Company: CENN
Filing Date: 2025-08-12
Form Type: 10-Q
Source: 0001140361-25-030576
Chunk: 32

Company: Cenntro Inc.
Filing Date: 2025-08-12
Form: 10-Q
Item: Part II, Item 8
Chunk 32
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        most significant components of our operating expenses. Operating expenses also include provision for credit losses.

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, trade shows, events, corporate communications, and brand-building activities. We expect our selling and marketing expenses to remain at the current level, as we have
        stabilized our blended sales channel mix, especially in Europe, by strengthening e-commerce and distributor networks, which reduces the reliance on high-cost direct selling.

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.

        27

      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 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. 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