OPERATING LEASE

9 Months Ended

Sep. 30, 2023

Operating Lease

OPERATING LEASE

NOTE 12 - OPERATING LEASE

The Company has four operating lease agreement for the office space, the first one is in Beijing China with remaining lease term of 0.17 year, the second is in Changsha, Hunan China with remaining lease term of zero year, the third is in Beijing China with remaining lease term of 0.25 years, and the forth is in Changsha, Hunan China with remaining lease term of 1.25 years, the fifth is in Changsha, Hunan China with remaining lease term of 0.83 year (that is the renew term of 2^nd lease agreement.

A lease with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its leases as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.

The details lease terms are shown as followings:

Lease agreement	Expiry Date	Original Lease Term	The Remaining Lease Term
1st Beijing office rent	Dec 9, 2023	2.67 years	0.17 year
2nd Changsha office rent, related party	Aug 1, 2023	1 year	zero year
3rd Beijing office rent, related party	Dec 31, 2023	1 year	0.25 year
4th Changsha office rent, related party	Dec 31, 2024	2 years	1.25 years
5th Changsha office rent, related party	Aug 1, 2024	1 year	0.83 year

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

This standard did not have a significant impact on our liquidity or on our compliance with our financial covenants associated with our loans.

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

(a) Rent expenses, non-related party

For the nine months ended September 30, 2023 and 2022, the Company has incurred non-related party’s rent expenses solely for the office premises on a monthly basis as follows:

	Nine months ended September 30,
	2023			2022
	(Unaudited)			(Unaudited)
Lease Cost, non-related party
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	129,638		$	138,069
Other Information, non-related party
Cash paid for amounts included in the measurement of lease liabilities	$	133,221		$	142,088
Weighted average remaining lease term – operating leases (in years)		0.17			1.17
Average discount rate – operating leases		4.35	%		4.35	%

The supplemental balance sheet information related to non-related party’s leases as of September 30, 2023 and December 31, 2022 is as follows:

	As of
	September 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
Operating leases, non-related party
Operating right-of-use assets, non-related party	$	55,009	$	181,520
Total operating right-of-use assets, non-related party	$	55,009	$	181,520
Operating lease liabilities, non-related party - current portion	$	22,504	$	156,015
Total operating lease liabilities, non-related party	$	22,504	$	156,015

Maturities of the Company’s lease liabilities of non-related party are as follows:

Period ending September 30,
2023 (non-related party)	$	22,614
2024 (non-related party)		-
Total lease payments (non-related party)		22,614
Less: Imputed interest/present value discount		(110	)
Present value of lease liabilities (non-related party)	$	22,504

EZAGOO LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(b) Rent expenses, related party

For the nine months ended September 30, 2023 and 2022, the Company has incurred related party’s rent expenses solely for the office premises on a monthly basis as follows:

	Nine months ended September 30,
	2023			2022
	(Unaudited)			(Unaudited)
Lease Cost, related party
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	20,593		$	-
Other Information, related party
Cash paid for amounts included in the measurement of lease liabilities	$	-		$	-
Weighted average remaining lease term – operating leases (in years)		1.25			-
Average discount rate – operating leases		4.35	%		-

The supplemental balance sheet information related to related party’s leases as of September 30, 2023 and December 31, 2022 is as follows:

	As of
	September 30, 2023		December 31, 2022
	(Unaudited)		(Unaudited)
Operating leases, related party
Operating right-of-use assets, related party	$	26,200	$	-
Total operating right-of-use assets, related party	$	26,200	$	-
Operating lease liabilities, related party - current portion	$	37,025	$	-
Operating lease liabilities, related party – non-current portion		5,354
Total operating lease liabilities, related party	$	42,379	$	-

Maturities of the Company’s lease liabilities of related party are as follows:

Period ending September 30,
2023 (related party)	$	37,753
2024 (related party)		5,393
Total lease payments (related party)		43,146
Less: Imputed interest/present value discount		(767	)
Present value of lease liabilities (related party)	$	42,379

Lease expenses of non-related party were $129,638 and $138,069 for the nine months ended September 30, 2023 and 2022, respectively. Lease expenses of related party were $20,593 and $0 for the nine months ended September 30, 2023 and 2022, respectively.