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Lease

6 Months Ended

Jun. 30, 2023

9. Lease

(a) Prepaid land use rights

	Prepaid
	land
	lease payments
Balance as of January 1, 2022	$	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
Amortization charge for the period		(164,537	)
Foreign exchange adjustment		(579,745	)
Balance as of June 30, 2023	$	11,616,881

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

Amortization expenses of the prepaid land use rights were $86,189 and $81,295 for the three months ended June 30, 2022 and 2023 and $175,907 and $164,537 for the six months ended June 30, 2022 and 2023, respectively.

No impairment loss was made to the carrying amounts of the prepaid land use right for the three and six months ended June 30, 2022 and 2023.

(b) Operating lease

On 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 ($2,687) 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 Tianjin with a three year term, commencing on March 1, 2021 and expiring on February 29, 2024. The monthly rental payment is approximately RMB73,143 ($10,918) 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 ($14,590) 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 ($35,540) per month for the first year and approximately RMB277,778 ($41,463) 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 ($793) per month.

On December 9, 2021, Hitrans entered into a lease agreement for extra 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 RMB9,905 ($1,478) per month for the first year, RMB10,103 ($1,508) and RMB10,305 ($1,538) 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 ($2,364) 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 ($8,792) 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 ($9,012) 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 ($7,570) 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 ($1,058) per month.

On April 20, 2023, Hitrans entered into another lease agreement for extra staff quarters spaces in Zhejiang with a three year term commencing on May 1, 2023 and expiring on April 30, 2026. The monthly rental payment is RMB28,000 ($3,860) per month.

Operating lease expenses for the three and six months ended June 30, 2022 and 2023 for the capitation agreement was as follows:

	Three months ended June 30,				Six months ended June 30,
	2022		2023		2022		2023
Operating lease cost – straight line	$	145,966	$	128,430	$	358,657	$	265,747

	December 31,			June 30,
	2022			2023
Property, plant and equipment, at cost	$	1,890,396		$	1,800,589
Accumulated depreciation		(251,626	)		(413,621	)
Impairment		(662,006	)		(630,556	)
Property, plant and equipment, net under finance lease		976,764			756,412

Finance lease liabilities, current		844,297			114,884
Finance lease liabilities, non-current		-			-
Total finance lease liabilities	$	844,297		$	114,884

The components of finance lease expenses were as follows:

	2022		2023
Finance lease cost:
Depreciation of assets	$	-	$	89,610
Interest of lease liabilities		-		10,111
Total lease expense	$	-	$	99,721

	Three months ended June 30,				Six months ended June 30,
	2022		2023		2022		2023
Finance lease cost:
Depreciation of assets		-		44,275		-		89,610
Interest of lease liabilities		-		4,995		-		10,110
Total lease expense	$	-	$	49,270	$	-	$	99,720

The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2023 were as follows:

	Operating leases			Finance leases

Remainder of 2023	$	273,705		$	116,492
2024		286,299			-
2025		263,031			-
2026		137,892			-
2027		12,018			-
Thereafter		-			-
Total undiscounted cash flows		972,945			116,492
Less: imputed interest		(66,812	)		(1,608	)
Present value of lease liabilities	$	906,133		$	114,884

Lease term and discount rate:

	December 31, 2022			June 30, 2023
Weighted-average remaining lease term
Land use rights		37.9			37.4
Operating lease		3.39			3.2
Finance lease		0.5			0.1

Weighted-average discount rate
Land use rights		Nil			Nil
Operating lease		4.94	%		4.87	%
Finance lease		1.40	%		1.40	%

Supplemental cash flow information related to leases where the Company was the lessee for the three and six months ended June 30, 2022 and 2023 was as follows:

	Three months ended June 30,				Six months ended June 30,
	2022		2023		2022		2023
Operating cash outflows from operating assets	$	182,944	$	213,469	$	215,395	$	391,475