Company: CENN
Filing Date: 2025-08-12
Form Type: 10-Q
Source: 0001140361-25-030576
Chunk: 9

Company: Cenntro Inc.
Filing Date: 2025-08-12
Form: 10-Q
Item: Part II, Item 8
Chunk 9
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 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.

      8

          CENNTRO INC.
          NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 warrant 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