450, Antric®, Avantier™, Logistar™ 100, Clubcar and 1-ton Electric Flatbed Truck, (b) sales of ECV spare-parts related to our Metro® vehicles, and (c) other sales, which primarily were: (i) the sales of inventory of outsourced ECV batteries, and (ii) charges on services provided to channel partners for technical developments and assistance with vehicle homologation or certification.

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 plants and equipment, manufacturing waste treatment processing fees, shipping cost and inventory write-downs. We incur cost of goods sold in relation to (i) vehicle sales and spare-part sales, including, among others, purchases of raw materials, labor costs, and manufacturing expenses that related to ECVs, and (ii) other sales, including cost and expenses that are not related to ECV sales.

Cost of goods sold also includes inventory write-downs. 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 is comprised of direct materials, direct labor cost and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices fewer 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 cost of goods sold in our statements of operations and comprehensive loss.

Operating expenses

Our operating expenses consist of general and administrative, selling and marketing expenses, and research and development expenses. General and administrative expenses are the most significant components of our operating expenses. Operating expenses also include provision for doubtful accounts and impairment loss for long-lived assets.

Research and Development Expenses

Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, costs associated with assets acquired for research and development, product development costs, production inspection and testing expenses, product strategic advisory fees, third-party engineering and contractor support costs and allocated overhead. We expect our research and development expenses to increase as we continue to invest in new ECV models, new materials and techniques, vehicle management and control systems, digital control capabilities and other technologies.

Selling and Marketing Expenses

Selling and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, freight costs, travel and entertainment expenses and allocated overhead. Marketing programs consist of advertising, tradeshows, events, corporate communications and brand-building activities. We expect our selling and marketing expenses to increase as we introduce our new ECV models, further develop additional local dealership and service support networks to augment our expanding sales globally.

General and Administrative Expenses

General and administrative expenses consist primarily of employee compensation and related expenses for administrative functions including finance, legal, human resources, and fees for third-party professional services. While we continue to monitor general and administrative expenses, we expect general and administrative expenses to decrease over the next two years in connection with our continued effort to improve efficiency, combining our EV centers with local distribution networks and utilizing well-proven OEMs and supply chains.

Provision for credit losses

We adopted ASC 326 Financial Instruments – Credit Losses using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit from January 1, 2023 and interim periods therein. We used an expected credit loss model for the impairment of accounts receivable as of period ends. We believe the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. We measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, we will evaluate such accounts receivable for expected credit loss on an individual basis. Allowance for credit losses balances are written off and deducted from allowance. when receivables are deemed uncollectible. after all collection efforts have been exhausted and the potential for recovery is considered remote. We expect provision for credit losses to decrease in the future as we shift our sales more to FOB terms, when goods will be delivered only if material payment are received.

Other income (expenses)

Interest expense, net

Interest expense, net, consists of interest on outstanding loans and the convertible promissory notes.

Gain (loss) from long-term investments

Entities over which we have the ability to exercise significant influence but do not have a controlling interest through investment in common shares, or in-substance common shares, are accounted for using the equity method. Under the equity method, we initially record our investment at cost and subsequently recognize our proportionate share of each such entity’s net income or loss after the date of investment into the statements of operations and comprehensive loss and accordingly adjust the carrying amount of the investment. When our share of losses in the equity of such entity equals or exceeds our interest in the equity of such entity, we do not recognize further losses, unless we have incurred obligations or made payments or guarantees on behalf of such entity. 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.

Discontinued operations

We classify the results of a component (or group of components) to be disposed (“disposal group”) as a discontinued operation when the disposal group meets the held-for-sale criteria, is disposed of by sale or is disposed of other than by sale (e.g. abandonment) and when the disposal group represents a strategic shift that has, or will have, a major effect on our operations and our financial results.

We report the operating results related to the disposal group as discontinued operations for all periods presented in our consolidated statements of comprehensive loss, respectively.

Key Operating Metrics

We prepare and analyze operating and financial data to assess the performance of our business and allocate our resources. The following table sets forth our key performance indicators for the six months ended June 30, 2026 and 2025.

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Gross margin of vehicle sales. Gross margin of vehicle sales is defined as gross profit of vehicle sales divided by total revenue of vehicle sales.

Results of Operations

The following table sets forth a summary of our statements of operations for the periods indicated:

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Comparison of the Three and Six months ended June 30, 2026 and 2025

Net Revenues

The following table presents our net revenue components by amount and as a percentage of the total net revenues for the periods presented.

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Net revenues for the six months ended June 30, 2026 were approximately $7.4 million, a decrease of approximately $1.1 million or 13.1% from approximately $8.5 million for the six months ended June 30, 2025. The decrease in net revenues in 2026 was primarily due to the decrease in vehicle sales of approximately $2.6 million, offset by the increase in spare-part sales by approximately $1.6 million due to the increase in sales of iChassis™. The net revenues in Europe market for the six months ended June 30, 2026 were approximately $2.9 million, a decrease of approximately $2.7 million from approximately $5.6 million for the six months ended June 30, 2025. While the net revenues in America market for the six months ended June, 2026 were approximately $1.8 million, representing an increase of approximately $0.9 million from approximately $1.0 million for the six months ended June 30, 2025.

Net revenues for the three months ended June 30, 2026 were approximately $6.2 million, a decrease of approximately $0.2 million or 2.9% from approximately $6.4 million for the three months ended June 30, 2025. The decrease in net revenues in 2026 was primarily due to the decrease in vehicle sales of approximately $1.4 million, offset by the increase in spare-part sales by approximately $1.2 million due to the increase in sales of iChassis™. The net revenues in Europe market for the three months ended June 30, 2026 were approximately $2.6 million, a decrease of approximately $2.3 million from approximately $4.9 million for the three months ended June 30, 2025. While the net revenues in America market for the three months ended June 30, 2026 were approximately $1.8 million, representing an increase of approximately $1.1 million from approximately $0.7 million for the three months ended June 30, 2025.

For the six months ended June 30, 2026, we sold 563 ECVs, including 10 fully assembled Metro® units, 132 fully assembled Logistar™ 100 units, 14 fully assembled Logistar™ 260 units, 4 fully assembled Teemak™ units, 141 fully assembled Logistar™ 210 units, 11 fully assembled Logistar™ 450 units, 231 fully assembled Avantier™ units, 8 Antric® units, 2 Clubcar units, and 10 fully assembled 1-ton Electric Flatbed Truck, compared with 559 ECVs for the six months end ed June 30, 2025, including 30 fully assembled Metro® units, 28 fully assembled Logistar™ 200 units, 58 fully assembled Logistar™ 100 units, 33 fully assembled Teemak™ units, 2 fully assembled Logistar™ 260 units, 1 fully assembled Logistar™ 400 units, 80 fully assembled Logistar™ 450 units, 7 fully assembled Logistar™ 210 units, 222 fully assembled Avantier™ units, 14 Antric® units, 57 Clubcar units, 21 fully assembled Seres 5 units, 5 fully assembled Joylong-A4 units and 1 fully assembled Joylong-EA6 units.

For the six months ended June 30, 2026, we also sold 183 iChassis™ units, other than the 563 ECVs.

For the three months ended June 30, 2026, we sold 506 ECVs, including 7 fully assembled Metro® units, 122 fully assembled Logistar™ 100 units, 1 fully assembled Teemak™ units, 134 fully assembled Logistar™ 210 units, 11 fully assembled Logistar™ 450 units, 224 fully assembled Avantier™ units, 5 Antric® units and 2 Clubcar units, compared with 430 ECVs for the three months ended June 30, 2025, including 10 fully assembled Metro® units, 21 fully assembled Logistar™ 200 units, 56 fully assembled Logistar™ 100 units, 1 fully assembled Teemak™ units, 1 fully assembled Logistar™ 400 units, 5 fully assembled Logistar™ 210 units, 191 fully assembled Avantier™ units, 7 Antric® units, 53 Clubcar units, 69 fully assembled Logistar™ 450 units and 16 fully assembled Seres 5 units.

For the three months ended June 30, 2026, we also sold 111 iChassis™ units, other than the 506 ECVs.

Geographically, the vast majority of our net revenues were generated from sales in European during the six months ended June 30, 2026. For the six months ended June 30, 2026, net revenues from Europe, North America, Asia (including China) and Africa as a percentage of total revenues was 39.5%, 24.6%, 30.8% and 5.1%, respectively, compared to 65.8%, 11.2%, 22.6% and 0.4%, respectively for the corresponding period in 2025.

The vast majority of our net revenues were generated from vehicle sales in European during the three months ended June 30, 2026. For the three months ended June 30, 2026, net revenues from Europe, North America, Asia (including China) and Africa as a percentage of total revenues was 41.4%, 28.3%, 26.1% and 4.2%, respectively, compared to 76.8%, 10.9%, 11.8% and 0.5%, respectively for the corresponding period in 2025.

For the six months ended June 30, 2026, net revenues from vehicle sales in Europe and North America, Asia (including China) and Africa as a percentage of total vehicle net revenues was 48.1%, 33.6%, 11.2% and 7.1%, respectively, compared to 68.3%, 11.0%, 20.3% and 0.4%, respectively, for the corresponding period in 2025.

For the three months ended June 30, 2026, net revenues from vehicle sales in Europe and North America, Asia (including China) and Africa as a percentage of total vehicle net revenues was 48.0%, 36.6%, 9.9% and 5.5%, respectively, compared to 78.8%, 11.5%, 9.2% and 0.6%, respectively, for the corresponding period in 2025.

Cost of goods sold

The following table presents our cost of goods sold by amount and as a percentage of the total cost of goods sold for the periods presented.

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Cost of goods sold for the six months ended June 30, 2026 was approximately $6.8 million, a decrease of approximately $1.5 million or approximately 17.7% from approximately $8.2 million for the six months ended June 30, 2025. The decrease of cost of vehicle sales was mainly caused by the decrease in the cost of vehicle sales of approximately $2.7 million, offset by the increase in the cost of spare-part sales of approximately $1.5 million.

Cost of goods sold for the three months ended June 30, 2026 was approximately $5.8 million, a decrease of approximately $0.6 million or approximately 9.6% from approximately $6.4 million for the three months ended June 30, 2025. The decrease of cost of vehicle sales was mainly caused by the decrease in the cost of vehicle sales of approximately $1.5 million, offset by the decrease in the cost of spare-part sales of approximately $1.2 million.

Gross Profit/(Loss)

Gross profit for the six months ended June 30, 2026 was approximately $0.6 million, an increase of approximately $0.3 million from approximately $0.3 million of gross profit for the six months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, our overall gross margin was approximately 8.7% and 3.5%, respectively. Our gross margin of vehicle sales for the six months ended June 30, 2026 and 2025 was 8.1% and 1.3%, respectively. The increase of our overall gross profit was caused by the increase in the gross profit of our vehicle sales of approximately $0.3 million.

Gross profit for the three months ended June 30, 2026 was approximately $0.4 million, a change of approximately $0.4 million from approximately $0.02 million of gross loss for the three months ended June 30, 2025. For the three months ended June 30, 2026 and 2025, our overall gross margin was approximately 6.6% and negative 0.3%, respectively. Our gross margin of vehicle sales for the three months ended June 30, 2026 and 2025 was 6.8% and negative 1.5%, respectively. The increase of our overall gross profit was caused by the increase in the gross profit of our vehicle sales of approximately $0.4 million.

Selling and Marketing Expenses

Selling and marketing expenses for the six months ended June 30, 2026 were approximately $1.0 million, which remained stable compared with approximately $1.0 million for the six months ended June 30, 2025.

Selling and marketing expenses for the three months ended June 30, 2026 were approximately $0.7 million, an increase of approximately $0.4 million or approximately 194.8% from approximately $0.3 million for the three months ended June 30, 2025. The increase in selling and marketing expenses in 2026 was primarily due to the increase in freight expenses of approximately $0.4 million, resulting from higher customer shipment volumes.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2026 were approximately $7.2 million, a decrease of approximately $2.9 million or approximately 28.3% from approximately $10.1 million for the six months ended June 30, 2025. The decrease in general and administrative expenses in 2026 was primarily attributed to a decrease in salary and social insurance, leasing cost, and share-based compensation of approximately $0.5 million, $1.1 million, and $0.7 million, respectively, reflecting the Company’s ongoing cost optimization initiatives.

General and administrative expenses for the three months ended June 30, 2026 were approximately $3.8 million, a decrease of approximately $1.3 million or approximately 25.9% from approximately $5.2 million for the three months ended June 30, 2025. The decrease in general and administrative expenses in 2026 was primarily attributed to a decrease in leasing cost and share-based compensation of approximately $0.6 million and $0.6 million, respectively, reflecting the Company’s ongoing cost optimization initiatives.

Research and Development Expenses

Research and development expenses for the six months ended June 30, 2026 were approximately $0.9 million, a decrease of approximately $0.5 million or approximately 34.2% from approximately $1.4 million for the six months ended June 30, 2025. The decrease in research and development expenses in 2026 was primarily attributed to the decrease in salary expense and share-based compensations of approximately $0.4 million and $0.1 million, respectively.

Research and development expenses for the three months ended June 30, 2026 were approximately $0.5 million, a decrease of approximately $0.2 million or approximately 28.3% from approximately $0.6 million for the three months ended June 30, 2025. The decrease in research and development expenses in 2026 was primarily attributed the decrease in salary expense and share-based compensations of approximately $0.1 million and $0.1 million respectively.

Interest expense, net

Interest expense, net, mainly consists of interest expense on convertible bonds, offset by the interest income from deposit, short-term investment and unpaid purchases from HWE. Net interest expense was approximately $0.2 million for the six months ended June 30, 2026, representing a decrease of approximately $0.1 million compared to the approximately $0.3 million in interest expenses for the six months ended June 30, 2025.

Interest expense, net, mainly consists of interest expense on convertible bonds, offset by the interest income from deposit, short-term investment and unpaid purchases from HWE. Net interest expense was approximately $0.2 million for the three months ended June 30, 2026, which was relatively stable compared to the approximately $0.2 million in interest expenses for the three months ended June 30, 2025.

Other income (expense), net

Other income, net for the six months ended June 30, 2026 was approximately $0.6 million, representing an increase of approximately $0.4 million compared to approximately $0.2 million of other income, net for the six months ended June 30, 2025. The increase of other income in 2026 compared to 2025 was primarily attributable to the increase in income from early termination and modification of lease of approximately $0.8 million, and partially offset by lawsuit compensation of Sevic litigation of $0.2 million and loss on liquidation of $0.2 million.

Other income, net for the three months ended June 30, 2026 was approximately $0.7 million, representing a change of approximately $0.7 million compared to approximately $0.07 million of other expense, net for the three months ended June 30, 2025. The change of other expense in 2026 compared to 2025 was mainly attributable to the increase in income from early termination and modification of lease of approximately $0.8 million and the increase in income on disposal of PPE of approximately $0.1 million.

Change in fair value of convertible promissory notes and derivative liability

A gain in change in fair value of convertible promissory notes and derivative liability for the six months ended June 30, 2026 was approximately $1.3 million, and a loss in change in fair value of convertible promissory notes and derivative liability for the six months ended June 30, 2025 was approximately $0.1 million, respectively.

A gain in change in fair value of convertible promissory notes and derivative liability for the three months ended June 30, 2026 was approximately $1.1 million, and a loss in change in fair value of convertible promissory notes and derivative liability for the three months ended June 30, 2025 was approximately $0.1 million, respectively.

Change in fair value of equity securities

A gain from the change in fair value of equity securities for the six months ended June 30, 2026 and 2025 was approximately nil and $0.5 million, respectively.

A gain from the change in fair value of equity securities for the three months ended June 30, 2026 and 2025 was approximately nil and $0.3 million, respectively.

Loss from Note Amendment

A loss from Note Amendment for the six months ended June 30, 2026 and 2025 was nil and approximately $1.8 million, respectively.

A loss from Note Amendment for the three months ended June 30, 2026 and 2025 was nil and approximately $1.8 million, respectively.

Gain from disposal of Cenntro Electric CICS, SRL’s equity

A gain from disposal of Cenntro Electric CICS, SRL’s equity for the six months ended June 30, 2026 and 2025 was nil and approximately $1.2 million, respectively.

A gain from disposal of Cenntro Electric CICS, SRL’s equity for the three months ended June 30, 2026 and 2025 was nil and approximately $1.2 million, respectively.

Loss on deconsolidation of a subsidiary due to insolvency

Loss on deconsolidation of a subsidiary due to insolvency for the six months ended June 30, 2026 and 2025 was approximately $1.9 million and nil, respectively, which was resulting from the liquidation of Antric.

Loss on deconsolidation of a subsidiary due to insolvency for the three months ended June 30, 2026 and 2025 was approximately $1.9 million and nil, respectively, which was resulting from the liquidation of Antric.

Non-GAAP Financial Measures

Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025

In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP measure is useful in evaluating operational performance. We use Adjusted EBITDA to evaluate ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing operating performance.

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. We define Adjusted EBITDA as net income (or net loss) before net interest expense, income tax expense, depreciation and amortization as further adjusted to exclude the impact of stock-based compensation expense and other non-recurring expenses including expenses related to TME Acquisition, expenses related to one-off payment inherited from the original Naked Brand Group, impairment of goodwill, convertible bond issuance fee, loss on redemption of convertible promissory notes, and change in fair value of convertible promissory notes and derivative liability.

We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including this non-GAAP financial measure as a reasonable basis for comparing our ongoing results of operations. Management uses Adjusted EBITDA:

• as a measurement of operating performance because it assists us in comparing the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations;
• for planning purposes, including the preparation of our internal annual operating budget and financial projections;
• to evaluate the performance and effectiveness of our operational strategies; and
• to evaluate our capacity to expand our business.

By providing this non-GAAP financial measure, together with the reconciliation, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors because not all companies and analysts calculate Adjusted EBITDA in the same manner. Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our financial statements as indicators of financial performance. Some of the limitations are:

• such measures do not reflect our cash expenditures;
• such measures do not reflect changes in, or cash requirements for, our working capital needs;
• although depreciation and amortization are recurring, non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
• the exclusion of stock-based compensation expense, which has been a significant recurring expense and will continue to constitute a significant recurring expense for the foreseeable future, as equity awards are expected to continue to be an important component of our compensation strategy.

Due to these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of stock-based compensation expense and material infrequent items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal operating results and operating results of other companies over time. In addition, Adjusted EBITDA may include adjustments for other items that we do not expect to regularly occur in future reporting periods. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below helps management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

The following table reconciles Adjusted EBITDA to the most directly comparable GAAP financial performance measure, which is net loss:

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B. Liquidity and Capital Resources

We have historically funded working capital and other capital requirements primarily through bank loans, equity financings and short-term loans. Also, the reverse recapitalization we have completed at the end of December 2021 and in the mid-April 2026 provided significant funding for the Company’s operations. Our Cash is required primarily to purchase raw materials, and pay salaries, office expenses and other operating expenses.

As of June 30, 2026 we had approximately $4.3 million in cash and cash equivalents and approximately $1.5 million of accounts receivables as compared to approximately $6.0 million in cash and cash equivalents and $3.2 million in accounts receivable as of June 30, 2025. For the six months ended June 30, 2026 and 2025, net cash used in operating activities was approximately $5.5 million and $9.4 million, respectively.

Short-Term Liquidity Requirements

We are looking at measures to generate operating efficiency as well as increasing the inventory turns in containing the growth of working capital for reducing negative net cash used in operating activities. With the cash improvement initiatives, we believe our cash and cash equivalents will be sufficient for us to continue to execute our business strategy over the twelve months period following the date of issuance of this 10Q. Our current business strategy for the next twelve months includes (i) the continued rollout of our new ECV models in North America and Europe, as applicable, (ii) the establishment of local assembly facilities in the United States and the European Union and (iii) additional plants and equipment for the expansion of our Changxing factory. Actual results could vary materially as a result of a number of factors, including:

• The costs of bringing our new facilities into operation;
• The timing and costs involved in rolling out new ECV models to market;
• Our ability to manage the costs of manufacturing our ECVs;
• The costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities;
• Revenues received from sales of our ECVs;
• The costs of additional general and administrative personnel, including accounting and finance, legal and human resources, as well as costs related to litigation, investigations, or settlements;
• Our ability to collect future revenues; and
• Other risks discussed in the section titled “Risk Factors.”

For the twelve months from the date hereof, we also plan to continue implementing measures to increase revenues and control operating costs and expenses, implementing comprehensive budget controls and operational assessments, implementing enhanced vendor review and selection processes as well as enhancing internal controls.

Long-Term Liquidity Requirements

In the long-term, we plan to regionalize the manufacturing and supply chain relating to certain components of our ECVs in several geographic markets. Through our supply chain development know-how, we intend to establish supply chain relationships especially in the North America to support anticipated manufacturing and assembly needs in these markets, thereby reducing the time in transit and potentially other landed costs elements associated with importing our components and spare parts from China. As part of our growth strategy, we plan to expand our channel partner network, and local assembly facilities to regionalize our manufacturing and supply chains to better serve our global customers, especially to expand our after-sales-market services offerings.

We intend to further expand our technology through continued investment in research and development. Since inception in 2013 through June 30, 2026, we have spent over approximately $97.7 million in research and development activities related to our operations. We plan to increase our research and development expenditure over the long term as we build on our technologies in vehicle development, driving control, cloud-based platforms, and innovations for promoting sustainable energy.

For our long-term business plan, we plan to fund current and future planned operations mainly through cash on hand, cash flow from operations, lines of credit and additional equity and debt financings to the extent available on commercially favorable terms.

Working Capital

As of June 30, 2026, our working capital was approximately $16.4 million, as compared to a working capital of approximately $19.0 million as of December 31, 2025. The approximately $2.5 million decrease in working capital during 2026 was primarily due to (i) the decrease in inventories, net and assets held for sale, current of $3.5 million and $2.7 million;(ii) increase in accrued expenses and other current liabilities and contractual liabilities of $2.3 million and $2.7 million; and partially offset by (i) the increase in prepayment and other current assets of approximately $2.2 million, and (ii) the decrease in accounts payable, short-term loans, convertible promissory notes and current portion of long-term loans, operating lease liabilities, current and liabilities held for sale, current of $0.8 million, $1.3 million, $1.3 million, $0.5 million and $2.1 million.

Cash Flow

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Operating Activities

Our net cash used in operating activities was approximately $5.5 million and $9.4 million for the six months ended June 30, 2026 and 2025, respectively.

Net cash used in operating activities for the six months ended June 30, 2026 was primarily attributable to (i) our net loss of approximately $14.5 million and adjusted for non-cash items of approximately $5.5 million, which primarily consisted of loss from liquidation of discontinued operations, impairment loss, share based compensation expense , depreciation and amortization, amortization of operating lease right-of-use asset and loss in change in fair value of convertible promissory notes and derivative liability of approximately $4.5 million, $2.9 million, $0.7 million, $1.1 million, $0.6 million and $1.3 million, respectively, (ii) the decrease in inventories and contractual liabilities, of approximately $2.8 million, and $2.6 million, respectively, (iii) increase in prepayment and other current assets, accounts payable, accrued expense and other current liabilities and of approximately $1.0 million , $0.9 million, and $2.5 million, respectively.

Investing Activities

Net cash provided by investing activities was approximately $0.1 million for the six months ended June 30, 2026. Net cash provided by investing activities for the six months ended June 30, 2026 was primarily attributable to proceeds from disposal of property, plant and equipment and repayment of loans by third parties of approximately $0.1 million and $0.1 million, respectively, and offset by purchase of property, plant and equipment of approximately $0.1 million.

Financing Activities

Net cash provided by financing activities was approximately $5.0 million for the six months ended June 30, 2026. Net cash provided by financing activities for the six months ended June 30, 2026 was primarily attributable to proceeds from loans proceed from third parties and proceeds from bank loans of approximately $4.4 million and $2.3 million, and partially offset by repayment to bank loan of approximately $1.3 million.

Contractual Obligations

For a discussion of material contractual obligations and commitments, see Note 17 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in this report.

For a discussion of other contractual commitments, including bank loans and third-party loan repayment obligations, see Note 11 “Short-term and Long-term Bank Loans” and Note 10 “Accrued Expenses and Other Current Liabilities” to our unaudited condensed consolidated financial statements.

We lease offices space under non-cancellable operating leases. As of June 30, 2026, the minimum future commitments under these agreements are as follows.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires our 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 unaudited condensed consolidated financial statements, the reported amounts of revenue and expenses during the reporting period and the related disclosures in the unaudited condensed consolidated financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in “Note 2—Summary of Significant Accounting Policies” of our unaudited condensed consolidated financial statements for the six months ended June 30, 2026, included elsewhere in this Quarterly Report, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.

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.

Accounts receivable and allowance for credit losses

Accounts receivable are recognized and carried at net realizable value.

Management used an expected credit loss model for the impairment of accounts receivable as of period ends. Management believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. Management measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, management will evaluate such accounts receivable for expected credit loss on an individual basis. Allowance for credit losses balance are written off and deducted from allowance, when receivables are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote.

Our financial assets subject to the current expected credit loss (“CECL”) model mainly include accounts receivable, certain receivable components within other current assets and other non-current assets and debt security investments.

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. Loss on inventory write-off, including losses from physical inventory counts or obsolescence where no future economic benefit is expected, are recognized in cost of goods sold in the period incurred.

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, other current assets, amount due from and due to related parties, accounts payable and other current liabilities and short-term loans.

The carrying value of cash and cash equivalents, restricted cash, accounts receivable and other current assets, accounts payable, other current liabilities, bank loans and amount due from and due to related parties, 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.

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 counterparty that issued the subject debt security held by the Company(“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; and ii) 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 unaudited condensed consolidated statement of operations. The estimated fair value adjustment is presented in a respective single line item within other expense in the unaudited condensed 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 security on the unaudited condensed consolidated balance sheet.

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.

The promised warranty does not provide the clients with a service in addition to the assurance that the product complies with agreed-upon contract specifications and is considered an assurance warranty. The warranty is not considered separate performance obligations and no revenue is associated with these services under ASC 606. Historically, the Company has not experienced material costs for quality assurance and, therefore, does not believe an accrual for these costs is necessary.

Revenue is recognized upon the satisfaction of its performance obligation (upon transfer of control of promised goods or services to customers) in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services, excluding amounts collected on behalf of third parties (for example, value added taxes).

The Company acts as a principal in the revenue generating process and should recognize revenue on a gross basis. Revenues are measured as the amount of consideration the Company expects to receive in exchange for transferring products to customers. Consideration is recorded net of sales returns and VAT. Sales returns is estimated based on historical experiences, which were insignificant for the six months ended June 30, 2026 and 2025. The consideration is fixed, with no variable consideration. All transactions are settled in cash within the normal credit period, and there is no financing component.

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 six months ended June 30, 2026 and 2025:

(Unaudited)

(Unaudited)

38

The Company’s revenues are derived from Europe, Asia and America. The following table sets forth disaggregation of revenue by customer location.

(Unaudited)

(Unaudited)

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 contractual liability until goods or services have been provided to the customer. For the six months ended June 30, 2026 and 2025, the Company recognized $365,239 and $568,035 revenue that was included in contractual liabilities as of January 1, 2026 and 2025, respectively.

The following table provided information about receivables and contract liabilities from contracts with customers:

(Unaudited)

39

In July 2025, the FASB issued ASU 2025-05, which amends ASC 326-20 to address the measurement of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The update introduces a practical expedient available to all entities and an accounting policy election specifically for non-public business entities that adopt the practical expedient, aiming to simplify and reduce the cost complexity associated with estimating expected credit losses for such financial assets. The guidance was developed in conjunction with the Private Company Council to respond to stakeholder concerns regarding the burdens of existing credit loss estimation requirements for these transactions. The Company is currently assessing the impact that adopting this new accounting standard will have on its unaudited condensed consolidated financial statements. The Company is currently evaluating the impact of adopting this standard on its unaudited condensed consolidated financial statements and related disclosures and expects to adopt the guidance in its fiscal year beginning January 1, 2027.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments in this update improve interim financial reporting by clarifying and simplifying certain disclosure requirements and aligning interim reporting with existing annual disclosure requirements in specific areas. The amendments are intended to reduce complexity while maintaining decision-useful information for investors. The Company is currently evaluating the impact of adopting this standard on its unaudited condensed consolidated financial statements and related disclosures and expects to adopt the guidance when it becomes effective for the Company.

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated balance sheets, statements of operations and comprehensive loss and statements of cash flows.

As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is not required to provide the information required by this item.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Roles 12a-15(e) or 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by us in the reports that we file or submit 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 our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Material Weaknesses in Internal Control over Financial Reporting

There are inherent limitations on the effectiveness of any system of internal controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective internal controls and procedures can only provide reasonable assurance of achieving their control objectives.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2026, as required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act. Based on this evaluation, management concluded that the Company’s disclosure controls and procedures was not effective as of June 30, 2026, due to material weaknesses in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that have been previously identified but continue to exist. See Part II, Item 9A of the 2025 Form 10-K for additional information.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the first half of fiscal 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Remediation

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, we began implementing a remediation plan to address the material weakness mentioned above. The weakness will not be considered remediated, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. While management has taken steps to remediate these control weaknesses, the material weaknesses are still unresolved. Consequently, our internal control over financial reporting was not effective as of June 30, 2026.

Unless and until these material weaknesses are remediated, or if new material weaknesses arise in the future, material misstatements could occur and go undetected in our interim or annual Consolidated Financial Statements, and we may be required to restate our financial statements. In addition, we may experience delays in satisfying our reporting obligations or to comply with United States Securities and Exchange Commission rules and regulations, which could result in, among other things, regulatory or enforcement actions, securities litigation, limitations on our ability to access capital markets, debt rating agency downgrades or rating withdrawals, or loss in confidence of our investors, any one of which could adversely affect the valuation of our common stock and our business prospects. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting.

You should carefully consider the risks discussed in the section entitled “Risk Factors” in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which could materially affect our business, financial condition, or future results. The risks described in the Form 10-K are not the only risks facing the company. Additional risks and uncertainties not currently known to us or that we do not currently deem material, may also materially adversely affect our business, results of operations, cash flows, and financial position.