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Lease

12 Months Ended

Dec. 31, 2022

10. Lease

(a)	Prepaid land use rights

	Prepaid land lease payments
Balance as of January 1, 2021	$	7,500,780
Addition for the year		6,188,764
Amortization charge for the year		(189,044	)
Foreign exchange adjustment		296,730
Balance as of December 31, 2021		13,797,230
Amortization charge for the year		(338,706	)
Foreign exchange adjustment		(1,097,361	)
Balance as of December 31, 2022	$	12,361,163

In August 2014 and November 2021, the Group acquired land use rights to build a factory of the Company in Dalian and Zhejiang, PRC.

Lump sum payments were made upfront to acquire the leased land from the owners with lease periods of 36 to 50 years, and no ongoing payments will be made under the terms of these land leases.

No impairment loss was made to the carrying amounts of the prepaid land use right for the year ended December 31, 2021 and 2022.

(b)	Company as Lessor

The Company derives a portion of its revenue from leasing arrangements of these vehicles to end users. Such arrangements provide for monthly payments covering the vehicles sales and interest. These arrangements meet the criteria to be accounted for as sales-type leases. Accordingly, vehicle sale net of cost is recorded as other income and recognized upon delivery of the vehicle and its acceptance by the end user. Upon the recognition of such revenue, an asset is established for the investment in sales-type leases. Interests are recognized monthly over the lease term. The components of the net investment in sales-type leases as of December 31, 2021 and 2022 are as follows:

	December 31,			December 31,
	2021			2022
Total future minimum lease payments receivable	$	1,737,817			-
Less: unearned income, representing interest		(108,773	)		-
Present value of minimum lease payments receivables		1,629,044			-
Less: Current portion		(790,516	)		-
Non-current portion	$	838,528			-

Vehicle sale net of cost recognized in other income (expense) from vehicle leasing was $(92,272) and nil for the year ended December 31, 2021 and 2022, respectively.

Interest income from vehicle leasing was $99,424 and nil for the year ended December 31, 2021 and 2022, respectively.

The Company entered into supplemental agreement with the lessee to cancel the sales-type leases arrangement and entered into vehicles sales agreement (note 6) to sell all of the vehicles.

(c)	Operating lease

In April 2018, Hitrans entered into a lease agreement for staff quarters spaces in Zhejiang with a five year term, commencing on May 1, 2018 and expiring on April 30, 2023. The monthly rental payment is approximately RMB18,000 ($2,605) per month. In 2018, lump sum payments were made to landlord for the rental of staff quarter spaces and no ongoing payments will be made under the terms of these leases.

On January 14, 2021, Nanjing Daxin entered into a lease agreement for manufacturing, warehouse and office space in Tianjing with a three year term, commencing on March 1, 2021 and expiring on February 29, 2024. The monthly rental payment is approximately RMB73,143 ($10,586) per month. On February 28, 2022, Nanjing Daxin early terminated the lease after one-year non-cancellable period.

On April 6, 2021, Nanjing CBAK entered into a lease agreement for warehouse space in Nanjing with a three year term, commencing on April 15, 2021 and expiring on April 14, 2024. The monthly rental payment is approximately RMB97,743 ($14,146) per month.

On June 1, 2021, Nanjing Daxin entered into a lease agreement for manufacturing, warehouse and office space in Wuxi with a three year term, commencing on June 1, 2021 and expiring on May 31, 2024. The monthly rental payment is approximately RMB238,095 ($34,461) per month for the first year and approximately RMB277,778 ($40,205) per month from the second year. In May 2022, Nanjing Daxin early terminated the lease after one-year non-cancellable period.

On June 1, 2021, Hitrans entered into a lease agreement with liquid gas supplier for a five year term for supplying liquid nitrogen and oxygen, commencing on July 1, 2021. The monthly rental payment is approximately RMB5,310 ($769) per month.

On December 9, 2021, Hitrans entered into a lease agreement for another staff quarters spaces in Zhejiang with a three year term, commencing on December 10, 2021 and expiring on December 9, 2024. The monthly rental payment is approximately RMB10,400 ($1,505) per month for the first year, RMB10,608 ($1,535) and RMB10,820 ($1,566) per month from the second year and third year, respectively.

On March 1, 2022, Hitrans entered into a lease agreement for extra staff quarters spaces in Zhejiang with a five year term, commencing on March 1, 2022 and expiring on February 28, 2027. The monthly rental payment is approximately RMB15,840 ($2,293) per month for the first year, with 2% increase per year.

On August 1, 2022, Hitrans entered into a lease agreement for warehouse spaces in Zhejiang with a one and half years term, commencing on August 1, 2022 and expiring on January 31, 2024. The monthly rental payment is RMB60,394 ($8,741) per month.

On October 20, 2022, CBAK Power entered into a lease agreement for staff quarters spaces in Dalian with a five year term, commencing on October 20, 2022 and expiring on October 19, 2025. The monthly rental payment is RMB61,905 ($8,960) per month.

On December 20, 2022, Hitrans entered into a lease agreement for extra staff quarters spaces in Zhejiang with a five year term commencing on December 20, 2022 and expiring on December 19, 2027. The monthly rental payment is RMB52,000 ($7,526) per month for the first year, with 2% increase per year.

On December 30, 2022, Hitrans entered into a lease agreement with liquid gas supplier for a five year term for supplying liquid nitrogen and oxygen to December 29, 2027 The monthly rental payment is approximately RMB7,265 ($1,052) per month.

Operating lease expenses for the years ended December 31, 2021 and 2022 for the capitation agreement was as follows:

		December 31, 2021				December 31, 2022
Operating lease cost – straight line		$	539,075			$	495,478

(d)

Company as lessee - Finance lease

	December 31,		December 31,
	2021		2022
Property, plant and equipment, at cost	$	-	$	1,890,396
Accumulated depreciation		-		(251,626	)
Impairment		-		(662,006	)
Property, plant and equipment, net under finance lease		-		976,764

Finance lease liabilities, current		-		844,297
Finance lease liabilities, non-current		-		-
Total finance lease liabilities	$	-	$	844,297

The components of finance lease expenses for the years ended December 31, 2021 and 2022 were as follows:

		2021		2022
Finance lease cost:
Depreciation of assets	$	$	-	$	76,861
Interest of lease liabilities			-		8,672
Total lease expense	$	$	-	$	85,533

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2022:

	Operating leases			Finance leases

2023	$	634,361		$	856,117
2024		251,947			-
2025		227,519			-
2026		144,770			-
2027		11,566			-
Thereafter		-			-
Total undiscounted cash flows		1,270,163			856,117
Less: imputed interest		(87,445	)		(11,820	)
Present value of lease liabilities	$	1,182,718		$	844,297

Lease term and discount rate:

	December 31, 2021			December 31, 2022
Weighted-average remaining lease term
Land use rights		38.9			37.9
Operating leases		2.32			3.39
Finance lease		-			0.5

Weighted-average discount rate
Land use rights		Nil			Nil
Operating lease		5.88	%		4.94	%
Finance lease		-			1.40	%

Supplemental cash flow information related to leases where the Company was the lessee for the year ended December 31, 2021 and 2022 was as follows:

		December 31, 2021				December 31, 2022
Operating cash outflows from operating assets		$	447,734			$	230,382