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Deferred Government Grants

12 Months Ended

Dec. 31, 2021

18. Deferred Government Grants

Deferred government grants as of December 31, 2020 and 2021 consist of the following:

	December 31,			December 31,
	2020			2021
Total government grants	$	7,456,308		$	10,023,677
Less: Current portion		(151,476	)		(3,834,481	)
Non-current portion	$	7,304,832		$	6,189,196

In September 2013, the Management Committee of Dalian Economic Zone Management Committee (the “Management Committee”) provided a subsidy of RMB150 million to finance the costs incurred in moving the Company facilities to Dalian, including the loss of sales while the new facilities were being constructed. For the year ended September 30, 2015, the Company recognized $23,103,427 as income after offset of the related removal expenditures of $1,004,027. No such income or offset was recognized for the yearsended December 31, 2020 and 2021.

On October 17, 2014, the Company received a subsidy of RMB46,150,000 pursuant to an agreement with the Management Committee dated July 2, 2013 for costs of land use rights and to be used to construct the new manufacturing site in Dalian. Part of the facilities had been completed and was operated in July 2015 and the Company has initiated amortization on a straight-line basis over the estimated useful lives of the depreciable facilities constructed thereon.

On June 23, 2020, BAK Asia, the Company wholly-owned Hong Kong subsidiary, entered into a framework investment agreement with Jiangsu Gaochun Economic Development Zone Development Group Company (“Gaochun EDZ”), pursuant to which the Company intended to develop certain lithium battery projects that aim to have a production capacity of 8Gwh. Gaochun EDZ agreed to provide various support to facilitate the development and operation of the projects. The Company received RMB20 million (approximately $3.2 million) and RMB27.1 million (approximately $4.3 million) subsidy from Gaochun EDZ for the years ended December 31, 2020 and 2021, in which the Company recognized RMB10 million ($1.6 million) as other income for the year ended December 31, 2021. The Company will recognize the government subsidies as income or offsets them against the related expenditures when there are no present or future obligations for the subsidized projects.

Part of the subsidy of RMB20 million (approximately $3.2 million) was granted to facilitates the construction works in Nanjing. The facilities in Nanjing have been completed and was operated in November 2021 and the Company has initiated amortization on a straight-line basis over the estimated useful lives of the depreciable facilities constructed thereon.

The Company offset government grants of $143,256 and $316,398 for the fiscal year ended December 31, 2020 and 2021, respectively, against depreciation expenses of the Dalian and Nanjing facilities.