Hitek Global Inc. Announces Fiscal Year 2023 Financial Results

XIAMEN, China, April 9, 2024 /PRNewswire/ — Hitek Global Inc. (Nasdaq: HKIT) (the “Company“), a China-based information technology consulting and solutions service provider, today announced its financial results for the fiscal year ended December 31, 2023.

Ms. Xiaoyang Huang, Chief Executive Officer and Director of Hitek Global Inc. commented, “During the year ended December 31, 2023, due to governmental policy adjustments, the service fee portion of our tax control business has been affected to some extent, resulting in a decline in overall revenue. The Company is exploring new business opportunities to diversify the company’s revenue and business.”

Fiscal Year 2023 Financial Results

Revenue

Total revenue was $4.6 million in fiscal year 2023, as compared to $6.4 million in fiscal year 2022, mainly due to the decrease in revenue generated from tax devices and services sales due to governmental policy adjustments.

Revenue generated from hardware sales was $2.4 million in fiscal year 2023, as compared to $2.5 million in fiscal year 2022. The decrease was mainly due to the decrease in sales to large customers.
Revenue generated from software sales was $0.8 million in fiscal year 2023, as compared to $2.1 million in fiscal year 2022. The decrease was mainly due to the decrease in software sales to large customers that reduced their procurement.
Revenue generated from tax devices and services was $1.4 million in fiscal year 2023, as compared to $1.8 million in fiscal year 2022. The decrease was due to the decline in demand for our tax devices and services due to a new governmental policy effective in January 2021 that allows taxpayers in Xiamen to obtain tax Ukeys (USB security keys) from the PRC tax authorities for free to issue electronic invoices themselves.

Gross Profit and Gross Margin

Gross profit was $ 1.9 million in fiscal year 2023, a decreased by of 45% from $3.5 million in fiscal year 2022. Gross margin was 42.1% in fiscal year 2023, compared to 55% in fiscal year 2022.

Operating Expenses

Operating expenses were $ 1.8 million in fiscal year 2023, a decrease of 5% from $1.9 million in fiscal year 2022.

Selling expenses were $648 in fiscal year 2023, a decrease of 99% from $437,185 in fiscal year 2022. The decrease was mainly attributable to the decrease in the Company’s sales commissions to obtain new orders in 2023.
General and administrative expenses were $1.8 million in fiscal year 2023, an increase of 23.6% from $1.5 million in fiscal year 2022. The increase was mainly due to (1) the increase of professional service fee of $233,458 resulting from financial and legal consulting in 2023, (2) other fees of $36,728 related to the Company’s initial public offering in March 2023, and (3) rent of $78,246. The increase was offset by a decrease in salary expense of $133,492 resulting from the reduction of employees for cost-effectiveness consideration.

Other Income

Other income was $1.5 million in fiscal year 2023, an increase of 517.8% from $0.2 million in fiscal year 2022. The increase was primarily due to the increase in investment income of $349,915, government subsidies of $560,090 and interest income of $366,320.

Net Income

Net income was $1.0 million in fiscal year 2023, compared to $1.4 million in fiscal year 2022.

Basic and Diluted Earnings per Share

Basic and diluted earnings per share were $0.08 in fiscal year 2023, compared to $0.13 in fiscal year 2022.

Balance Sheet

As of December 31, 2023, the Company had cash of $9.3 million, compared to $1.2 million as of December 31, 2022.

Cash Flow

Net cash used by operating activities was $0.06 million in fiscal year 2023, compared to net cash provided in operating activities of $3.8 million in fiscal year 2022.

Net cash used in investing activities was $6.9 million in fiscal year 2023, compared to net cash used by investing activities of $7.3 million in fiscal year 2022.

Net cash provided by financing activities was $15.1 million in fiscal year 2023. compared to net cash provided by financing activities of $2.7 million in fiscal year 2022.

About Hitek Global Inc.

Hitek Global Inc., headquartered in Xiamen, China, is an information technology (“IT”) consulting and solutions service provider in China. The Company has two lines of business: 1) services to small and medium businesses, which consists of Anti-Counterfeiting Tax Control System (“ACTCS”) tax devices, ACTCS services, and IT services, and 2) services to large businesses, which consists of hardware sales and software sales. The Company’s vision is to become a one-stop consulting destination for holistic IT and other business consulting services in China. For more information, visit the Company’s website at http://ir.xmhitek.com/.

Forward-Looking Statements

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and in its other filings with the SEC.

For Investor and Media Inquiries Please Contact:
Tianyu Xia
Phone: +86 18519770823
Email: xiaty@xmhitek.com

HITEK GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	As of December 31,
	2023		2022
Assets
Current assets
Cash	$	9,311,537	$	1,203,160
Short-term investments		8,837,445		4,290,348
Accounts receivable, net		2,118,738		3,271,218
Accounts receivable – related party, net		–		399,465
Advances to suppliers, net		338,166		481,769
Inventories, net		219,505		430,670
Deferred offering cost		–		917,446
Loan receivable		3,608,289		1,013,157
Prepaid expenses and other current assets		352,919		94,925
Total current assets		24,786,599		12,102,158

Non-current assets
Non-current accounts receivable		4,597,214		4,209,546
Non-current accounts receivable – related party				–
Non-current advance to a third party		410,509		421,679
Non-current loan receivable		4,227,079		4,342,100
Property, equipment and software, net		403,330		122,967
Operating lease right-of-use assets		3,309		6,641
Total non-current assets		10,641,441		9,102,933
Total Assets	$	35,428,040	$	21,205,091

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	532,130	$	696,734
Loan payable		493,159		506,578
Deferred revenue		166,760		977,054
Taxes payable		1,917,647		1,671,322
Due to related parties		–		598
Accrued expenses and other current liabilities		255,131		348,167
Operating lease liabilities		–		3,242
Total current liabilities		3,372,752		4,203,695

Non-current Liabilities
Loan payable, non-current		2,113,539		2,171,050
Deferred income tax liabilities, non-current		1,604,163		1,300,421
Operating lease liabilities, non-current		–		3,399
Total non-current liabilities		3,717,702		3,474,870
Total Liabilities		7,090,454		7,678,565

Commitments and Contingencies

Shareholders’ Equity
Ordinary Shares*, par value $0.0001 per share, 490,000,000 shares authorized; 10,987,679 shares issued and outstanding		1,099		1,099
Additional paid-in capital		2,628,356		2,628,356
Statutory reserve		836,215		836,215
Retained earnings		11,387,748		10,340,107
Accumulated other comprehensive (loss) income		(609,367)		(279,251)
Total Shareholders’ Equity		28,337,586		13,526,526

Total Liabilities and Shareholders’ Equity	$	35,428,040	$	21,205,091

* Retrospectively restated for effect of Reverse Split.

HITEK GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Years Ended December 31,
	2023		2022		2021
Revenues	$	4,563,731	$	6,428,608	$	6,461,163
Cost of revenues		(2,642,491)		(2,891,565)		(2,581,218)
Gross profit		1,921,240		3,537,043		3,879,945

Operating expenses:
General and administrative		1,819,531		1,472,648		1,699,934
Selling		648		437,185		76,477
Total operating expenses		1,820,179		1,909,833		1,776,411

Operating income		101,061		1,627,210		2,103,534

Other income (expense)
Government subsidies		569,928		9,838		6,883
Net investment (loss) income		330,552		(19,363)		103,575
Financial income (expense), net		911,875		250,172		(2,190)
Other, net		(318,890)		1,106		608
Total other income		1,493,465		241,753		108,676

Net Income before provision for income taxes		1,594,526		1,868,963		2,212,210
Income tax expense		546,885		453,218		542,853

Net income	$	1,047,641	$	1,415,745	$	1,669,357
Comprehensive income
Net income	$	1,047,641	$	1,415,745	$	1,669,357
Foreign currency translation (loss) gain		(330,116)		(1,015,447)		290,407

Comprehensive income	$	717,525	$	400,298	$	1,959,764
Earnings per ordinary share
– Basic and diluted	$	0	$	0	$	0

Weighted average number of ordinary shares outstanding
– Basic and diluted		13,257,469		10,987,679		10,987,679

* Retrospectively restated for effect of Reverse Split.

HITEK GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2023		2022		2021

Operating Activities
Net income	$	1,047,641	$	1,415,745	$	1,669,357
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		50,662		21,881		355,738
Loss on disposal of property, plant and equipment		1,413
Interest income		(102,418)		(21,699)		(6,525)
Net investment loss (gain)		(208,626)		19,363		(103,375)
(Reversal of) doubtful accounts of receivables and advances to suppliers		(2,325)		(6,442)		(123,754)
(Reversal of) provision for obsolete inventories		5,559		2,217		(5,317)
Deferred income tax		339,332		177,029		340,624
Changes in operating assets and liabilities:
Short-term investment – trading securities		(1,696,545)		2,418,675		(2,625,216)
Accounts receivable		567,480		(2,490,725)		(1,100,056)
Accounts receivable – related party		390,197		499,933		578,157
Advances to suppliers		472,219		560,352		(183,369)
Deferred offering cost		(130,134)		60,000		155,915
Inventory		194,872		(57,899)		(276,672)
Prepaid expenses and other current assets		(13,028)		89,583		769,913
Due from related party
Accounts payable		(146,642)		225,198		127,422
Deferred revenue		(787,062)		261,856		12,089
Taxes payable		291,578		488,419		327,807
Due to related parties		(584)		(3,320)		1,062
Accrued expenses and other current liabilities		(340,133)		163,884		(127,735)
Net cash provided by (used in) operating activities		(61,912)		3,824,050)		(214,575)

Investing Activities
Advance payment for software development		(339,309)		(117,617)		(25,582)
Loans to third parties		(11,260,542)		(5,498,997)		(356,595)
Repayment from third-party loans		8,830,933		199,463		317,059
Purchases of held-to-maturity investments		(11,000,000)		(1,932,080)		(1,240,329)
Redemption of held-to-maturity Investments		7,159,018		–		1,705,453
Net cash (used in) provided by investing activities		(6,946,555)		(7,349,231)		400,006

Financing activities:
Borrowing from third parties		–		2,749,498
Proceeds from issuing ordinary shares		15,142,902
Net cash provided by financing activities		15,142,902		2,749,498		–

Effect of exchange rate changes on cash and equivalents		(26,058)		(112,465)		44,323
Net (decrease) increase in cash		8,108,377		(888,148)		229,754
Cash and equivalents at beginning of year		1,203,160		2,091,308		1,861,554
Cash and equivalents at end of year	$	9,311,537	$	1,203,160		2,091,308

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	36,504	$	45,002		32,646

Non-cash transactions:
Operating right-of-use assets recognized for related operating lease liabilities	$	–	$	6,820		–

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