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What changed in HiTek Global Inc.'s 20-F — 2023 vs 2024

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Paragraph-level year-over-year comparison of HiTek Global Inc.'s 2023 and 2024 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+515 added−370 removedSource: 20-F (2025-04-25) vs 20-F (2024-04-05)

Top changes in HiTek Global Inc.'s 2024 20-F

515 paragraphs added · 370 removed · 219 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

120 edited+77 added−49 removed369 unchanged
Biggest changeAll percentages in the following diagram reflect the voting ownership interests instead of the equity interests held by each of our shareholders given that each holder of Class B Ordinary Shares will be entitled to 15 votes per one Class B Ordinary Share and each holder of Class A Ordinary Shares will be entitled to one vote per one Class A Ordinary Share: (1) The equity of HiTek is 44.74% owned by Xiaoyang Huang, our Chief Executive Officer; 29.83% owned by Shenping Yin, our Chairman of the Board; 2.35% owned by Bo Shi, our Chief Technology Officer; 0.78% owned by Zhishuang Wang; 0.78% owned by Liuqing Huang; 3.02% owned by Jingru Li; 4.99% owned by Mian Tang; 2.0% owned by Ce Tian; 2.0% owned by Xianfeng Lin; 7.55% owned by Inner Mongolia Guangxin Investment Co., Ltd., a Chinese company of which its equity is 80% owned by Wei Cui, 10% owned by Yi Cui and 10 % owned by Lei Gao; 1.96% owned by Baotou Zhongzhe Hengtong Technology Co., Ltd., a Chinese company of which its equity is 95% owned by Jing Kong and 5% owned by Qingxia Kong. 1 The VIE Agreements The VIE Agreements by and among Tian Dahai (Xiamen) Information Technology Co.
Biggest changeAll percentages in the following diagram related to our shareholders reflect the voting ownership interests instead of the equity interests held by each of our shareholders given that each holder of our Class B Ordinary Shares is entitled to 15 votes per one Class B Ordinary Share and each holder of our Class A Ordinary Shares is entitled to one vote per one Class A Ordinary Share: (1) The equity of HiTek is 56.29% owned by Xiaoyang Huang, our Chief Executive Officer; 36.78% owned by Shenping Yin, our Chairman of the Board; 2.35% owned by Bo Shi, our Chief Technology Officer; 0.78% owned by Zhishuang Wang; 0.78% owned by Liuqing Huang; 3.02% owned by Jingru Li. 1 The VIE Agreements The VIE Agreements by and among Tian Dahai (Xiamen) Information Technology Co.
According to relevant notice, small-scale taxpayers with sales amount not in excess of RMB 100,000 for each month are exempt from ACTCS or GTD technical service fee since 2019. From January 2021, new taxpayers in Xiamen could receive free tax Ukeys from the Tax authorities.
According to relevant notice, small-scale taxpayers with sales amount not in excess of RMB 100,000 for each month are exempt from ACTCS or GTD technical service fee since 2019. Since January 2021, new taxpayers in Xiamen could receive free tax Ukeys from the Tax authorities.
Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application.
Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application.
One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
There are uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances.
There are uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances.
The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty.
The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty.
The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations.
The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations.
The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies.
The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies.
The market price of our Class A Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: ● actual or anticipated fluctuations in our revenue and other operating results; ● the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; ● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; ● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; ● lawsuits threatened or filed against us; and ● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.
The market price of our Class A Ordinary Shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: ● actual or anticipated fluctuations in our revenue and other operating results; ● the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; ● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; ● announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; 32 ● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; ● lawsuits threatened or filed against us; and ● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.
We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costlier. After we are no longer an “emerging growth company,” we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance increased disclosure requirements. 32 Since Mr.
We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costlier. After we are no longer an “emerging growth company,” we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance increased disclosure requirements. Since Mr.
In the event the underlying collateral value is less than the loan amount at the time of default, we will suffer a loss. 11 We may need additional capital to fund our future operations and, if it is not available when needed, we may need to reduce our planned expansion and marketing efforts, which may reduce our revenue.
In the event the underlying collateral value is less than the loan amount at the time of default, we will suffer a loss. We may need additional capital to fund our future operations and, if it is not available when needed, we may need to reduce our planned expansion and marketing efforts, which may reduce our revenue.
WFOE, the VIE and the shareholders of the VIE entered into a series of contractual arrangements, also known as the “VIE Agreements”, pursuant to which we are able to consolidate the financial results of the VIE in our consolidated financial statements because we are deemed as the primary beneficial of the VIE under generally accepted accounting principles in the U.S.
WFOE, the VIE entity and the shareholders of the VIE entity entered into a series of contractual arrangements, also known as the “VIE Agreements”, pursuant to which we are able to consolidate the financial results of the VIE entity in our consolidated financial statements because we are deemed as the primary beneficial of the VIE under generally accepted accounting principles in the U.S.
The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfil relevant procedures stipulated by applicable national regulations.
We believe that our existing working capital and cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional capital.
We believe our existing working capital and cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional capital.
Failure to expand our operations or manage our growth effectively could materially and adversely affect our ability to market our services in multiple venues. Because we rely upon a third party to perform the payment processing for our clients, the failure or inability of the third party to provide these services could impair our ability to operate.
Failure to expand our operations or manage our growth effectively could materially and adversely affect our ability to market our services in multiple venues. 12 Because we rely upon a third party to perform the payment processing for our clients, the failure or inability of the third party to provide these services could impair our ability to operate.
If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected. 25 In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, results of operations, and the offering.
If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our business, results of operations and financial condition could be adversely affected. 26 In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, results of operations, and the offering.
If we or our subsidiaries are unable to receive all of the revenues from our operations through the current VIE Agreements, we may be unable to pay dividends on our Class A Ordinary Shares. 5 Cash dividends, if any, on our Class A Ordinary Shares will be paid in U.S. dollars.
If we or our subsidiaries are unable to receive all of the revenues from our operations through the current VIE Agreements, we may be unable to pay dividends on our Class A Ordinary Shares. Cash dividends, if any, on our Class A Ordinary Shares will be paid in U.S. dollars.
Health epidemics may give rise to severe interruptions to public transportation and usual business operations, which could severely disrupt our operations. Our business operations depend on overall economy and demand for IT consulting and solutions service in Xiamen area, which could be disrupted by health epidemics.
Health epidemics may give rise to severe interruptions to public transportation and usual business operations, which could severely disrupt our operations. Our business operations depend on the overall economy and demand for IT consulting and solutions service in Xiamen area, which could be disrupted by health epidemics.
We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties hold ownership interests. 13 Transactions with related parties present potential for conflicts of interest, as the interests of related party may not align with the interests of our shareholders.
We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties hold ownership interests. Transactions with related parties present potential for conflicts of interest, as the interests of related party may not align with the interests of our shareholders.
Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations 18 Risks Relating to Doing Business in the PRC Although the audit report included in this annual report is prepared by U.S. auditors which are currently inspected by the PCAOB, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection.
Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations 19 Risks Relating to Doing Business in the PRC Although the audit report included in this annual report is prepared by U.S. auditors which are currently inspected by the PCAOB, there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection.
Noncompliance with applicable regulations or requirements could subject us to: ● investigations, enforcement actions, and sanctions; ● mandatory changes to our network and products; 27 ● disgorgement of profits, fines, and damages; ● civil and criminal penalties or injunctions; ● claims for damages by our customers or channel partners; ● termination of contracts; ● loss of intellectual property rights; ● failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and ● temporary or permanent debarment from sales to public service organizations.
Noncompliance with applicable regulations or requirements could subject us to: ● investigations, enforcement actions, and sanctions; ● mandatory changes to our network and products; 28 ● disgorgement of profits, fines, and damages; ● civil and criminal penalties or injunctions; ● claims for damages by our customers or channel partners; ● termination of contracts; ● loss of intellectual property rights; ● failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and ● temporary or permanent debarment from sales to public service organizations.
While we currently expect to qualify as a foreign private issuer, we may cease to qualify as a foreign private issuer in the future. Anti-takeover provisions in our memorandum and articles of association may discourage, delay or prevent a change in control.
While we currently expect to qualify as a foreign private issuer, we may cease to qualify as a foreign private issuer in the future. 34 Anti-takeover provisions in our memorandum and articles of association may discourage, delay or prevent a change in control.
Since this document is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us. 17 Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business.
Since this document is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us. 18 Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business.
Although we are currently not required to obtain permission from any of the PRC regulatory authorities to obtain such permission and has not received any denial regarding our listing on the Nasdaq Capital Market and the entry into the VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry. 29 PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.
Although we are currently not required to obtain permission from any of the PRC regulatory authorities to obtain such permission and has not received any denial regarding our listing on the Nasdaq Capital Market and the entry into the VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry. 30 PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.
If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Class A Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements. 34 Based on our operations and the composition of our assets we do not expect to be treated as a PFIC under the current PFIC rules.
If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Class A Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements. 35 Based on our operations and the composition of our assets we do not expect to be treated as a PFIC under the current PFIC rules.
As a result, we may be required to suspend our relevant businesses, shut down our website, take down our operating applications, or face other penalties, which may materially and adversely affect our business, financial condition, and results of operations. 26 On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection Law of the PRC, or the PIPL, which took effect in November 2021.
As a result, we may be required to suspend our relevant businesses, shut down our website, take down our operating applications, or face other penalties, which may materially and adversely affect our business, financial condition, and results of operations. 27 On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection Law of the PRC, or the PIPL, which took effect in November 2021.
While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. 21 Our principal business operation is conducted in the PRC.
While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. 22 Our principal business operation is conducted in the PRC.
This could have a material and adverse effect on the value of your investment in us and the price of our Class A Ordinary Shares. 24 There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.
This could have a material and adverse effect on the value of your investment in us and the price of our Class A Ordinary Shares. 25 There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.
Increased use of electronic invoice will reduce the number of customers using our ACTCS services. From 2018, the Chinese tax regulators have been rolling out the electronic invoicing system. Currently, electronic invoices are mostly used by businesses in the Fast Moving Consumer Goods (“FMCG”) industry such as fast food restaurants and coffee shops.
Increased use of electronic invoice will reduce the number of customers using our ACTCS services. Since 2018, the Chinese tax regulators have been rolling out the electronic invoicing system. Currently, electronic invoices are mostly used by businesses in the Fast Moving Consumer Goods (“FMCG”) industry such as fast food restaurants and coffee shops.
Conversely, if we decide to convert our Renminbi into USD for the purpose of making payments for dividends on our Class A Ordinary Shares or for other business purposes, appreciation of the USD against the Renminbi would have a negative effect on the USD amount. 28 Increases in labor costs in the PRC may adversely affect our business and results of operations.
Conversely, if we decide to convert our Renminbi into USD for the purpose of making payments for dividends on our Class A Ordinary Shares or for other business purposes, appreciation of the USD against the Renminbi would have a negative effect on the USD amount. 29 Increases in labor costs in the PRC may adversely affect our business and results of operations.
As of the date of this annual report, there has been no distribution of dividends or assets among the holding company, the subsidiary or the consolidated VIE. In the future, cash proceeds raised from overseas financing activities may be transferred by us to the consolidated VIE via capital contribution or shareholder loans, as the case may be.
As of the date of this annual report, there has been no distribution of dividends or assets among the holding company, the subsidiary or the consolidated VIE. In the future, cash proceeds raised from overseas financing activities may be transferred by us to the consolidated VIE via capital contributions or shareholder loans, as the case may be.
Prolonged unrest, intensified military activities or more extensive sanctions impacting these regions could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations and prospects. 9 Increasing competition within our industry could have an impact on our business prospects.
Prolonged unrest, intensified military activities or more extensive sanctions impacting these regions could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations and prospects. 10 Increasing competition within our industry could have an impact on our business prospects.
Xiaoyang Huang’s voting power is below 50%, Mr. Shenping Yin and Ms. Xiaoyang Huang as the controlling shareholders have substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions.
Xiaoyang Huang’s voting power is below 50%, Mr. Shenping Yin and Ms. Xiaoyang Huang as the controlling shareholders have substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, appointment of directors, and other significant corporate actions.
We are a “controlled company” as defined under the NASDAQ Stock Market Rules because two of our principal shareholders, Shenping Yin, our Chairman of the Board, and Xiaoyang Huang our CEO, who are husband and wife, beneficially own more than 50% of voting power for the election of directors.
We are a “controlled company” as defined under the NASDAQ Stock Market Rules because two of our principal shareholders, Shenping Yin, our Chairman of the Board, and Xiaoyang Huang our CEO, who are husband and wife, beneficially own more than 50% of voting power for the appointment of directors.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company. 22 Economic conditions in China could impact our business and results of operations in both lines of our business The VIE entity and its subsidiaries’ business and operating results are impacted by Chinese economic conditions, such as a potential general reduction in net disposable income as a result of fiscal measures adopted by Chinese government to address high levels of budgetary indebtedness, which may adversely affect our business, results of operations and financial condition.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company. 23 Economic conditions in China could impact our business and results of operations in both lines of our business The VIE entity and its subsidiary’s business and operating results are impacted by Chinese economic conditions, such as a potential general reduction in net disposable income as a result of fiscal measures adopted by Chinese government to address high levels of budgetary indebtedness, which may adversely affect our business, results of operations and financial condition.
Risks Relating to Our Corporate Structure We do not have direct ownership of our operating entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its subsidiaries through VIE Agreements, which may not be effective in providing control over HiTek.
Risks Relating to Our Corporate Structure We do not have direct ownership of our operating entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its Subsidiary through VIE Agreements, which may not be effective in providing control over HiTek.
The SEC has regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our Class A Ordinary Shares could be considered to be a “penny stock”.
The SEC has regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our Class A Ordinary Shares are considered to be “penny stock”.
The VIE Agreements may not be effective in providing control over HiTek. See “Risk Factors — Risks Relating to Our Corporate Structure” starting on page 14 of this annual report, “Risk Factors — Risks Relating to Doing Business in the PRC” starting on page 19 of this annual report for more information.
The VIE Agreements may not be effective in providing control over HiTek. See “Risk Factors — Risks Relating to Our Corporate Structure” starting on page 14 of this annual report, “Risk Factors — Risks Relating to Doing Business in the PRC” starting on page 20 of this annual report for more information.
We do not have direct ownership of our operating entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its subsidiaries through VIE Agreements. All of our current revenue and net income is derived from HiTek, the VIE in China.
We do not have direct ownership of our operating entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its Subsidiary through VIE Agreements. All of our current revenue and net income is derived from HiTek, the VIE in China.
These PRC laws apply not only to third-party transactions, but also to transfers of information between us, our WFOE, the VIE, and the VIE’s subsidiaries, and among us, our WFOE, the VIE, and the VIE’s subsidiaries, and other parties with which we have commercial relations.
These PRC laws apply not only to third-party transactions, but also to transfers of information between us, our WFOE, the VIE, and the VIE’s subsidiary, and among us, our WFOE, the VIE, and the VIE’s subsidiary, and other parties with which we have commercial relations.
Extended payment terms may cause deferred payments or bad debts, which could negatively affect our business operations. The Company gave a two-year credit period to large customers such as large-scale oil and coal mining groups. Their collection period is usually longer than other medium or small-sized companies.
Extended payment terms may cause deferred payments or bad debts, which could negatively affect our business operations. The Company generally gives a two-year credit period to large customers such as large-scale oil and coal mining groups. Their collection period is usually longer than other medium or small-sized companies.
The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures.
The revised Provisions was issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures.
As a result, both you and us face uncertainty about future actions by PRC regulatory authorities that could significantly affect the operating company’s financial performance and the enforceability of the VIE Agreements.
As a result, both you and we face uncertainty about future actions by PRC regulatory authorities that could significantly affect the operating company’s financial performance and the enforceability of the VIE Agreements.
As a result, our Class A Ordinary Shares would be known as a “penny stock”, which is subject to various regulations involving disclosures to be given to you prior to the purchase of any penny stock.
As a result, our Class A Ordinary Shares are known as a “penny stock”, which is subject to various regulations involving disclosures to be given to you prior to the purchase of any penny stock.
Any failure to obtain or delay in obtaining CSRC approval for our future offerings in the U.S. would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
Any failure to obtain or delay in obtaining CSRC approval for future public offerings in the U.S. would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
If in the future we are going to conduct any offering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures.
If in the future we are going to conduct any offering or financing in the U.S., we will be required to complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures.
The payment processing business is highly regulated, and it is subject to a number of risks that could materially and adversely affect their abilities to provide payment processing and escrow services to us, including: ● increased regulatory focus and the requirement that it comply with numerous complex and evolving laws, rules and regulations; ● increases in the costs to the third party, including fees charged by banks to process funds through the third parties, which could result in increased costs to us and to our participants; ● dissatisfaction with the third parties’ services; ● a decline in the use of the third parties’ services generally which could result in increases in costs to users such as us and our participants; ● the ability of the third parties to maintain adequate security procedures to prevent the hacking or other unauthorized access to account and other information provided by us and the participants who use the system; ● system failures or failure to effectively scale the system to handle large and growing transaction volumes; ● the failure or inability of the third parties to manage funds accurately or the loss of funds by the third parties, whether due to employee fraud, security breaches, technical errors or otherwise; and ● the failure or inability of these third parties to adequately manage business and regulatory risks. 12 We rely on the convenience and ease of use that third party’s payment methods provide to our users.
The payment processing business is highly regulated, and it is subject to a number of risks that could materially and adversely affect their abilities to provide payment processing and escrow services to us, including: ● increased regulatory focus and the requirement that it comply with numerous complex and evolving laws, rules and regulations; ● increases in the costs to the third party, including fees charged by banks to process funds through the third parties, which could result in increased costs to us and to our participants; ● dissatisfaction with the third parties’ services; ● a decline in the use of the third parties’ services generally which could result in increases in costs to users such as us and our participants; ● the ability of the third parties to maintain adequate security procedures to prevent the hacking or other unauthorized access to account and other information provided by us and the participants who use the system; ● system failures or failure to effectively scale the system to handle large and growing transaction volumes; ● the failure or inability of the third parties to manage funds accurately or the loss of funds by the third parties, whether due to employee fraud, security breaches, technical errors or otherwise; and ● the failure or inability of these third parties to adequately manage business and regulatory risks.
Neither we nor our subsidiaries own any equity interests in the VIE.
Neither we nor our subsidiaries own any equity interests in the VIE entity.
Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.
Any failure or perceived failure of us to fully comply with such new regulatory requirements on a timely basis could significantly limit or completely hinder our ability to continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.
Because we are a Cayman Islands corporation and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain.
Because we are a Cayman Islands exempted company and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain.
Shenping Yin, Chairman of the Board, and his wife, Ms. Xiaoyang Huang, chief executive officer, are able to exercise more than 95% of the total voting power of our issued and outstanding share capital, Mr. Yin will have the ability to elect directors and approve matters requiring shareholder approval. Mr.
Shenping Yin, Chairman of the Board, and his wife, Ms. Xiaoyang Huang, chief executive officer, are able to exercise more than 95% of the total voting power of our issued and outstanding share capital, Mr. Yin will have the ability to elect directors and approve matters requiring shareholder approval. As of April 21, 2025, Mr.
A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established Members and accredited investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of these securities.
Penny stocks are subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established members and accredited investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of these securities.
U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC.
U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and U.S. regulatory agencies.
Our articles of association allow sour shareholders holding shares representing in aggregate not less than ten per cent in par value of the issued Shares which as at that date carry the right to vote at general meetings, to requisition an extraordinary general meeting of our shareholders, in which case our directors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting.
Our articles of association allow our shareholders holding shares representing in aggregate not less than twenty per cent in par value of the issued Shares which as at that date carry the right to vote at general meetings, to requisition a general meeting of our shareholders, in which case our directors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting.
Although the CAC Revised Measures provides no further explanation on the extent of “network platform operator” and “foreign” listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
Although the CAC Revised Measures provides no further explanation on the extent of “network platform operator” and “foreign” listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures and security assessment for outbound data, considering that (i) we are not in possession of or otherwise holding any Important Data; (ii) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; and (iii) as of the date of this prospectus, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
Although our articles of association does not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders, any shareholder may submit a proposal to our BOD for consideration of inclusion in a proxy statement.
Although our articles of association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders, any shareholder may submit a proposal to our board of directors for consideration of inclusion in a proxy statement.
As confirmed by our PRC counsel, Jingtian & Gongcheng, we are not subject to cybersecurity review with the CAC in accordance with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
As confirmed by our PRC counsel, Jingtian & Gongcheng, we are not subject to cybersecurity review with the CAC in accordance with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying us as a critical information infrastructure operator; and (iii) we have not received any notification of cybersecurity review from relevant governmental authorities due to our impact or potential impact on national security.
ITEM 3. KEY INFORMATION Our Corporate Structure We are an offshore holding company incorporated in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by (i) Haitian Weilai, our indirect subsidiary, (ii) the VIE, Hitek and the VIE’s subsidiaries, Huasheng and Huoerguosi.
ITEM 3. KEY INFORMATION Our Corporate Structure We are an offshore holding company incorporated in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by (i) Haitian Weilai, our indirect subsidiary, (ii) the VIE entity and the VIE entity’s subsidiary, Huasheng.
As a holding company, we may rely on dividends and other distributions on equity paid by our subsidiary in Hong Kong, Hitek HK, and the consolidated VIE in mainland China, HiTek, for our cash and financing requirements. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution.
As a holding company, we may rely on dividends and other distributions on equity paid by Hitek HK, and HiTek, for our cash and financing requirements. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution.
Shenping Yin, our Chairman of the Board, and his wife, Ms. Xiaoyang Huang, the chief executive officer, are currently the beneficial owners of 8,192,000 Class B Ordinary Shares, approximately 95.20% of the voting rights in our Company, which are directly held by Fortune Enterprise Holdings Limited, an entity 100% owned by Mr. Yin and Ms. Huang. As a result, Mr.
Shenping Yin, our Chairman of the Board, and his wife, Ms. Xiaoyang Huang, the chief executive officer, were the beneficial owners of 8,192,000 Class B Ordinary Shares, or 85.34% of the voting rights in our Company, which are directly held by Fortune Enterprise Holdings Limited, an entity 100% owned by Mr. Yin and Ms. Huang. As a result, Mr.
We rely primarily on copyright, trade secret laws, confidentiality procedures, license agreements and contractual provisions to establish and protect our proprietary rights over our products, procedures and services. Other persons could copy or otherwise obtain and use our technology without authorization, or develop similar IP independently.
Our success depends in part upon our intellectual property rights. We rely primarily on copyright, trade secret laws, confidentiality procedures, license agreements and contractual provisions to establish and protect our proprietary rights over our products, procedures and services. Other persons could copy or otherwise obtain and use our technology without authorization, or develop similar IP independently.
If WFOE, HiTek or their ownership structure or the VIE Agreements are determined to be in violation of any existing or future PRC laws, rules or regulations, or WFOE or HiTek fails to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including: ● revoking the business and operating licenses of WFOE or HiTek; ● discontinuing or restricting the operations of WFOE or HiTek; ● imposing conditions or requirements with which we, WFOE, or HiTek may not be able to comply; ● requiring us, WFOE, or HiTek to restructure the relevant ownership structure or operations which may significantly impair the rights of the holders of our Class A Ordinary Shares in the equity of HiTek; ● restricting or prohibiting our use of the proceeds from our initial public offering to finance our business and operations in China; and ● imposing fines.
Failure of cybersecurity, data privacy and data security compliance could subject Hitek to penalties, damage its reputation and brand, and harm its business and results of operations 15 If WFOE, HiTek or their ownership structure or the VIE Agreements are determined to be in violation of any existing or future PRC laws, rules or regulations, or WFOE or HiTek fails to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including: ● revoking the business and operating licenses of WFOE or HiTek; ● discontinuing or restricting the operations of WFOE or HiTek; ● imposing conditions or requirements with which we, WFOE, or HiTek may not be able to comply; ● requiring us, WFOE, or HiTek to restructure the relevant ownership structure or operations which may significantly impair the rights of the holders of our Class A Ordinary Shares in the equity of HiTek; ● restricting or prohibiting our use of the proceeds from our initial public offering to finance our business and operations in China; and ● imposing fines.
Nasdaq may apply additional and more stringent criteria for our continued listing because we plan to have a small public offering and our insiders will hold a large portion of our listed securities.
Nasdaq may apply additional and more stringent criteria for our continued listing because we completed a small public offering and our insiders hold a large portion of our listed securities.
Federal Income Taxation — Passive Foreign Investment Company.” Our Class A Ordinary Shares may trade under $5.00 per share and thus will be a penny stock. Trading in penny stocks has certain restrictions and these restrictions could negatively affect the price and liquidity of our shares. Our Class A Ordinary Shares may trade below $5.00 per share after listing.
Federal Income Taxation — Passive Foreign Investment Company.” Our Class A Ordinary Shares currently trades under $5.00 per share and thus is a penny stock. Trading in penny stocks has certain restrictions and these restrictions could negatively affect the price and liquidity of our shares. Our Class A Ordinary Shares currently trade below $5.00 per share.
On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. 19 On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.
On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
You may be unable to present proposals before general meetings or extraordinary general meetings not called by shareholders. Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association.
Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.
Risks Relating to Our Class A Ordinary Shares We do not intend to pay dividends for the foreseeable future. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.
For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2020 Version) promulgated on June 23, 2020 and effective on July 23, 2020, respectively, and other applicable laws and regulations.
For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2020 Version) promulgated on June 23, 2020 and effective on July 23, 2020, respectively, and other applicable laws and regulations. 14 To comply with PRC laws and regulations, we do not intend to have an equity ownership interest in HiTek but rely on VIE Agreements with HiTek to control and operate its business.
As a holding company with no material operations, our operations were conducted in China by our subsidiaries and through VIE Agreements with HiTek, the VIE in China, the equity of which is owned by Xiaoyang Huang, Shenping Yin, Bo Shi, Zhishuang Wang, Liuqing Huang, Jingru Li, Mian Tang, Ce Tian, Xianfeng Lin, Inner Mongolia Guangxin Investment Co., Ltd. and Baotou Zhongzhe Hengtong Technology Co., Ltd. through VIE Agreements, as a result of which, under United States generally accepted accounting principles, the assets and liabilities of HiTek are treated as our assets and liabilities and the results of operations of HiTek are treated in all respects as if they were the results of our operations.
As a holding company with no material operations, our operations were conducted in China by our subsidiaries and through VIE Agreements with HiTek, the VIE in China, the equity of which is owned by Xiaoyang Huang, Shenping Yin, Bo Shi, Zhishuang Wang, Liuqing Huang and Jingru Li, through VIE Agreements, as a result of which, under United States generally accepted accounting principles, the assets and liabilities of HiTek are treated as our assets and liabilities and the results of operations of HiTek are treated in all respects as if they were the results of our operations.
However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
However, since the Trial Measures were newly promulgated, there remains uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
In the event that the performance of such software, equipment or services provided and/or managed by third parties deteriorates or our arrangements with any of these third parties related to the provision and/or management of software, equipment or services are terminated, we may not be able to find alternative services, equipment or software on a timely basis or on commercially reasonable terms, or at all, or be able to do so without significant cost or disruptions to our business, and our relationships with our customers may be adversely impacted. 10 A significant portion of our revenue is concentrated on a few large customers, and we do not have long-term service agreements with our key customers and rely upon our longstanding relationship with them.
In the event that the performance of such software, equipment or services provided and/or managed by third parties deteriorates or our arrangements with any of these third parties related to the provision and/or management of software, equipment or services are terminated, we may not be able to find alternative services, equipment or software on a timely basis or on commercially reasonable terms, or at all, or be able to do so without significant cost or disruptions to our business, and our relationships with our customers may be adversely impacted.
As of the date of this annual report, Mr. Shenping Yin, our Chairman of the Board, and his wife, Ms. Xiaoyang Huang, our chief executive officer, beneficially owns 8,192,000, or 100%, of our issued Class B Ordinary Shares, representing approximately 95.20% of the voting rights in our Company. As a result, until such time as Mr. Shenping Yin’s and Ms.
As of April 21, 2025, Mr. Shenping Yin, our Chairman of the Board, and his wife, Ms. Xiaoyang Huang, our chief executive officer, beneficially owns 8,192,000, or 100%, of our issued Class B Ordinary Shares, or 85.34% of the voting rights in our Company. As a result, until such time as Mr. Shenping Yin’s and Ms.
Although the CAC Revised Measures provides no further explanation on the extent of “network platform operator” and “foreign” listing, as confirmed by our PRC counsel, Jingtian & Gongcheng, we are not subject to cybersecurity review with the CAC , because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
As confirmed by our PRC counsel, Jingtian & Gongcheng, we are not subject to cybersecurity review with the CAC and security assessment for outbound data, because (i) we are not in possession of or otherwise holding any Important Data, (ii) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; and (iii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
Some provisions of our memorandum and articles of association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including, among other things, the following: ● provisions that authorize our board of directors (“BOD”) to issue shares with preferred, deferred or other special rights or restrictions without any further vote or action by our shareholders; and ● provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings 33 Our board of directors may decline to register transfers of Class A Ordinary Shares in certain circumstances.
Some provisions of our memorandum and articles of association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including, among other things, the following: ● provisions that authorize our board of directors (“BOD”) to issue shares with preferred, deferred or other special rights or restrictions without any further vote or action by our shareholders; and ● provisions that restrict the ability of our shareholders to call general meetings and to propose special matters for consideration at general meetings You may be unable to present proposals before general meetings or extraordinary general meetings not called by shareholders.
Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our offering, business and our share price.
Some of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our business and stock prices when listed on a national stock exchange.
Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.
Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities, lack of effective internal controls over financial reporting (“ICFR”), inadequate corporate governance policies and, in many cases, allegations of fraudulent activities.
Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China (“CAC”).
Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse to us, which may take place quickly with little advance notice 3 Additionally, pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China (“CAC”).
Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters.
Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirement in the future.
As such, our operations and revenues may be negatively impacted. The willingness of people to establish business entities in the Xiamen metropolitan areas is beyond our control. There are multiple reasons people may find appealing to establish a particular business in the Xiamen metropolitan areas, such as people’s personal belief and volatility in the Chinese capital markets.
There are multiple reasons people may find appealing to establish a particular business in the Xiamen metropolitan areas, such as people’s personal belief and volatility in the Chinese capital markets.
An extended credit period will have a potential risk of causing deferred payments or bad debts, which could negatively affect our business operations. We source our retail hardware primarily from a limited number of suppliers. If we lose one or more of the suppliers, our operation may be disrupted, and our results of operations may be adversely and materially impacted.
If we lose one or more of our customers, our results of operations may be adversely and materially impacted. ● Extended payment terms may cause deferred payments or bad debts, which could negatively affect our business operations. ● We source our retail hardware primarily from a limited number of suppliers.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

27 edited+147 added−2 removed43 unchanged
Biggest changeSELECTED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS For the Year Ended December 31, 2023 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Revenues $ 36,402 $ - $ 191,738 $ 4,335,591 $ - $ 4,563,731 Cost of revenues $ - $ - $ (46,768 ) $ (2,595,723 ) $ - $ (2,642,491 ) Income for Non-VIE subsidiaries $ 1,222,415 $ 1,224,590 $ - $ - $ (2,447,005 ) $ - Income for VIE and its subsidiaries (1) $ - $ - $ 1,098,946 $ - $ (1,098,946 ) $ - Net income $ 1,047,641 $ 1,222,415 $ 1,224,590 $ 1,098,946 $ (3,545,951 ) $ 1,047,641 Comprehensive income $ 1,047,641 $ 1,222,415 $ 1,222,759 $ 770,661 $ (3,545,951 ) $ 717,525 For the Year Ended December 31, 2022 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Revenues $ - $ - $ 353,836 $ 6,228,595 $ (153,823 ) $ 6,428,608 Cost of revenues $ - $ - $ (212,995 ) $ (2,832,393 ) $ 153,823 $ (2,891,565 ) Income for Non-VIE subsidiaries $ 1,798,894 $ 1,801,042 $ - $ - $ (3,599,936 ) $ - Income for VIE and its subsidiaries (1) $ - $ - $ 1,684,992 $ - $ (1,684,992 ) $ - Net income $ 1,415,745 $ 1,798,894 $ 1,801,042 $ 1,684,992 $ (5,284,928 ) $ 1,415,745 Comprehensive income $ 1,415,745 $ 1,798,894 $ 1,803,198 $ 667,389 $ (5,284,928 ) $ 400,298 For the Year Ended December 31, 2021 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Revenues $ - $ - $ 53,344 $ 6,473,638 $ (65,819 ) $ 6,461,163 Cost of revenues $ - $ - $ (104,115 ) $ (2,542,922 ) $ 65,819 $ (2,581,218 ) Income for Non-VIE subsidiaries $ 1,994,595 $ 1,997,821 $ - $ - $ (3,992,416 ) $ - Income for VIE and its subsidiaries (1) $ - $ - $ 2,061,517 $ - $ (2,061,517 ) $ - Net income $ 1,669,357 $ 1,994,595 $ 1,997,821 $ 2,061,517 $ (6,053,933 ) $ 1,669,357 Comprehensive income $ 1,669,357 $ 1,994,595 $ 1,996,896 $ 2,352,849 $ (6,053,933 ) $ 1,959,764 Note: (1) It represents the technical consultation and service (“Consulting Fees”) income received from the VIE and its subsidiaries pursuant to the Exclusive Technical Consulting and Service (the “Agreement”). 36 SELECTED CONDENSED CONSOLIDATING BALANCE SHEETS As of December 31, 2023 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Cash and cash equivalents $ 8,236,065 $ 4,282 $ 29,281 $ 1,041,909 $ - $ 9,311,537 Due from inter companies (1) - - 10,846,775 - (10,846,775 ) - Total current assets $ 14,077,640 $ 4,282 $ 147,902 $ 11,941,416 $ (1,384,641 ) $ 24,786,599 Investments in non-VIE subsidiaries $ 14,621,943 $ 14,686,108 $ - $ - $ (29,308,051 ) $ - Net assets of the VIE and its subsidiaries through the VIE Agreements $ - $ - $ 14,509,197 $ - $ (14,509,197 ) $ - Total non-current assets $ 15,621,943 $ 14,686,108 $ 14,509,493 $ 9,641,441 $ (43,817,544 ) $ 10,641,441 Total Assets $ 29,699,583 $ 14,690,390 $ 14,657,395 $ 21,582,857 $ (45,202,185 ) $ 35,428,040 Due to inter companies (1) - - - 10,846,775 (10,846,775 ) - Total Liabilities $ 1,361,997 $ 20,000 $ (28,713 ) $ 7,073,660 $ (1,336,490 ) $ 7,090,454 Total Shareholders’ Equity $ 28,337,586 $ 14,670,390 $ 14,686,108 $ 14,509,197 $ (43,865,695 ) $ 28,337,586 Total Liabilities and Shareholders’ Equity $ 29,699,583 $ 14,690,390 $ 14,657,395 $ 21,582,857 $ (45,202,185 ) $ 35,428,040 As of December 31, 2022 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Cash and cash equivalents $ 226,578 $ 6,457 $ 126,420 $ 843,705 $ - $ 1,203,160 Due from inter companies (1) 10,000 - 9,747,829 1,383,988 (11,141,817 ) - Total current assets $ 586,420 $ 6,457 $ 242,429 $ 12,747,913 $ (1,481,061 ) $ 12,102,158 Investments in non-VIE subsidiaries $ 14,299,036 $ 14,399,652 $ - $ - $ (28,698,688 ) $ - Net assets of the VIE and its subsidiaries through the VIE Agreements $ - $ - $ 14,346,554 $ - $ (14,346,554 ) $ - Total non-current assets $ 14,299,036 $ 14,399,652 $ 14,350,741 $ 9,102,933 $ (43,049,429 ) $ 9,102,933 Total Assets $ 14,885,456 $ 14,406,109 $ 14,593,170 $ 21,850,846 $ (44,530,490 ) $ 21,205,091 Due to inter companies (1) 1,358,930 20,000 15,058 9,747,829 (11,141,817 ) - Total Liabilities $ 1,358,930 $ 20,000 $ 193,518 $ 7,504,292 $ (1,398,175 ) $ 7,678,565 Total Shareholders’ Equity $ 13,526,526 $ 14,386,109 $ 14,399,652 $ 14,346,554 $ (43,132,315 ) $ 13,526,526 Total Liabilities and Shareholders’ Equity $ 14,885,456 $ 14,406,109 $ 14,593,170 $ 21,850,846 $ (44,530,490 ) $ 21,205,091 Note: (1) As of December 31, 2023 and 2022, VIE and its subsidiaries owed WFOE and its subsidiaries technical consulting and service fees of $10,846,775 and $9,747,829, respectively.
Biggest changeSELECTED CONDENSED CONSOLIDATING BALANCE SHEETS As of December 31, 2024 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiary Eliminations Consolidated Cash $ 6,489,424 $ 2,422 $ 18,440 $ 726,512 $ - $ 7,236,798 Due from inter companies (1) - 9,656,017 - (9,656,017 ) - Total current assets $ 22,498,317 $ 2,422 $ 206,458 $ 13,362,125 $ (1,883,144 ) $ 34,186,178 Investments in non-VIE subsidiaries $ 14,138,600 $ 14,165,412 $ - $ - $ (28,304,012 ) $ - Net assets of the VIE and its subsidiaries through the VIE Agreements $ - $ - $ 14,016,761 $ - $ (14,016,761 ) $ - Total non-current assets $ 14,138,600 $ 14,165,412 $ 14,016,473 $ 7,356,012 $ (42,320,485 ) $ 7,356,012 Total Assets $ 36,636,917 $ 14,167,834 $ 14,222,931 $ 20,718,137 $ (44,203,629 ) $ 41,542,190 Due to inter companies (1) - - - 9,656,017 (9,656,017 ) - Total Liabilities $ 1,361,997 $ 20,000 $ 57,519 $ 6,701,376 $ (1,873,622 ) $ 6,267,270 Total Shareholders’ Equity $ 35,274,920 $ 14,147,834 $ 14,165,412 $ 14,016,761 $ (42,330,007 ) $ 35,274,920 Total Liabilities and Shareholders’ Equity $ 36,636,917 $ 14,167,834 $ 14,222,931 $ 20,718,137 $ (44,203,629 ) $ 41,542,190 38 As of December 31, 2023 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiaries Eliminations Consolidated Cash $ 8,236,065 $ 4,282 $ 29,281 $ 1,041,909 $ - $ 9,311,537 Due from inter companies (1) - - 10,846,775 - (10,846,775 ) - Total current assets $ 14,077,640 $ 4,282 $ 147,902 $ 11,941,416 $ (1,384,641 ) $ 24,786,599 Investments in non-VIE subsidiaries $ 14,621,943 $ 14,686,108 $ - $ - $ (29,308,051 ) $ - Net assets of the VIE and its subsidiaries through the VIE Agreements $ - $ - $ 14,509,197 $ - $ (14,509,197 ) $ - Total non-current assets $ 15,621,943 $ 14,686,108 $ 14,509,493 $ 9,641,441 $ (43,817,544 ) $ 10,641,441 Total Assets $ 29,699,583 $ 14,690,390 $ 14,657,395 $ 21,582,857 $ (45,202,185 ) $ 35,428,040 Due to inter companies (1) - - - 10,846,775 (10,846,775 ) - Total Liabilities $ 1,361,997 $ 20,000 $ (28,713 ) $ 7,073,660 $ (1,336,490 ) $ 7,090,454 Total Shareholders’ Equity $ 28,337,586 $ 14,670,390 $ 14,686,108 $ 14,509,197 $ (43,865,695 ) $ 28,337,586 Total Liabilities and Shareholders’ Equity $ 29,699,583 $ 14,690,390 $ 14,657,395 $ 21,582,857 $ (45,202,185 ) $ 35,428,040 Note: (1) As of December 31, 2024 and 2023, VIE entity and its subsidiaries owed WFOE and its subsidiaries technical consulting and service fees of $9,656,017 and $10,846,775, respectively.
We are not able to adjust such pricing and as such our profit margin is limited. The Chinese tax regulators have been rolling out electronic invoicing starting from 2018. The electronic invoices enable companies to apply for, issue, transfer and check the invoices through the unified online electronic invoice management system of the Chinese Tax authority.
We are not able to adjust to such pricing and as such our profit margin is limited. The Chinese tax regulators have been rolling out electronic invoicing starting from 2018. The electronic invoices enable companies to apply for, issue, transfer and check the invoices through the unified online electronic invoice management system of the Chinese Tax authority.
Electronic invoices are very useful in helping business entities reduce operating costs and streamline service process, since they do not involve printing, storage and postage procedures. From January 21, 2021, new taxpayers can receive electronic tax control ukey for free from the Tax authority.
Electronic invoices are very useful in helping business entities reduce operating costs and streamline service process, since they do not involve printing, storage and postage procedures. Since January 21, 2021, new taxpayers can receive electronic tax control ukey for free from the Tax authority.
Such investments are presented in the selected condensed consolidating balance sheets of the Parent as “investments in non-VIE subsidiaries” and net assets of the VIE and its subsidiaries through the VIE agreements” and the profit of the subsidiaries is presented as “Income for Non-VIE subsidiaries” and “Income for VIE and its subsidiaries” in the selected condensed consolidating statements of operations.
Such investments are presented in the selected condensed consolidating balance sheets of the Parent as “investments in non-VIE subsidiaries” and net assets of the VIE entity and its subsidiaries through the VIE agreements” and the profit of the subsidiaries is presented as “Income for Non-VIE subsidiaries” and “Income for VIE and its subsidiaries” in the selected condensed consolidating statements of operations.
Selected Condensed Consolidating Financial Statements of Parent, Subsidiaries, VIE and its Subsidiaries The following tables present Selected condensed consolidating financial data of the Parent (HiTek Global Inc.), HiTek HK (HiTek Hong Kong Limited), WFOE and its subsidiaries (Tian Dahai (Xiamen) Information Technology Co.
Selected Condensed Consolidating Financial Statements of Parent, Subsidiaries, VIE entity and its Subsidiaries The following tables present Selected condensed consolidating financial data of the Parent (HiTek Global Inc.), HiTek HK (HiTek Hong Kong Limited), WFOE and its subsidiaries (Tian Dahai (Xiamen) Information Technology Co.
CIS is a universal embedded interface system used in petrochemical and coal businesses to collect industrial, electricity, facility pressure and temperature statistics and convert to readable format for analytical purposes. 39 As part of our services to large businesses, Huasheng sold hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers, cameras and monitors.
CIS is a universal embedded interface system used in petrochemical and coal businesses to collect industrial, electricity, facility pressure and temperature statistics and convert to readable format for analytical purposes. 41 As part of our services to large businesses, Huasheng sold hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers, cameras and monitors.
Remote monitoring system October 19, 2018 October 19, 2018 It is used for remote monitoring, debugging and early warning of the App. 41 Customers We rely upon several of our large customers from whom we generated substantial revenue each year, and the composition of our largest customers has changed from year to year.
Remote monitoring system October 19, 2018 October 19, 2018 It is used for remote monitoring, debugging and early warning of the App. 43 Customers We rely upon several of our large customers from whom we generated substantial revenue each year, and the composition of our largest customers has changed from year to year.
Such financial data include condensed consolidating balance sheets data as of December 31, 2023 and 2022 and the related condensed consolidating statements of operations and cash flows data for the years ended December 31, 2023, 2022 and 2021. The Parent records its investments in its subsidiaries under the equity method of accounting.
Such financial data include condensed consolidating balance sheets data as of December 31, 2024 and 2023 and the related condensed consolidating statements of operations and cash flows data for the years ended December 31, 2024, 2023 and 2022. The Parent records its investments in its subsidiaries under the equity method of accounting.
In the beginning of 2018, we established 3 joint IT research collaborative syndicates with other Internet technology companies for innovative Internet service projects such as the Tax Service Mobile APP, WeChat Cloud Charging System and Remote monitoring system.
In the beginning of 2018, we established 3 joint IT research collaborative syndicates with other Internet technology companies for innovative Internet service projects such as the Tax Service Mobile APP, WeChat Cloud Charging Syste m and Remote monitoring system.
The total net proceeds to the Company from the IPO, after deducting discounts, expense allowance, and expenses, were approximately $13,523,140. 35 On February 5, 2024, our shareholders approved the re-designation and re-classification of Ordinary Shares of the Company beneficially held by Mr. Shenping Yin, our Chairman of the Board, and his wife, Ms.
The total net proceeds to the Company from the IPO, after deducting discounts, expense allowance, and expenses, were $13,523,140. 36 On February 5, 2024, our shareholders approved the re-designation and re-classification of Ordinary Shares of the Company beneficially held by Mr. Shenping Yin, our Chairman of the Board, and his wife, Ms.
Our Business We are an information technology (“IT”) consulting and solutions service provider focusing on delivering services to business in various industry sectors in China.
Business Overview We are an information technology (“IT”) consulting and solutions service provider focusing on delivering services to business in various industry sectors in China.
Services For the year ended December 31, 2023, HiTek’s two business lines operated three revenue streams. The first business line, services to large businesses, include hardware sales, representing 53% of total revenue, and the software sales, representing 17% of total revenue; and the second business line, ACTCS devices and services, represented 30% of total revenue.
For the year ended December 31, 2023, HiTek’s two business lines operated three revenue streams. The first business line, services to large businesses, include hardware sales, representing 53.2% of total revenue, and the software sales, representing 16.6% of total revenue; and the second business line, ACTCS devices and services, represented 30.2% of total revenue.
Our Ordinary Shares started to trade on the Nasdaq Capital Market under the ticker symbol “HKIT” on March 31, 2023 and on April 4, 2023, the Company completed its IPO of 3,200,000 Ordinary Shares at a public offering price of $5.00 per share.
Our Ordinary Shares started to trade on the Nasdaq Capital Market under the ticker symbol “HKIT” on March 31, 2023 and on April 4, 2023, the Company completed its IPO of 3,200,000 Ordinary Shares at $5.00 per share.
As of December 31, 2023, we had three full-time R&D professionals. We were successful in developing 12 software products and had obtained 6 Registration of Computer Software Copyright Certificates (the “Certificates”) in 2015, 3 Certificates in 2017 and 3 Certificates in 2018. Our Certificates last indefinitely.
As of December 31, 2024, we had 2 full-time R&D professionals. We were successful in developing 12 software products and had obtained 6 Registration of Computer Software Copyright Certificates (the “Certificates”) in 2015, 3 Certificates in 2017 and 3 Certificates in 2018. Our Certificates last indefinitely.
We plan to market large scale hardware integration systems such as router for commercial use, industrial switch, server, large internet firewall etc. to large businesses in the future. Revenue generated from our hardware sales was 39% and 53%, respectively, of total revenue derived from our businesses for the years ended December 31, 2022 and 2023.
We plan to market large scale hardware integration systems such as router for commercial use, industrial switch, server, large internet firewall etc. to large businesses in the future. Revenue generated from our hardware sales was 53.2% and 57.9%, respectively, of total revenue derived from our businesses for the years ended December 31, 2023 and 2024.
Ltd. and Xiamen Haitian Weilai Technology Co., Ltd.), the VIE (Xiamen Hengda HiTek Computer Network Co., Ltd.) and its subsidiaries (Xiamen Huasheng HiTek Computer Network Co., Ltd and Huoerguosi Hengda Information Technology Co., Ltd).
Ltd. and Xiamen Haitian Weilai Technology Co., Ltd.), the VIE entity (Xiamen Hengda HiTek Computer Network Co., Ltd.) and its subsidiaries (Xiamen Huasheng HiTek Computer Network Co., Ltd and the former subsidiary, Huoerguosi Hengda Information Technology Co., Ltd).
For ACTCS devices sales, we charge one a piece-by-piece basis. Revenue generated from our ACTCS device and services was 28.0% and 30.2%, respectively, of the total revenue derived from our businesses for the fiscal years ended December 31, 2022 and 2023.
For ACTCS devices sales, we charge one a piece-by-piece basis. Revenue generated from our ACTCS device and services was 30.2% and 13.7%, respectively, of the total revenue derived from our businesses for the fiscal years ended December 31, 2023 and 2024.
LONG-TERM INVESTMENTS ROLL-FORWARD Investments in Non-VIE subsidiaries and VIE and its subsidiaries As of December 31, 2021 $ 13,515,589 Equity pick-up during the year 1,798,894 Foreign currency translation adjustment (1,015,447 ) As of December 31, 2022 14,299,036 Equity pick-up during the year 1,222,415 Deferred offering cost (569,392 ) Foreign currency translation adjustment (330,116 ) As of December 31, 2023 $ 14,621,943 38 B.
LONG-TERM INVESTMENTS ROLL-FORWARD Investments in Non-VIE subsidiaries and VIE entity and its subsidiaries As of December 31, 2021 $ 13,515,589 Equity pick-up during the year 1,798,894 Foreign currency translation adjustment (1,015,447 ) As of December 31, 2022 14,299,036 Equity pick-up during the year 1,222,415 Deferred offering cost (569,392 ) Foreign currency translation adjustment (330,116 ) As of December 31, 2023 14,621,943 Equity pick-up during the period (117,367 ) Foreign currency translation adjustment (365,976 ) As of December 31, 2024 $ 14,138,600 40 B.
Revenue generated from our software sales was 33% and 17%, respectively, of total revenue derived from our businesses for the years ended December 31, 2022 and 2023. 40 Hardware Sales We also generate revenue from our hardware sales, which includes sales of computer hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers, cameras and monitors.
Revenue generated from our software sales was 16.6% and 28.4%, respectively, of total revenue derived from our businesses for the years ended December 31, 2023 and 2024. 42 Hardware Sales We also generate revenue from our hardware sales, which includes sales of computer hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers, cameras and monitors.
For the fiscal years ended December 31, 2023, 2022 and 2021, VIE and its subsidiaries owed WFOE and its subsidiaries Consulting Fees of $1,098,946, $1,684,992 and $2,061,517 million, respectively. The Consulting Fees have not been paid since 2018, and are planned to be paid in the fiscal year 2024.
For the years ended December 31, 2024, 2023 and 2022, VIE entity and its subsidiaries owed WFOE and its subsidiaries Consulting Fees of $91,812, $1,098,946 and $1,684,992, respectively. The Consulting Fees have not been paid since 2018, and are planned to be paid in 2025.
For the year ended December 31, 2022, HiTek’s two business lines operated three revenue streams. Within the first business line, the services to large businesses, including the hardware sales, represented 39% of the total revenue, and the software sales represented 33% of total revenue. The second business line, ACTCS devices and services, represented 28% of total revenue.
Services For the year ended December 31, 2024, HiTek’s two business lines operated three revenue streams. The first business line, services to large businesses, include hardware sales, representing 57.9% of total revenue, and the software sales, representing 28.4% of total revenue; and the second business line, ACTCS devices and services, represented 13.7% of total revenue.
For the year ended December 31, 2023, one customer accounted for 18% of total HiTek’s revenues. For the year ended December 31, 2022, two customers accounted for 49% of total HiTek’s revenues, the largest of which was 36%.
For the year ended December 31, 2024, two customers accounted for 29% of total the Company’s revenues, the largest of which was 15%. For the year ended December 31, 2023, one customer accounted for 18% of total the Company’s revenues.
For the year ended December 31, 2022, four suppliers accounted for 55% of total purchases. We enter into procurement agreements in the ordinary course of business with our suppliers, pursuant to a form of supply order typically on a “deal by deal” basis.
We enter into procurement agreements in the ordinary course of business with our suppliers, pursuant to a form of supply order typically on a “deal by deal” basis.
SELECTED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2023 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Net cash (used in) provided by operating activities $ (862,825 ) $ (2,175 ) $ (94,106 ) $ 897,257 $ (63 ) $ (61,912 ) Net cash used in investing activities $ (6,270,591 ) $ - $ - $ (675,964 ) $ - $ (6,946,555 ) Net cash provided by financing activities $ 15,142,902 $ - $ - $ - $ - $ 15,142,902 For the Year Ended December 31, 2022 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Net cash (used in) provided by operating activities $ (283,149 ) $ (2,148 ) $ 47,909 $ 4,061,438 $ - $ 3,824,050 Net cash (used in) provided by investing activities $ - $ - $ - $ (7,349,231 ) $ - $ (7,349,231 ) Net cash provided by financing activities $ - $ - $ - $ 2,749,498 $ - $ 2,749,498 37 For the Year Ended December 31, 2021 Parent HiTek HK WFOE and its Subsidiaries VIE and its Subsidiaries Eliminations Consolidated Net cash (used in) provided by operating activities $ (276,777 ) $ (3,226 ) $ 69,801 $ (278,773 ) $ 274,400 $ (214,575 ) Net cash (used in) provided by investing activities $ (10,000 ) $ - $ - $ 392,254 $ 17,752 $ 400,006 Net cash provided by financing activities $ 280,300 $ 10,000 $ 7,752 $ - $ (298,052 ) $ - For the year ended December 31, 2023 and 2022, net cash provided by financing activities of HiTek Global Inc., or the “parent”, was $15,142,902 and $nil, which was mainly because that parent received fund from issuance of ordinary shares and sales collection dominated in USD on behalf of the VIE and its subsidiaries.
SELECTED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2024 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiaries Eliminations Consolidated Net cash (used in) provided by operating activities $ (954,277 ) $ (1,860 ) $ 61,397 $ 277,772 $ (71,570 ) $ (688,538 ) Net cash used in investing activities $ (8,992,364 ) $ - $ - $ (568,432 ) $ - $ (9,560,796 ) Net cash provided by financing activities $ 8,200,000 $ - $ - $ - $ - $ 8,200,000 39 For the Year Ended December 31, 2023 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiaries Eliminations Consolidated Net cash (used in) provided by operating activities $ (862,825 ) $ (2,175 ) $ (94,106 ) $ 897,257 $ (63 ) $ (61,912 ) Net cash used in investing activities $ (6,270,591 ) $ - $ - $ (675,964 ) $ - $ (6,946,555 ) Net cash provided by financing activities $ 15,142,902 $ - $ - $ - $ - $ 15,142,902 For the Year Ended December 31, 2022 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiaries Eliminations Consolidated Net cash (used in) provided by operating activities $ (283,149 ) $ (2,148 ) $ 47,909 $ 4,061,438 $ - $ 3,824,050 Net cash (used in) provided by investing activities $ - $ - $ - $ (7,349,231 ) $ - $ (7,349,231 ) Net cash provided by financing activities $ - $ - $ - $ 2,749,498 $ - $ 2,749,498 For the years ended December 31, 2024, 2023 and 2022, net cash provided by financing activities of HiTek Global Inc., or the “parent”, was $8,200,000, $15,142,902 and $nil, which was mainly because that parent received fund from private placement, issuance of ordinary shares and sales collection dominated in USD on behalf of the VIE entity and its subsidiaries.
The information contained in, or accessible from, our website or any other website does not constitute a part of this annual report. 42 C. Organizational Structure The following diagram illustrates our corporate structure as of the date of this annual report.
We maintain a corporate website at http://www.xmhitek.com/ . The information contained in, or accessible from, our website or any other website does not constitute a part of this annual report. 53 C.
Corporate Information Our principal executive offices are located at Unit 304, No. 30 Guanri Road, Siming District, Xiamen City, Fujian Province, PRC, and our phone number is +86 592-5395967. We maintain a corporate website at http://www.xmhitek.com/ .
A data processor shall, before applying for the security assessment of an outbound data transfer, conduct a self-assessment of the risks involved in the outbound data transfer. Corporate Information Our principal executive offices are located at Unit 304, No. 30 Guanri Road, Siming District, Xiamen City, Fujian Province, PRC, and our phone number is +86 592-5395967.
Suppliers Aside from a set number of suppliers from whom we purchase general hardware for our resale business, we are required by the government to purchase our ACTCS devices from specific suppliers. For the year ended December 31, 2023, one supplier accounted for 12% of total purchases.
We anticipate that our customer base will continue to expand and that in the future we will be less dependent on major customers. Suppliers Aside from a set number of suppliers from whom we purchase general hardware for our resale business, we are required by the government to purchase our ACTCS devices from specific suppliers.
Removed
While we believe that one or more of our major customers could account for a significant portion of our sales for at least the year 2022, we anticipate that our customer base will continue to expand and that in the future we will be less dependent on major customers.
Added
SELECTED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS For the Year Ended December 31, 2024 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiary Eliminations Consolidated Revenues $ - $ - $ 13,267 $ 2,891,683 $ - $ 2,904,950 Cost of revenues $ - $ - $ (25,471 ) $ (1,873,594 ) $ - $ (1,899,065 ) Loss for Non-VIE subsidiaries $ (117,367 ) $ (115,507 ) $ - $ - $ 232,874 $ - Loss for VIE and its subsidiary (1) $ - $ - $ (91,812 ) $ - $ 91,812 $ - Net loss $ (896,690 ) $ (117,367 ) $ (115,507 ) $ (91,812 ) $ 324,686 $ (896,690 ) Comprehensive loss $ (896,690 ) $ (117,367 ) $ (120,073 ) $ (453,222 ) $ 324,686 $ (1,262,666 ) For the Year Ended December 31, 2023 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiaries Eliminations Consolidated Revenues $ 36,402 $ - $ 191,738 $ 4,335,591 $ - $ 4,563,731 Cost of revenues $ - $ - $ (46,768 ) $ (2,595,723 ) $ - $ (2,642,491 ) Income for Non-VIE subsidiaries $ 1,222,415 $ 1,224,590 $ - $ - $ (2,447,005 ) $ - Income for VIE and its subsidiaries (1) $ - $ - $ 1,098,946 $ - $ (1,098,946 ) $ - Net income $ 1,047,641 $ 1,222,415 $ 1,224,590 $ 1,098,946 $ (3,545,951 ) $ 1,047,641 Comprehensive income $ 1,047,641 $ 1,222,415 $ 1,222,759 $ 770,661 $ (3,545,951 ) $ 717,525 37 For the Year Ended December 31, 2022 Parent HiTek HK WFOE and its Subsidiaries VIE entity and its Subsidiaries Eliminations Consolidated Revenues $ - $ - $ 353,836 $ 6,228,595 $ (153,823 ) $ 6,428,608 Cost of revenues $ - $ - $ (212,995 ) $ (2,832,393 ) $ 153,823 $ (2,891,565 ) Income for Non-VIE subsidiaries $ 1,798,894 $ 1,801,042 $ - $ - $ (3,599,936 ) $ - Income for VIE and its subsidiaries (1) $ - $ - $ 1,684,992 $ - $ (1,684,992 ) $ - Net income $ 1,415,745 $ 1,798,894 $ 1,801,042 $ 1,684,992 $ (5,284,928 ) $ 1,415,745 Comprehensive income $ 1,415,745 $ 1,798,894 $ 1,803,198 $ 667,389 $ (5,284,928 ) $ 400,298 Note: (1) It represents the technical consultation and service (“Consulting Fees”) income received from the VIE and its subsidiaries pursuant to the Exclusive Technical Consulting and Service (the “Agreement”).
Removed
All percentages in the following diagram reflect the voting ownership interests instead of the equity interests held by each of our shareholders given that each holder of Class B Ordinary Shares will be entitled to 15 votes per one Class B Ordinary Share and each holder of Class A Ordinary Shares will be entitled to one vote per one Class A Ordinary Share: (1) The equity of HiTek is 44.74% owned by Xiaoyang Huang, our Chief Executive Officer; 29.83% owned by Shenping Yin, our Chairman of the Board; 2.35% owned by Bo Shi, our Chief Technology Officer; 0.78% owned by Zhishuang Wang; 0.78% owned by Liuqing Huang; 3.02% owned by Jingru Li; 4.99% owned by Mian Tang; 2.0% owned by Ce Tian; 2.0% owned by Xianfeng Lin; 7.55% owned by Inner Mongolia Guangxin Investment Co., Ltd., a Chinese company of which its equity is 80% owned by Wei Cui, 10% owned by Yi Cui and 10 % owned by Lei Gao; 1.96% owned by Baotou Zhongzhe Hengtong Technology Co., Ltd., a Chinese company of which its equity is 95% owned by Jing Kong and 5% owned by Qingxia Kong.
Added
For the year ended December 31, 2024, two suppliers accounted for 40% of the total purchases made by us. For the year ended December 31, 2023, one supplier accounted for 12% of the total purchases made by us.
Added
Regulations This section sets forth a summary of the principal PRC laws and regulations relevant to our business and operations in China.
Added
Regulations on Company Establishment and Foreign Investment The PRC Company Law, which was promulgated by the SCNPC and further amended in December 1999, August 2004, October 2005, December 2013, October 2018 and December 2023, applies to the establishment, operation and management of both PRC domestic companies and foreign invested enterprises.
Added
According to the PRC Company Law, where there are otherwise provisions in the laws relating to foreign investment, such provisions shall prevail.
Added
The Foreign Investment Law of the PRC (the “FIL”), which was promulgated by the National People’s Congress (the “NPC”) on March 15, 2019, and came into effect on January 1, 2020, provides that the “foreign investment” refers to the investment activities in China carried out directly or indirectly by foreign individuals, enterprises or other organizations (the “Foreign Investors”), including the following: (1) Foreign Investors establishing foreign-invested enterprises in China alone or collectively with other investors; (2) Foreign Investors acquiring shares, equities, properties or other similar rights of Chinese domestic enterprises; (3) Foreign Investors investing in new projects in China alone or collectively with other investors; and (4) Foreign Investors investing through other ways prescribed by laws and regulations or the State Council.
Added
The FIL further adopts the management system of pre-establishment national treatment and negative list for foreign investment.
Added
The “pre-establishment national treatment” refers to granting to foreign investors and their investments, in the stage of investment access, the treatment no less favorable than that granted to domestic investors and their investments; the “negative list” refers to special administrative measures for access of foreign investment in specific fields as stipulated by the State.
Added
The FIL granted national treatment to foreign investments outside the negative list. The negative list will be released by or upon approval of the State Council.
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In December 2019, the State Council promulgated the Regulations on Implementing the Foreign Investment Law. 44 Regulation for Implementing the Foreign Investment Law of the PRC (the “Implementation Rules”) came into effect in January 2020.
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The Implementation Rules further clarified that the state shall encourage and promote foreign investment, protect the lawful rights and interests in foreign investments, regulate foreign investment administration, continue to optimize foreign investment environment, and advances a higher-level opening.
Added
Investment activities in the PRC by foreign investors were principally governed by the Special Administrative Measures (Negative List) for Access of Foreign Investment (2021 version) (the “Negative List”), and the Catalogue of Industries for Encouraging Foreign Investment (the “Encouraging List”) promulgated by the MOFCOM and the NDRC in October 2022.
Added
The Negative List, which came into effect on January 1, 2022, sets out special administrative measures (restricted or prohibited) in respect of the access of foreign investments in a centralized manner, and the Encouraging List, which came into effect on January 1, 2023, sets out the encouraged industries for foreign investment.
Added
The Negative Lists cover 12 industries, and any field not falling in the Negative Lists shall be administered under the principle of equal treatment for domestic and foreign investment. Our business as currently conducted does not fall within the confines of the Negative List and is not subject to special administrative measures.
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The Measures on Reporting of Foreign Investment Information was released by the MOFCOM and the State Administration for Market Regulation (the “SAMR”) on December 30, 2019, and became effective on January 1, 2020.
Added
Foreign investors directly or indirectly conducting investment activities within the territory of China shall submit the investment information through submission of initial reports, change reports, deregistration reports, annual reports etc. to the competent commerce authorities in accordance with The Measures on Reporting of Foreign Investment Information.
Added
When submitting an annual report, a foreign-invested enterprise shall submit the basic information on the enterprise, the information on the investors and their actual controlling party, the enterprise’s operation and asset and liabilities information etc, and where the foreign investment admission special administrative measures are involved, the foreign investment enterprise shall also submit the relevant industry licensing information.
Added
Regulations on Intellectual Property Rights Regulations on Copyright On September 7, 1990, the SCNPC promulgated the Copyright Law of the PRC, or the Copyright Law, effective on June 1, 1991 and amended on October 27, 2001, February 26, 2010, and November 11, 2020, respectively.
Added
The amended Copyright Law extends copyright protection to internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the Copyright Protection Center of China.
Added
Under the Regulations on the Protection of the Right to Network Dissemination of Information that took effect on July 1, 2006 and was amended on January 30, 2013, it is further provided that an Internet information service provider may be held liable under various situations, including that if it knows or should reasonably have known a copyright infringement through the Internet and the service provider fails to take measures to remove or block or disconnect links to the relevant content, or, although not aware of the infringement, the Internet information service provider fails to take such measures upon receipt of the copyright holder’s notice of such infringement.
Added
To further implement the Regulations on Computer Software Protection, promulgated by the State Council on December 20, 2001 and amended on January 8, 2011 and January 30, 2013, respectively, the National Copyright Administration issued the Measures for the Registration of Computer Software Copyright on February 20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights.
Added
Regulations on Trademarks According to the Trademark Law of the PRC promulgated by the SCNPC on August 23, 1982, and amended on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019 respectively, the Trademark Office of the SAIC is responsible for the registration and administration of trademarks in China.
Added
The SAIC under the State Council has established a Trademark Review and Adjudication Board for resolving trademark disputes. Registered trademarks are valid for ten years from the date the registration is approved. A registrant may apply to renew a registration within twelve months before the expiration date of the registration.
Added
If the registrant fails to apply in a timely manner, a grace period of six months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shall be deregistered. Renewed registrations are valid for another ten years.
Added
On April 29, 2014, the State Council issued the revised Regulation on the Implementation of the Trademark Law of the PRC, which specified the requirements of applying for trademark registration and renewal.
Added
According to this law, using a trademark that is identical to or similar to a registered trademark in connection with the same or similar goods without the authorization of the owner of the registered trademark constitutes an infringement of the exclusive right to use a registered trademark.
Added
The infringer shall, in accordance with the regulations, undertake to cease the infringement, take remedial action, and pay damages. 45 Regulations on Patents According to the Patent Law of the PRC, or the Patent Law, promulgated by the SCNPC on March 12, 1984 and amended on September 4, 1992, August 25, 2000, December 27, 2008, and October 17, 2020, respectively, and the Detailed Rules for the Implementation of the Patent Law of the PRC, or the Implementation Rules of the Patent Law, promulgated by the State Council on December 21, 1992, and revised on June 15, 2001, December 28, 2002 and January 9, 2010, the patent administrative department under the State Council is responsible for the administration of patent-related work nationwide.
Added
The patent administration departments of provincial or autonomous regions or municipal governments are responsible for administering patents within their respective administrative areas.
Added
The Patent Law and Implementation Rules of the Patent Law provide for three types of patents, namely “inventions,” “utility models,” and “designs.” Invention patents are valid for 20 years, while utility model patents are valid for ten years, and design patents are valid for fifteen years from the date of application.
Added
The Chinese patent system adopts a “first-come, first file” principle, which means that where more than one person files a patent application for the same invention, a patent will be granted to the person who files the application first. An invention or a utility model must possess novelty, inventiveness, and practical applicability to be patentable.
Added
Third Parties must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the unauthorized use constitutes an infringement on the patent rights.
Added
Regulations on Domain Names The Ministry of Industry and Information Technology of the PRC, or the MIIT, promulgated the Measures on Administration of Internet Domain Names, or the Domain Name Measures , on August 24, 2017, which took effect on November 1, 2017 and replaced the Measures for the Administration of Internet Domain Names of China promulgated by the MIIT on November 5, 2004.
Added
According to the Domain Name Measures, the MIIT is in charge of the administration of PRC internet domain names. The domain name registration follows a first-to-file principle. Applicants for registration of domain names shall provide true, accurate and complete information of their identities to the domain name registration service institutions.
Added
The applicant will become the holder of such domain names upon completion of the registration procedure. Regulations on M&A Rules and Overseas Listing The MOFCOM adopted the Interim Provisions on the Takeover of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was last amended on June 22, 2009.
Added
Foreign investors shall comply with the M&A Rules when they purchase equity interests in a domestic company or subscribe the increased capital of a domestic company, and thus changing the nature of the domestic company into a foreign-invested enterprise; or when the foreign investors establish a foreign-invested enterprise in China, and purchase the assets of a domestic company and operate the assets; or when the foreign investors purchase the asset of a domestic company, and establish a foreign-invested enterprise by injecting such assets and operate the assets.
Added
The M&A Rules purport, among other things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of Chinese domestic companies and controlled by Chinese companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.
Added
However, the Foreign Investment Law has partly replaced the M&A Rules in terms of its rules on equity or assets acquisition of a non-related domestic company by a foreign investor. The equity and assets acquisition of a related domestic company by a foreign investor shall still be subject to the M&A Rules.
Added
As of the date of this annual report, as advised by Jingtian & Gongcheng, our PRC counsel, based on its understanding of the current PRC laws and regulations, we will not be required to submit an application to the CSRC under the M&A Rules for the approval of the listing and trading of our shares on Nasdaq because we established our PRC VIEs by means of contractual agreements and not through a merger or acquisition of the equity or assets of a “PRC domestic company” as such term is defined under the M&A Rules.
Added
However, our PRC legal counsel has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, and its opinions summarized above are subject to any new laws, rules, regulations, or detailed implementations and interpretations in any form relating to the M&A Rules.
Added
On February 17, 2023, CSRC published the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial Measures”), which came into effect on March 31, 2023, together with five relevant guidelines (together with the Overseas Listing Trial Measures, collectively referred to as the “New Regulations on Filing”).
Added
Under New Regulations on Filing, the PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information.
Added
According to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies (the “Notice”) published by the CSRC on February 17, 2023 and effective on the same date, the domestic companies that were listed overseas before March 31, 2023 shall be deemed as existing issuer (the “Existing Issuers”).
Added
Existing Issuers are not required to go through filing immediately but shall be required to do so if they involve in re-financing and other filing matters in the future.
Added
Further, domestic companies that have obtained the approval documents issued by the CSRC for overseas offering and listing (including new issuance) by joint-stock companies may continue their overseas offering and listing during the valid term of the approval documents.
Added
If they fail to complete overseas offering and listing upon expiry of the said term, they shall go through filing as per relevant regulations.
Added
As of the date of this annual report, as advised by Jingtian & Gongcheng, our PRC counsel, as our post-effective amendment to the registration statement on Form F-1 relating to our initial public offering (“IPO”) was declared effective on March 30, 2023 and we completed our initial public offering and listing prior to September 30, 2023, we are not required to complete the filing procedures pursuant to the Trial Measures for our IPO.
Added
If in the future we are going to conduct any offering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures.
Added
In addition, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect to our listing on the Nasdaq Capital Market. 46 According to the Provisions on Strengthening Confidentiality and Archives Administration in Respect of Overseas Issuance and Listing of Securities by Domestic Enterprises , which were issued by the CSRC, Ministry of Finance of China, National Administration of State Secrets Protection, National Archives Administration of China on February 24, 2023 and came into effect on March 31, 2023, where a domestic company provides or publicly discloses to the relevant securities companies, securities service institutions, overseas regulatory authorities and other entities and individuals, or provides or publicly discloses through its overseas listing subjects, documents and materials involving state secrets and working secrets of state organs, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level.
Added
Domestic company providing accounting archives or copies thereof to entities and individuals concerned such as securities companies, securities service institutions and overseas regulatory authorities shall perform the corresponding procedures in compliance with applicable national regulations.
Added
Regulations on Employment and Social Welfare According to the Labor Law of the PRC , which was promulgated by SCNPC on July 5, 1994, became effective on January 1, 1995, and was most recently amended on December 29, 2018, an employer shall develop and improve its rules and regulations to safeguard the rights of its employees, and shall develop and improve its labor safety and health system, stringently implement national protocols and standards on labor safety and health, conduct labor safety and health education for workers, guard against labor accidents and reduce occupational hazards.
Added
The Labor Contract Law of the PRC , or the Labor Contract Law, which was promulgated on June 29, 2007 and amended on December 28, 2012, is primarily aimed at regulating the rights and obligations of employers and employees, including the establishment, performance and termination of such relationship.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

57 edited+38 added−92 removed59 unchanged
Biggest changeThe following table sets forth the assets, liabilities, results of operations and changes in cash, cash equivalents the VIE and its subsidiaries taken as a whole, which were included in the Company’s consolidated balance sheets and statements of comprehensive income and statements of cash flows with intercompany transactions eliminated: As of December 31, 2023 2022 Current assets $ 10,571,775 $ 11,276,852 Total non-current assets $ 9,641,441 $ 9,102,933 Total Assets $ 20,213,216 $ 20,379,785 Total liabilities $ 7,073,660 $ 5,329,843 Years Ended December 31, 2023 2022 2021 Revenues $ 4,335,591 $ 6,228,595 $ 6,473,638 Net income $ 1,098,947 $ 1,684,991 $ 2,061,517 Years Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 834,596 $ 4,016,852 $ (757,861 ) Net cash (used in) provided by investing activities $ (675,964 ) $ (7,349,231 ) $ 400,006 Net cash provided by financing activities $ - $ 2,749,498 $ - Revenue Recognition The Company follows ASU 2014-09, Topic 606, “Revenue from Contracts with Customers” and its related amendments (collectively referred to as “ASC 606”) for its revenue recognition accounting policy that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Biggest changeAs of December 31, 2024 2023 Total current assets $ 13,362,125 $ 10,571,775 Total non-current assets $ 7,356,012 $ 9,641,441 Total Assets $ 20,718,137 $ 20,213,216 Total Liabilities $ 6,701,376 $ 7,073,660 Years Ended December 31, 2024 2023 2022 Revenues $ 2,891,683 $ 4,335,591 $ 6,228,595 Net (loss) income $ (91,812 ) $ 1,098,947 $ 1,684,991 Years Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 277,772 $ 834,596 $ 4,016,852 Net cash used in investing activities $ (568,432 ) $ (675,964 ) $ (7,349,231 ) Net cash provided by financing activities $ - $ - $ 2,749,498 Tabular Disclosure of Contractual Obligations Below is a table setting forth all of our contractual obligations as of December 31, 2024: Payment Due by Period Less than More than Contractual Obligations Total 1 year 1 – 3 years 3 – 5 years 5 years Operating lease obligations $ - $ - $ - $ - $ - Loan Obligations Principal 2,534,490 479,498 - 2,054,992 - Interest 763,772 270,574 493,198 - - Total $ 3,298,262 $ 750,072 $ 493,198 $ 2,054,992 $ - 60 Results of Operations The following consolidated results of operations include the results of operations of the Company, its wholly owned subsidiaries and consolidated VIE entity and its subsidiaries.
The increase was due primarily to one PRC subsidiary with a preferential tax policy recording a loss in 2023, whereas it recorded a profit in 2022. Net income . As a result of the factors described above, net income was $1,047,641 for the year ended December 31, 2023, a decrease of $368,104 from $1,415,745 for 2022.
The increase was due primarily to one PRC subsidiary with a preferential tax policy recording a loss in 2023, whereas it recorded a profit in 2022. Net income . As a result of the factors described above, net income was $1,047,641 for the year ended December 31, 2023, resulting in a decrease of $368,104 from $1,415,745 for 2022.
As such, through the VIE Agreements among WFOE, HiTek and HiTek’s shareholders, we are deemed to have a controlling financial interest in, and be the primary beneficiary of, the VIE for accounting purposes only and must consolidate the VIE because it met the conditions under U.S. GAAP to consolidate the VIE.
As such, through the VIE Agreements among WFOE, HiTek and HiTek’s shareholders, we are deemed to have a controlling financial interest in, and be the primary beneficiary of, the VIE entity for accounting purposes only and must consolidate the VIE entity because it met the conditions under U.S. GAAP to consolidate the VIE entity.
General and administrative expenses were 39.9% of total revenue for the year ended December 31, 2023 and 22.9% of total revenue in 2022. 53 Net Income Increase / Percentage 2023 2022 (Decrease) Change Operating income $ 101,061 $ 1,627,210 $ (1,526,149 ) (93.8 )% Total other income 1,493,465 241,753 1,251,712 517.8 % Income before income taxes 1,594,526 1,868,963 (274,437 ) (14.7 )% Income tax expense (546,885 ) (453,218 ) (93,667 ) 20.7 % Net income $ 1,047,641 $ 1,415,745 $ (368,104 ) (26.0 )% Effective tax rate 34.3 % 24.2 % (10.1 )% Operating income .
General and administrative expenses were 39.9% of total revenue for the year ended December 31, 2023 and 22.9% of total revenue in 2022. 64 Net Income Increase / Percentage 2023 2022 (Decrease) Change Operating income $ 101,061 $ 1,627,210 $ (1,526,149 ) (93.8 )% Total other income 1,493,465 241,753 1,251,712 517.8 % Income before income taxes 1,594,526 1,868,963 (274,437 ) (14.7 )% Income tax expense (546,885 ) (453,218 ) (93,667 ) 20.7 % Net income $ 1,047,641 $ 1,415,745 $ (368,104 ) (26.0 )% Effective tax rate 34.3 % 24.2 % (10.1 )% Operating income .
These limitations on the free flow of funds between us and our subsidiaries in China and VIEs could restrict our ability to act in response to changing market conditions and reallocate funds internally in a timely manner. 46 Dividend Distributions We intend to keep any future earnings to re-invest in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.
These limitations on the free flow of funds between us and our subsidiaries in China and VIEs could restrict our ability to act in response to changing market conditions and reallocate funds internally in a timely manner. 57 Dividend Distributions We intend to keep any future earnings to re-invest in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.
Cost of revenues decreased to $2,642,491 for the year ended December 31, 2023 from $2,891,565 for 2022, a decrease of $249,074 or 8.6%.
Cost of revenues decreased to $2,642,491 for the year ended December 31, 2023 from $2,891,565 for 2022, reflecting a decrease of $249,074 or 8.6%.
We are also unaware of any known trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material adverse effect on our revenues, net income, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.
We are also unaware of any known trends, uncertainties, demands, commitments or events for the year ended December 31, 2024 that are reasonably likely to have a material adverse effect on our revenues, net income, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.
The Company assesses collectability by reviewing receivables on a collective basis where similar characteristics exist, primarily based on the size and nature of specific customers’ receivables.
Assumptions: The Company assesses collectability by reviewing receivables on a collective basis where similar characteristics exist, primarily based on the size and nature of specific customers’ receivables.
The strategy purpose of establishing the new subsidiary is for the integration of tax invoicing management services from Hitek to Haitian Weilai. 45 As part of the services to large businesses, HiTek currently sells Communication Interface System (“CIS”), its self-developed software which provides embedded system interface solutions for large businesses.
The strategy purpose of establishing the new subsidiary is for the integration of tax invoicing management services from Hitek to Haitian Weilai. 56 As part of the services to large businesses, HiTek currently sells Communication Interface System (“CIS”), its self-developed software which provides embedded system interface solutions for large businesses.
In order for us to pay dividends to our shareholders, we will rely on payments made from HiTek to WFOE, pursuant to VIE Agreements between them, and the distribution of such payments to HiTek HK as dividends from WFOE. Certain payments from our HiTek to WFOE are subject to PRC taxes, including business taxes and VAT.
For us to pay dividends to our shareholders, we will rely on payments made from Hitek to WFOE, pursuant to VIE Agreements between them, and the distribution of such payments to Hitek HK as dividends from WFOE. Certain payments from our Hitek to WFOE are subject to PRC taxes, including business taxes and VAT.
Tax devices and service sales decreased due to new policies from January 2021 that new taxpayers in Xiamen could get free tax Ukeys from the Tax authorization. We expect the tax devices and service sales will be affected in the future.
Tax devices and service sales decreased due to new policies from January 2021 that new taxpayers in Xiamen could get free tax Ukeys from the Tax authorities. We expect the tax devices and service sales will be affected in the future.
The hardware sales increase was mainly due to the increase in sales to large customers. CIS software sales consist of software sales and services. CIS software sales decreased mainly due to the decrease of software sales to large customers, for these large customers reduced their procurement.
The hardware sales increase was mainly due to the increase in sales to large customers. CIS software sales consist of software sales and services. CIS software sales decreased mainly due to the decrease of software sales to large customers, because these large customers reduced their procurement.
For the year ended December 31, 2023, HiTek’s two business lines operated three revenue streams. The first business line, services to large businesses, including hardware sales, representing 53% of total revenue, and the software sales, representing 17% of total revenue; and the second business line, ACTCS devices and services, represented 30% of total revenue.
For the year ended December 31, 2023, HiTek’s two business lines operated three revenue streams. The first business line, services to large businesses, including hardware sales, was 53% of total revenue, and the software sales, was 17% of total revenue; and the second business line, ACTCS devices and services, was 30% of total revenue.
To date, we have financed our operations primarily through cash flows from operations, third-party loans and stock offering. With the uncertainty of the current market, our management believes it is necessary to enhance the collection of outstanding accounts receivable and other receivables, and to be cautious on operational decisions and project selection.
To date, we have financed our operations primarily through cash flows from operations, third-party loans, stock offering and private placement. With the current market, our management believes it is necessary to enhance collection of outstanding accounts and other receivables, and be cautious on operational decisions and project selection.
We have a dedicated team of three highly skilled in-house IT specialists, which includes three full-time IT professionals responsible for controlling the direction of outsourced R&D projects. Among all the software we have developed, CIS is the only software product we are currently marketing and generated revenue. Trend information.
We have a dedicated team of three highly skilled full-time in-house IT specialists, who are responsible for controlling the direction of outsourced R&D projects. Among all the software we have developed, CIS is the only software product we are currently marketing and generating revenue. Trend information.
GTD is an ACTCS hardware necessary for normal operation of ACTCS software. The purchase of GTD is allowed only in conjunction with the use of the ACTCS software and its supporting services. Currently, there are three ACTCS services providers for Xiamen business companies, and we are one of them.
GTD is an ACTCS hardware necessary for normal operation of ACTCS software. The purchase of GTD is allowed only in conjunction with the use of the ACTCS software and its supporting services. Currently, there are three ACTCS services providers for Xiamen business companies, including us.
However, the VIE agreements have not been tested in a court of law, and the VIE structure cannot completely replicate a foreign investment in China-based companies, as the investors will not and may never hold equity interests in the Chinese operating entities. Instead, the VIE structure provides contractual exposure to foreign investment in us.
However, the VIE agreements have not been tested in a court of law, and the VIE structure cannot completely replicate a foreign investment in China-based companies, as the investors will not and may never hold equity interests in the Chinese operating entities.
The Company expects to expand tax control system risk investigation service for SMEs and also increase orders for software and hardware sales from major customers in 2024. 52 Cost and Margin Increase / Percentage 2023 2022 (Decrease) Change Total revenues $ 4,563,731 $ 6,428,608 $ (1,864,877 ) (29.0 )% Cost of revenues 2,642,491 2,891,565 (249,074 ) (8.6 )% Gross profit $ 1,921,240 $ 3,537,043 $ (1,615,803 ) (45.7 )% Margin % 42.1 % 55.0 % (12.9 )% Cost of revenue is comprised of (i) the direct cost of our hardware products purchased from third parties; (ii) logistics-related costs, which primarily include product packaging and freight-in charges; (iii) third-party royalties paid related to the Golden Tax Disk (“GTD”), an Anti-Counterfeiting Tax Control System (“ACTCS”) tax device; (iv) compensation for the employees who handle the products and perform Tax invoicing management services and other costs that are necessary for us to provide the services to our customers; and (v) outsourcing costs, which primarily include software outsourcing service cost to the third parties.
The decrease was due primarily to the Company’s decreased software sales to large customers for their slow repayment. 63 Cost and Gross Margin Increase / Percentage 2023 2022 (Decrease) Change Total revenues $ 4,563,731 $ 6,428,608 $ (1,864,877 ) (29.0 )% Cost of revenues 2,642,491 2,891,565 (249,074 ) (8.6 )% Gross profit $ 1,921,240 $ 3,537,043 $ (1,615,803 ) (45.7 )% Gross Margin % 42.1 % 55.0 % (12.9 )% Cost of revenue comprised of (i) the direct cost of our hardware products purchased from third parties; (ii) logistics-related costs, which primarily include product packaging and freight-in charges; (iii) third-party royalties paid related to the Golden Tax Disk (“GTD”), an Anti-Counterfeiting Tax Control System (“ACTCS”) tax device; (iv) compensation for the employees who handle the products and perform Tax invoicing management services and other costs that are necessary for us to provide the services to our customers; and (v) outsourcing costs, which primarily include software outsourcing service cost to the third parties.
For the year ended December 31, 2022, HiTek’s two business lines operated three revenue streams. The first business line, services to large businesses, including hardware sales, represented 39% of total revenue, and the software sales, represented 33% of total revenue, and the second business line, ACTCS devices and services, represented 28% of total revenue.
For the year ended December 31, 2024, HiTek’s two business lines operated three revenue streams. The first business line, services to large businesses, including hardware sales, was 58% of total revenue, and the software sales, was 28% of total revenue; and the second business line, ACTCS devices and services, was 14% of total revenue.
The Company reviews accounts receivable on a periodic basis and records credit losses when there is doubt as to the collectability of balances. Our management is confident in collecting account receivables and other receivables. The accounts receivable, net and the accounts receivable from related party, net balance was $2,118,738 and nil as of December 31, 2023, respectively.
The Company reviews accounts receivable on a periodic basis and records credit losses when there is doubt as to the collectability of balances. Our management is confident in collecting accounts and other receivables. The current accounts receivable, net was $1,385,761 and $2,118,738 as of December 31, 2024 and 2023, respectively.
We base our estimates and judgment on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. 60
Our significant accounting policies are disclosed in Note 2 to our CFS. We base our estimates and judgment on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
Furthermore, we did not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity as of the end of fiscal year 2024.
In recent years, the Chinese tax regulators have been rolling out the electronic invoicing system. Holding Company Structure Overview We are a holding company with no material operations of our own. We conduct substantially all of our business in China through contractual arrangements with Xiamen Hengda HiTek Computer Network Co., Ltd., the VIE, and its subsidiaries.
Holding Company Structure Overview We are a holding company with no material operations. We conduct substantially all of our business in China through contractual arrangements with Xiamen Hengda HiTek Computer Network Co., Ltd., the VIE, and its subsidiaries.
We believe our current cash and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months. Capital Resources and Capital Needs .
In addition, in June 2024, the Company received $8.2 million from the private placement. We believe our current cash and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months. 65 Capital Resources and Capital Needs .
Moreover, we do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. 57 Cash Flows Analysis (a) Operating Activities (1) Net cash used in operating activities was $61,912 for the year ended December 31, 2023, while net cash provided by operating activities was $3,824,050 for the year ended December 31, 2022 .
Moreover, we did not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development (“R&D”) services with us as of December 31, 2024. 66 Cash Flows Analysis Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 (a) Operating Activities Net cash used in operating activities was $688,538 for the year ended December 31, 2024.
As a holding company with no material operations, our operations were conducted in China by our subsidiaries and through VIE Agreements, with HiTek and its subsidiaries. Neither we nor our subsidiaries own any equity interests in the VIE. The VIE Agreements are designed so that the operations of the VIE are solely for the benefit of the Company.
Overview We are an offshore holding company incorporated in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by our subsidiaries and through VIE Agreements, with HiTek and its subsidiary. Neither we nor our subsidiaries own any equity interests in the VIE entity.
Our total revenues for the year ended December 31, 2023 were $4,563,731, a decrease of $1,864,877 or 29.0% from $6,428,608 for the year ended December 31, 2022. The decrease was due primarily to the Company’s decreased software sales to large customers for their slow repayment.
Our total revenues for the year ended December 31, 2023 were $4,563,731, reflecting a decrease of $1,864,877 or 29.0% from $6,428,608 for the year ended December 31, 2022.
Liquidity and Capital Resources Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Our principal sources of liquidity come from cash generated from operating activities, equity financing and loans. As of December 31, 2023 and 2022, we had cash of $9,311,537 and $1,203,160, respectively. Working Capital .
Liquidity and Capital Resources Our principal sources of liquidity come from cash generated from operating activities, equity financing and loans. As of December 31, 2024 and 2023, we had cash of $7,236,798 and $9,311,537, respectively. Working Capital . Working capital as of December 31, 2024 was $31,572,809 compared to $21,413,847 as of December 31, 2023.
We intend to fund these planned expenditures with our operating cash flow and our cash balance, as well as net proceeds received from our initial public offering in April 2023. 56 The Company engages an external vendor to develop software APP.
We intend to fund these planned expenditures with our operating cash flow and our cash balance, as well as net proceeds received from our initial public offering in April 2023 and private placement in July 2024.
In 2023, the Company signed a software upgrade and development contract (for internal use) (Interface System), which obligated the software company to perform certain specific software upgrade and development activities from May to September 2023. The development is finished and will be accepted by the Company in April 2024.
In 2023, the Company signed a software upgrade and development contract (Interface System), which obligated the software company to perform certain software upgrade and development activities from May to September 2023. The development is finished and was accepted by the Company in March 2024. The Company capitalized $608,653 as intangible assets.
As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. HiTek HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to HiTek HK.
As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority.
As of December 31, 2023, 2022, and 2021, $1,041,909, $843,705 and $1,486,311 of cash was denominated in RMB, respectively.
As of December 31, 2024 and 2023, $726,512 and $1,041,909 of cash was denominated in RMB, respectively.
Results of Operations The following consolidated results of operations include the results of operations of the Company, its wholly owned subsidiary and consolidated VIEs. Our historical reporting results are not necessarily indicative of the results to be expected for any future period.
Our historical reporting results are not necessarily indicative of the results to be expected for any future period.
The Company expects to continue to focus on projects with high gross profit such as services for SMEs, and at the same time, increase the hardware and software sales of large customers.
As revenue generated from tax invoicing management services with higher profit margin decreased with the decreases in tax devices sales, it reduced overall profit margin. The Company expects to focus on projects with high gross profit, such as services for SMEs and software sales, and at the same time, increase the hardware sales to large customers.
See “Business — Contractual Agreements between WFOE and HiTek” for a summary of these VIE arrangements. As of December 31, 2023, the VIE and its subsidiaries (the “VIEs”) accounted for 57% and 100% of the Company’s total assets and total liabilities, respectively.
As of December 31, 2024, the VIE entity and its subsidiaries (the “VIEs”) accounted for 46% and 100% of the Company’s total assets and total liabilities, respectively. As of December 31, 2023, the “VIEs” accounted for 57% and 100% of the Company’s total assets and total liabilities, respectively.
For the year ended December 31, 2023, we had $15,142,902 cash inflow from insurance of Ordinary Shares.
For the year ended December 31, 2023, we had $15,142,902 cash inflow from insurance of Ordinary Shares. For the year ended December 31, 2022, we had $2,749,498 cash inflow from borrowing from third parties. 68 Research and Development, Patents and Licenses, etc.
Selling expenses consist primarily of shipping and handling costs for products sold and advertisement and marketing expenses for promotion of our products. Selling expenses increased by 471.7% or $360,708 to $437,185 in the year ended December 31, 2022 from $76,477 in 2021.
Selling expenses consist primarily of shipping and handling costs for products sold and advertising and marketing expenses for the promotion of our products. Selling expenses increased by 164.8% or $1,068 to $1,716 for the year ended December 31, 2024 from $648 in 2023.
The accounts receivable, net balance was $nil and $64,478 as of December 31, 2022 and 2021, respectively. For small and medium customers, the Company gives six months credit period. The accounts receivable, net balance was $1,077,923 and $218,621 as of December 31, 2022 and 2021, respectively. Off-Balance Sheet Arrangements .
For IT outsourcing customers, the Company gives an eighteen (18) months credit period. The accounts receivable, net balance was $nil as of December 31, 2024. For small and medium customers, the Company gives a six (6) months credit period. The accounts receivable, net balance was $274,303 as of December 31, 2024. Off-Balance Sheet Arrangements .
The increase was mainly due to an increase in the current portion of short-term investments of $4,547,097, loan receivable of $2,595,132, and prepaid expenses and other current assets of $257,994, which was offset by a decrease in accounts receivable of $1,551,945, inventories of $211,165 and advance to suppliers of $143,603.
The increase was mainly due to an increase in the current portion of short-term investments of $14,095,095, and prepaid expenses and other current assets of $1,153,378, which was offset by a decrease in loans receivable of $2,649,293, accounts receivable of $732,977, advance to suppliers of $326,851 and inventories of $65,034.
Operating income was $1,627,210 for the year ended December 31, 2022, compared to $2,103,534 for 2021. The decrease in operating income in 2022 was primary due to the decrease in gross profit. Other income . Other income includes government subsidy income, net investment income (loss), and interest income and expenses.
Operating loss was $1,747,144 for the year ended December 31, 2024, compared to operating income of $101,061 for 2023. The decrease in operating income in 2024 was primarily due to the decrease in revenue and increase in general and administrative expenses. Other income . Other income includes government subsidy income, net investment income (loss), and interest income and expenses.
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes to those statements included in this annual report. In addition to historical financial information, this discussion may contain forward-looking statements reflecting our current plans, estimates, beliefs and expectations that involve risks and uncertainties.
Item 5. Operating and Financial Review and Prospects 54 The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes to those statements included in this annual report.
As a result of the factors described above, net income was $1,415,745 for the year ended December 31, 2022, a decrease of $253,612 from net income $1,669,357 for 2021.
As a result of the factors described above, net loss was $896,690 for the year ended December 31, 2024, a decrease of $1,944,331 from net income of $1,047,641 for 2023.
General and administrative expenses consist primarily of costs in salary and welfare expenses for our general administrative and management staff, facilities costs, depreciation expenses, professional fees, accounting fees, and other miscellaneous expenses incurred in connection with general operations. General and administrative expenses decreased in 13.4% or $227,286 to $1,472,648 for the year ended December 31, 2022 from $1,699,934 in 2021.
General and administrative expenses consist primarily of salary and welfare for our general administrative and management staff, facilities costs, depreciation expenses, professional fees, accounting fees, directors and officers’ liability insurance, and other miscellaneous expenses incurred in connection with general operations.
The Company gives customers different credit periods, depending on the scale of the customer and past credit experience. For large customers such as large-scale oil and coal mine customers, the Company gives a two-year credit period from March 2019 because of these customers’ long repayment cycle.
For large customers such as large-scale oil and coal mine customers, the Company gives a two-year credit period from March 2019 because of these customers’ long repayment cycle. Net balance of the accounts receivable was $3,338,547 as of December 31, 2024, of which $1.0 million was collected as of April 25, 2025.
The Company expects to expand tax control system risk investigation service for SMEs and also increase orders for software and hardware sales from major customers in 2023. 54 Cost and Margin Increase / Percentage 2022 2021 (Decrease) Change Total revenues $ 6,428,608 $ 6,461,163 $ (32,555 ) (0.5 )% Cost of revenues 2,891,565 2,581,218 310,347 12.0 % Gross profit 3,537,043 3,879,945 (342,902 ) (8.8 )% Margin % 55.0 % 60.1 % (5.1 )% Cost of revenue is comprised of (i) the direct cost of our hardware products purchased from third parties; (ii) logistics-related costs, which primarily include product packaging and freight-in charges; (iii) third-party royalties paid related to the GTD (iv) compensation for the employees who handle the products and perform Tax invoicing management services and other costs that are necessary for us to provide the services to our customers; and (v) outsourcing costs, which primarily include software outsourcing service cost to the third parties.
Cost of Revenues and Gross Margin Increase / Percentage 2024 2023 (Decrease) Change Total revenues $ 2,904,950 $ 4,563,731 $ (1,658,781 ) (36.3 )% Cost of revenues 1,899,065 2,642,491 (743,426 ) (28.1 )% Gross profit $ 1,005,885 $ 1,921,240 $ (915,355 ) (47.6 )% Gross Margin % 34.6 % 42.1 % (7.5 )% 61 Cost of revenue is comprised of (i) the direct cost of our hardware products purchased from third parties; (ii) logistics-related costs, which primarily include product packaging and freight-in charges; (iii) third-party royalties paid to the Golden Tax Devices (“GTD”) (iv) compensation for employees who handle the products and perform Tax invoicing management services and other costs that are necessary for us to provide the services to our customers; and (v) outsourcing costs, which primarily include software outsourcing service cost to third parties.
See “Business — Contractual Arrangements between WFOE and HiTek” for a summary of these VIE Agreements. 44 We are an IT consulting and solutions service provider focusing on delivering services to business in various industry sectors in China.
Instead, the VIE structure provides contractual exposure to foreign investment in us. 55 We are an IT consulting and solutions service provider focusing on delivering services to business in various industry sectors in China.
See “Risk Factors — Risks Relating to Doing Business in the PRC” for more information, including the risk factors titled “Our contractual arrangements with HiTek and its shareholders may not be effective in providing control over HiTek” and “Because we conduct our business through HiTek, a VIE, if we fail to comply with applicable law, we could be subject to severe penalties and our business could be adversely affected.” In addition, any transfer of funds from us to any of our subsidiaries in China or VIEs, either as a shareholder loan or as an increase in registered capital, is subject to certain statutory limit requirements and registration or approval of the relevant PRC governmental authorities, including the relevant administration of foreign exchange and/or the relevant examining and approval authority.
In addition, any transfer of funds from us to any of our subsidiaries in China or VIEs, either as a shareholder loan or as an increase in registered capital, is subject to certain statutory limit requirements and registration or approval of the relevant PRC governmental authorities, including the relevant administration of foreign exchange and/or the relevant examining and approval authority.
The increase of $7,749,237 in net cash used in investing activities for the year ended December 31, 2022 was mainly due to (1) an increase of $5,142,402 in loans lent to third parties, (2) an increase of $1,705,453 in redemption of held-to-maturity investments, (3) an increase of $691,751 in purchase of held-to-maturity investments, (4) an increase of $117,596 in recovery of third-party loans and (5) an increase of $92,035 in advance payment for software development.
The net cash used in investing activities for the year ended December 31, 2024 was primarily attributable to (1) $290,488 in advance payment for software development; (2) $2,899,088 in loans to third parties; (3) $5,338,780 in repayment from third-party loans; (4) $18,200,000 in purchases of held-to-maturity investments; (5) $7,500,000 in redemption of held-to-maturity Investments; and (6) $1,010,000 in deposit for acquisition.
Income tax expense was $453,218 for the year ended December 31, 2022, compared to $542,853 for 2021. The decrease in income tax expense was due primarily to the decrease in gross profit. Effective tax rate . Effective tax rate was 24.2% for the year ended December 31, 2022, compared to 24.5% for 2021. Net income .
Income tax expense was $39,747 for the year ended December 31, 2024, compared to $546,885 for 2023. The decrease in income tax expense was due primarily to the pre-tax loss in year 2024. Net (loss) income .
Item 5. Operating and Financial Review and Prospects A. Operating Results The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes. 43 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This annual report contains certain statements that may be deemed “forward-looking statements” within the meaning of U.S. of America securities laws.
Risk Factors” and elsewhere in this annual report. our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements. A. Operating Results The following discussion and analysis should be read in conjunction with our consolidated financial statements (“CFS”) and the related notes.
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders’ equity, or that are not reflected in our financial statements.
As of December 31, 2024, we did not enter into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
Tax Devices and service sales were decreased due to the new policies carried from January 2021 that the new taxpayers in Xiamen could get free tax Ukeys from the Tax authorization. We expect the tax devices and service sales will be affected in the future.
We expect our tax devices and service sales will continue to be negatively affected in the future.
Our gross profit as a percentage of revenue decreased to 55.0% for the year ended December 31, 2022 from 60.1% for 2021.
Our gross profit as a percentage of revenue decreased to 34.6% for the year ended December 31, 2024 from 42.1% for 2023. The decrease in profit margin was mainly due to the change in revenue mix, with fewer revenues being generated in 2024 from tax devices and services sales.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue Increase / Percentage 2022 2021 (Decrease) Change Hardware $ 2,504,426 $ 2,434,694 $ 69,732 2.9 % CIS Software 2,120,532 2,056,106 64,426 3.1 % Tax devices and service 1,803,650 1,970,363 (166,713 ) (8.5 )% Total revenues $ 6,428,608 $ 6,461,163 $ (32,555 ) (0.5 )% We have the following three streams - hardware retail and wholesale, software sales, and ACTCS sales and services.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Revenues Increase / Percentage 2024 2023 (Decrease) Change Hardware $ 1,683,155 $ 2,428,592 $ (745,437 ) (30.7 )% Tax devices and service 398,048 1,376,323 (978,275 ) (71.1 )% CIS software 823,747 758,816 64,931 8.6 % Total revenues $ 2,904,950 $ 4,563,731 $ (1,658,781 ) (36.3 )% We have the following three revenue streams – hardware sales, CIS software sales, and tax devices and services sales.
Moreover, we do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. 59 Cash Flows Analysis (a) Operating Activities (1) Net cash provided by operating activities was $3,824,050 for the year ended December 31, 2022, while, net cash used in operating activities was $214,575 for the year ended December 31, 2021.
The net cash provided by financing activities for the year ended December 31, 2024 was attributable to a private placement. 67 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 (a) Operating Activities (1) Net cash used in operating activities was $61,912 for the year ended December 31, 2023, while net cash provided by operating activities was $3,824,050 for the year ended December 31, 2022.
Current liabilities were $4,203,695 as of December 31, 2022, compared to $2,788,504 as of December 31, 2021. This increase of liabilities was attributable mainly to an increase in accounts payable of $177,995, deferred revenue of $192,524, loan payable of $506,578 and tax payable of $372,175. Capital Resources and Capital Needs .
Current liabilities were $2,613,369 as of December 31, 2024, compared to $3,372,752 as of December 31, 2023. This decrease in liabilities was attributable mainly to a decrease in accounts payable of $276,180, taxes payable of $237,171 and deferred revenue of $111,040, which was offset by an increase in accrued expenses and other current liabilities of $124,440.
The Hardware sales slightly increase was mainly from small retail sales. The Software sales consist of software sales and software services. The sales of software slightly increased was due to increase of maintenance service revenue.
CIS software sales consist of software sales and services. The increase in CIS software sales was due mainly to launch of updated CIS software since March 2024. And we expect it will keep increase in the future.
Removed
All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate and similar expressions or future conditional verbs such as will, should, would, could or may occur in the future are forward-looking statements.
Added
In addition to historical financial information, this discussion may contain forward-looking statements reflecting our current plans, estimates, beliefs and expectations that involve risks and uncertainties. As a result of many important factors, including those we describe under “Item 3. Key Information — D.
Removed
Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.
Added
The VIE Agreements are designed so that the operations of the VIE entity are solely for the benefit of the Company.
Removed
These statements include, without limitation, statements about our anticipated expenditures, including those related to general and administrative expenses; the potential size of the market for our services, future development and/or expansion of our services in our markets, our ability to generate revenues, our ability to obtain regulatory clearance and expectations as to our future financial performance.
Added
HiTek HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to HiTek HK. 58 Risks in relation to the VIE structure It is possible the Company’s operations and businesses through its VIE could be found by PRC authorities to violate PRC law and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses.
Removed
Our actual results will likely differ, perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including: our need and ability to raise additional cash.
Added
While the Company’s management considers the possibility of such a finding by PRC regulatory authorities under current law and regulations to be remote, on January 19, 2015, the Ministry of Commerce of the PRC, or (the “MOFCOM”) released on its Website for public comment a proposed PRC law (the “Draft FIE Law”) that appears to include VIEs within the scope of entities that could be considered foreign invested companies (or “FIEs”) that would be subject to restrictions under existing PRC law on foreign investment in certain categories of industry.
Removed
The forward-looking statements included in this annual report are subject to a number of additional material risks and uncertainties, including but not limited to the risks described in our filings with the SEC.
Added
Specifically, the Draft FIE Law introduces the concept of “actual control” for determining whether an entity is considered to be an FIE.
Removed
As a result of many important factors, our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements. Overview We are an offshore holding company incorporated in the Cayman Islands.
Added
In addition to control through direct or indirect ownership or equity, the Draft FIE Law includes control through contractual arrangements within the definition of “actual control.” If the Draft FIE Law is passed by the People’s Congress of the PRC and goes into effect in its current form, these provisions regarding control through contractual arrangements could be construed to reach the Company’s VIE arrangements, and as a result, the Company’s VIE could become subject to the current restrictions on foreign investment in certain categories of industry.
Removed
As of December 31, 2022, the VIEs accounted for 96% and 98% of our total assets and total liabilities, respectively. As of December 31, 2021, the VIEs accounted for 93% and 100% of our total assets and total liabilities, respectively. As of December 31, 2023, 2022, and 2021, $1,041,909, $843,705 and $1,486,311 of cash was denominated in RMB, respectively.
Added
If a finding were made by PRC authorities, under existing law and regulations or under the Draft FIE Law if it becomes effective, about the Company’s operation of certain of its operations and businesses through its VIEs, regulatory authorities with jurisdiction over the licensing and operation of such operations and businesses would have broad discretion in dealing with such a violation, including levying fines, confiscating the Company’s income, revoking the business or operating licenses of the affected businesses, requiring the Company to restructure its ownership structure or operations, or requiring the Company to discontinue all or any portion of its operations.
Removed
See “Risk Factors - There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.” 47 Risks in relation to the VIE structure The VIE structure through contractual arrangements has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China.
Added
Any of these actions could cause significant disruption to the Company’s business operations and have a severe adverse impact on the Company’s cash flows, financial position and operating performance.
Removed
The MOFCOM published a discussion draft of the proposed PRC Foreign Investment Law (“FIL”) in January 2015, or the 2015 Draft FIL, according to which, variable interest entities that are controlled via contractual arrangements would also be deemed as foreign-invested entities, if they are ultimately “controlled” by foreign investors.
Added
In addition, it is possible the contracts among WFOE, HiTek and HiTek’s shareholders would not be enforceable in China if PRC government authorities or courts found that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons.
Removed
In March 2019, the PRC National People’s Congress promulgated the PRC FIL, and in December 2019, the State Council promulgated the Implementing Rules of PRC FIL, or the Implementing Rules, to further clarify and elaborate the relevant provisions of the PRC FIL.
Added
If the Company was unable to enforce these contractual arrangements, the Company would not be able to exert effective control over the VIEs. Consequently, the VIEs’ results of operations, assets and liabilities would not be included in the Company’s CFS. If such were the case, the Company’s cash flows, financial position, and operating performance would be materially adversely affected.
Removed
The PRC FIL and the Implementing Rules both became effective from January 1, 2020 and replaced the major previous laws and regulations governing foreign investments in the PRC.
Added
The Company’s contractual arrangements WFOE, HiTek and HiTek’s shareholders are approved and in place. Management believes such contracts are enforceable, and considers the possibility remote that PRC regulatory authorities with jurisdiction over the Company’s operations and contractual relationships would find the contracts to be unenforceable.
Removed
Pursuant to the PRC FIL, “foreign investments” refer to investment activities conducted by foreign investors (including foreign natural persons, foreign companies or other foreign organizations) directly or indirectly in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested companies in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of companies within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

15 edited+33 added−5 removed38 unchanged
Biggest changeVenick satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act. Our board also determined that Mr. Wang qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules.
Biggest changeOur audit committee consists of Mr. Weijun Wang, Mr. Shuiqing Huang and Mr. Lawrence Venick. Mr. Weijun Wang is the chairman of our audit committee. We determined that Mr. Wang, Mr. Huang and Mr. Venick satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act.
Compensation Committee. Our compensation committee consists of Mr. Weijun Wang, Mr. Shuiqing Huang and Mr. Lawrence Venick. Mr. Huang is the chairman of our compensation committee. We have determined that Mr. Wang, Mr. Huang and Mr. Venick satisfy the “independence” requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act.
Compensation Committee. Our compensation committee consists of Mr. Weijun Wang, Mr. Shuiqing Huang and Mr. Lawrence Venick. Mr. Huang is the chairman of our compensation committee. We determined that Mr. Wang, Mr. Huang and Mr. Venick satisfy the “independence” requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act.
The nominating and corporate governance committee is responsible for, among other things: ● identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy; 64 ● reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us; ● identifying and recommending to our BOD to serve as members of committees; ● advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
The nominating and corporate governance committee is responsible for, among other things: ● identifying and recommending nominees for election or re-election to our BOD or for appointment to fill any vacancy; 73 ● reviewing annually with our BOD its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us; ● identifying and recommending to our BOD to serve as members of committees; ● advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our BOD on all matters of corporate governance and on any corrective action to be taken; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
Shi graduated from Wuhan University of Technology (formerly known as “Wuhan Automotive University”) in July 1996, with a bachelor’s degree in Computer Science and Application. 61 Weijun Wang Mr. Weijun Wang has served as the vice general manager of Shanghai UDH Technologies Co., Ltd since May 2022.
Shi graduated from Wuhan University of Technology (formerly known as “Wuhan Automotive University”) in July 1996, with a bachelor’s degree in Computer Science and Application. 70 Weijun Wang Mr. Weijun Wang has served as the vice general manager of Shanghai UDH Technologies Co., Ltd since May 2022.
Holders of Class B Ordinary Shares are entitled to 15 votes per one Class B Ordinary Share. (1) These Class B Ordinary Shares are deemed as beneficially owned by Shenping Yin and Xiaoyang Huang as they are husband and wife. (2) These Class B Ordinary Shares are held by Fortune Enterprise Holdings Limited, a British Virgin Islands company. Since Mr.
Holders of Class B Ordinary Shares are entitled to 15 votes per one Class B Ordinary Share. (1) These Class B Ordinary Shares are deemed as beneficially owned by Shenping Yin and Xiaoyang Huang as they are husband and wife. (2) These Class B Ordinary Shares are held by Fortune Enterprise Holdings Limited, a British Virgin Islands (“BVI”) company.
Directors and Senior Management Our directors and executive officers are as follows: Name Age Position(s) Shenping Yin 54 Chairman of the Board Xiaoyang Huang 55 Chief Executive Officer and Director Tianyu Xia 34 Chief Financial Officer Bo Shi 50 Chief Technology Officer Weijun Wang 52 Independent Director Shuiqing Huang 59 Independent Director Lawrence Venick 51 Independent Director Below is a summary of the business experience of each of our executive officers and directors: Shenping Yin Mr.
Directors and Senior Management Our directors and executive officers are as follows: Name Age Position(s) Shenping Yin 55 Chairman of the Board Xiaoyang Huang 56 Chief Executive Officer and Director Tianyu Xia 35 Chief Financial Officer Bo Shi 51 Chief Technology Officer Weijun Wang 53 Independent Director Shuiqing Huang 60 Independent Director Lawrence Venick 52 Independent Director Below is a summary of the business experience of each of our executive officers and directors: Shenping Yin Mr.
Share ownership The following table sets forth information regarding the beneficial of our Class A Ordinary Shares and Class B Ordinary Shares as of the date of this annual report for: ● each person known by us to be the beneficial owner of more than 5% of our outstanding Class A Ordinary Shares or Class B Ordinary Shares; ● each of our executive officers and directors; and ● all our executive officers and directors as a group.
Share ownership The following table sets forth information regarding the beneficial of our Class A Ordinary Shares and Class B Ordinary Shares as of April 21, 2025 for: ● each person known by us to be the beneficial owner of more than 5% of our outstanding Class A Ordinary Shares or Class B Ordinary Shares; ● each of our executive officers and directors; and ● all our executive officers and directors as a group.
Other than as disclosed above, we have not entered into any agreements or arrangements with our executive officers or directors, and have not made any agreements to provide benefits upon termination of employment. 63 C.
Other than as disclosed above, we have not entered into any agreements or arrangements with our executive officers or directors, and have not made any agreements to provide benefits upon termination of employment. 72 C. Board Practices Board of Directors Our Board of Directors (“BOD”) consists of five directors.
Board Practices Committees of the Board of Directors We have three committees under the BOD: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Even though we are exempted from corporate governance standards because we are a Foreign Private Issuer (“FPI”), we have voluntarily adopted a charter for each of the three committees.
We have three committees under the BOD: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Even though we are exempted from corporate governance standards because we are a Foreign Private Issuer (“FPI”), we have voluntarily adopted a charter for each of the three committees. Each committee’s members and functions are described below. Audit Committee .
The following table sets forth the numbers of our employees categorized by function as of December 31, 2023: Function: Management Department (HiTek) 7 Financial Department (HiTek) 5 Technical Service Department (HiTek) 9 Sales Training Department (HiTek) 4 Hotline Service Department (HiTek) 5 Research and Development Department (HiTek) 4 Operation and Maintenance Department (HiTek) 1 Financial Department (Huasheng) 1 Technical Service Department (Huasheng) 1 Management Department (Huoerguosi) 3 Operation and Maintenance Department (Huoerguosi) 1 Technical Service Department (weilai) 5 Financial Department (weilai) 2 Total 48 65 As of December 31, 2023, our employees were located in Xiamen , Fujian province and Huoerguosi, Xinjiang, China.
The following table sets forth the numbers of our employees categorized by function as of December 31, 2024: Function: Management Department (HiTek) 8 Financial Department (HiTek) 6 Technical Service Department (HiTek) 2 Sales Training Department (HiTek) 5 Hotline Service Department (HiTek) 3 Research and Development Department (HiTek) 4 Operation and Maintenance Department (HiTek) 1 Technical Service Department (weilai) 1 Total 30 74 As of December 31, 2024, our employees were located in Xiamen , Fujian province and Huoerguosi, Xinjiang, China.
Compensation Executive Compensation The following table shows compensation earned by our executive officers in the fiscal years ended December 31, 2023 and 2022: Summary Compensation Table Name and Principal Position Year Salary ($) Bonus ($) Share Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation Deferred Compensation Earnings Other Total ($) Xiaoyang Huang, 2022 12,484 56,476 - - - - - 68,960 Chief Executive Officer 2023 102,335 10,145 - - - - - 112,480 Bo Shi, 2022 28,706 29,724 58,430 Chief Technology Officer 2023 26,779 5,072 - - - - - 31,851 Tianyu Xia, 2022 53,504 - - - - - - 53,504 Chief Financial Officer 2023 65,481 - - - - - - 65,481 62 Grants of Plan Based Awards None.
Compensation Executive Compensation The following table shows compensation earned by our executive officers in the years ended December 31, 2024 and 2023: Summary Compensation Table Name and Principal Position Year Salary ($) Bonus ($) Share Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation Deferred Compensation Earnings Other Total ($) Xiaoyang Huang, 2024 168,358 50,000 - - - - - 218,358 Chief Executive Officer 2023 102,335 10,145 - - - - - 112,480 Bo Shi, 2024 26,701 - - - - - - 26,701 Chief Technology Officer 2023 26,779 5,072 - - - - - 31,851 Tianyu Xia, 2024 80,000 20,000 - - - - - 100,000 Chief Financial Officer 2023 65,481 - - - - - - 65,481 71 Grants of Plan Based Awards None.
Percentage of beneficial ownership of each listed person is based on 6,200,364 Class A Ordinary Shares outstanding and 8,192,000 Class B Ordinary Shares outstanding as of the date of this annual report.
Percentage of beneficial ownership of each listed person is based on 21,107,364 Class A Ordinary Shares outstanding, and 8,192,000 Class B Ordinary Shares outstanding as of April 21, 2025.
Class A Number Class B Number Percent of Class A Percentage of Class B Percent of Total Voting Power* Directors And Executive Officers: Shenping Yin — 8,192,000 (1)(2) — 100 % 95.20 % Xiaoyang Huang — 8,192,000 (1)(2) — 100 % 95.20 % Tianyu Xia — — — — — Bo Shi 431,000 (3) — 6.95 % — 0.33 % Weijun Wang — — — — — Shuiqing Huang — — — — — Lawrence Venick — — — — — Directors and Executive Officers as a group (7 individuals): 431,000 8,192,000 6.95 % 100 % 95.53 % 5% Shareholders: Fortune Enterprise Holdings Limited — 8,192,000 (1)(2) — 100 % 95.20 % Bo Shi 431,000 (3) — 6.95 % — 0.33 % * Holders of Class A Ordinary Shares are entitled to one vote per one Class A Ordinary Share.
Class A Number Class B Number Percent of Class A Percentage of Class B Percent of Total Voting Power* Directors And Executive Officers: Shenping Yin — 8,192,000 (1)(2) — 100 % 85.34 % Xiaoyang Huang — 8,192,000 (1)(2) — 100 % 85.34 % Tianyu Xia — — — — — Bo Shi — — — — — Weijun Wang — — — — — Shuiqing Huang — — — — — Lawrence Venick — — — — — Directors and Executive Officers as a group (7 individuals): — 8,192,000 — 100 % 85.34 % 5% Shareholders: Fortune Enterprise Holdings Limited — 8,192,000 (1)(2) — 100 % 85.34 % Apex Management Limited (3) 4,000,000 17.31 % 2.73 % Canaan International Ltd.
Compensation Recovery Policy We have a compensation recovery policy to provide for the recovery of erroneously-awarded incentive compensation, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, final SEC rules, and applicable listing standards. D. Employees We had 48, 60 and 66 employees as of December 31, 2023, 2022 and 2021, respectively.
Family Relationships Shenping Yin, our Chairman of the Board, and Xiaoyang Huang, our Chief Executive Officer and Director, are husband and wife. Compensation Recovery Policy We have a compensation recovery policy to provide for the recovery of erroneously-awarded incentive compensation, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, final SEC rules, and applicable listing standards. D.
The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Our board also determined that Mr. Wang qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Removed
Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Mr. Weijun Wang, Mr. Shuiqing Huang and Mr. Lawrence Venick. Mr. Weijun Wang is the chairman of our audit committee. We have determined that Mr. Wang, Mr. Huang and Mr.
Added
A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested.
Removed
Board Diversity The table below provides certain information regarding the diversity of our BOD as of the date of this annual report.
Added
The directors may exercise all the powers of the Company to borrow money, mortgage its business, property and uncalled capital and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party. Committees of the Board of Directors.
Removed
Board Diversity Matrix Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 5 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 4 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 Family Relationships None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
Added
Employees We had 30, 48, and 60 employees as of December 31, 2024, 2023, and 2022, respectively.
Removed
Yin and Ms. Huang are the shareholders and directors of Fortune Enterprise Holdings Limited, they are deemed as the beneficial owners of these securities. (3) Represents 431,000 Class A Ordinary Shares held by Star Discover Global Limited, a British Virgin Islands company which Bo Shi owns and controls 60% equity interest and voting power. 66 F.
Added
(4) 3.636,000 15.86 % 2.49 % Gold ray Ventures Limited (5) 4,000,000 17.31 % 2.73 % Rapid Proceed Limited (6) 3,436,000 14.98 % 2.35 % HK Red Sun Co., Limited (7) 1,818,000 7.93 % 1.24 % Grand Bright International Holdings Limited (8) 2,180,000 9.36 % 1.49 % Fairview Eastern International Holdings Limited (9) 2,000,000 8.65 % 1.36 % Yong Lin (10) 1,237,000 5.53 % 0.85 % * Holders of Class A Ordinary Shares are entitled to one vote per one Class A Ordinary Share.
Removed
Disclosure of A Registrant’s Action to Recover Erroneously Awarded Compensation None.
Added
Since Mr. Yin and Ms. Huang are the shareholders and directors of Fortune Enterprise Holdings Limited, they are deemed as the beneficial owners of these securities. 75 (3) Based on Schedule 13G that was filed with the SEC on January 10, 2025.
Added
On July 29, 2024, Apex Management Limited, a BVI company, purchased 2,000,000 shares of Class A Ordinary Shares and warrants to purchase 2,000,000 additional shares of Class A Ordinary Shares in a private placement. The total beneficial ownership reflected above includes both the Class A Ordinary Shares purchased and 2,000,000 Class A Ordinary Shares underlying the warrants.
Added
The percentage ownership referenced above above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by Apex Management Limited.
Added
Li Jian Hui, as Chief Executive Officer and Director of Apex Management Limited, may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) the Issuer's securities described herein. Li Jian Hui disclaims beneficial ownership of these securities for all other purposes.
Added
(4) Based on Schedule 13G that was filed with the SEC on January 10, 2025. On July 29, 2024, Canaan International Ltd., a Cayman Island company, purchased 1,818,000 shares of Class A Ordinary Shares and warrants to purchase 1,818,000 additional shares of Class A Ordinary Shares in a private placement.
Added
The total beneficial ownership reflected above includes both the Class A Ordinary Shares purchased and 1,818,000 Class A Ordinary Shares underlying the warrants. The percentage ownership referenced above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by Canaan International Ltd.
Added
Yuanqiu Gao, as Director of Canaan International Ltd., may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) the securities described herein. Yuanqiu Gao disclaims beneficial ownership of these securities for all other purposes (5) Based on Schedule 13G that was filed with the SEC on January 15, 2025.
Added
On July 29, 2024, Gold Ray Ventures Limited, a BVI company, purchased 2,000,000 shares of Class A Ordinary Shares and warrants to purchase 2,000,000 additional shares of Class A Ordinary Shares in a private placement. The total beneficial ownership reflected above includes both the Class A Ordinary Shares purchased and 2,000,000 Class A Ordinary Shares underlying the warrants.
Added
The percentage ownership referenced above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by Gold Ray Ventures Limited.
Added
Lin Li, as Director of Gold Ray Ventures Limited, may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) the Issuer's securities described herein. Lin Li disclaims beneficial ownership of these securities for all other purposes.
Added
(6) Based on Schedule 13G that was filed with the SEC on January 10, 2025. On July 29, 2024, Rapid Proceed Limited, a BVI company, purchased 1,818,000 shares of Class A Ordinary Shares and warrants to purchase 1,818,000 additional shares of Class A Ordinary Shares in a private placement.
Added
The total beneficial ownership reflected above includes both 1,618,000 Class A Ordinary Shares held by Rapid Proceed Limited as of April 21, 2025, and 1,818,000 Class A Ordinary Shares underlying the warrants.
Added
The percentage ownership referenced above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by Rapid Proceed Limited.
Added
Huoyuan Chen, as Chairman and Director of Rapid Proceed Limited, may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) the Issuer's securities described herein. Huan Liu disclaims beneficial ownership of these securities for all other purposes. .
Added
(7) Based on Schedule 13G that was filed with the SEC on January 15, 2025. On July 29, 2024, HK Red Sun Co., Limited, an Hong Kong company, purchased 1,818,000 shares of Class A Ordinary Shares and warrants to purchase 1,818,000 additional shares of Class A Ordinary Shares in a private placement.
Added
The total beneficial ownership reflected above includes 1,818,000 Class A Ordinary Shares underlying the warrants as HK Red Sun Co., is not holding any Ordinary Shares as of April 21, 2025.
Added
The percentage ownership referenced above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by HK Red Sun Co., Limited.
Added
Hongfei Wang, as Director of HK Red Sun Co., Limited, may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) the securities described herein. Huan Liu disclaims beneficial ownership of these securities for all other purposes.
Added
(7) Based on Schedule 13G that was filed with the SEC on January 10, 2025. On July 29, 2024, Grand Bright International Holdings Limited, a BVI company, purchased 2,180,000 shares of Class A Ordinary Shares and warrants to purchase 2,180,000 additional shares of Class A Ordinary Shares in a private placement.
Added
The total beneficial ownership reflected above includes 2,180,000 Class A Ordinary Shares underlying the warrants as Grand Bright International Holdings Limited is not holding any Ordinary Shares as of April 21, 2025.
Added
The percentage ownership referenced above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by Grand Bright International Holdings Limited.
Added
Ying Chang Yuan, as Director of Grand Bright International Holdings Limited, may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) the Issuer's securities described herein. Li Jian Hui disclaims beneficial ownership of these securities for all other purposes.
Added
(9) Based on Schedule 13G that was filed with the SEC on January 10, 2025. On July 29, 2024, Fairview Eastern International Holdings Limited, a BVI company, purchased 2,000,000 shares of Class A Ordinary Shares and warrants to purchase 2,000,000 additional shares of Class A Ordinary Shares in a private placement.
Added
The total beneficial ownership reflected above includes 2,000,000 Class A Ordinary Shares underlying the warrants as Fairview Eastern International Holdings Limited is not holding any Ordinary Shares as of April 21, 2025.
Added
The percentage ownership referenced above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by Fairview Eastern International Holdings Limited.
Added
Hongfei Huan Liu, as Director of Fairview Eastern International Holdings Limited, may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) the Issuer's securities described herein. Huan Liu disclaims beneficial ownership of these securities for all other purposes.
Added
(10) Based on Schedule 13G that was filed with the SEC on January 10, 2025. On July 29, 2024, Yong Lin purchased 1,237,000 shares of Class A Ordinary Shares and warrants to purchase 1,237,000 additional shares of Class A Ordinary Shares in a private placement.
Added
The total beneficial ownership reflected above includes 1,237,000 Class A Ordinary Shares underlying the warrants as Yong Lin is not holding any Ordinary Shares as of April 21, 2025.
Added
The percentage ownership referenced above is based upon the 21,107,364 Class A ordinary shares issued and outstanding and assumes full exercise of the warrants that are exercisable by Yong Lin. 76 F. Disclosure of A Registrant’s Action to Recover Erroneously Awarded Compensation None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

0 edited+1 added−3 removed3 unchanged
Removed
For a description of these contractual arrangements, see “Business — Our History and Corporate Structure”. B. Related Party Transactions Advances from Related Parties As of December 31, 2022, Company had outstanding advances owed to Fengqi (Beijing) Zhineng Technology Co., Ltd., 3.04% owned by HiTek’s Chairman Mr. Shenping Yin, of $598. The advances are due on demand and non-interest bearing.
Added
For a description of these contractual arrangements, see “Business — Our History and Corporate Structure”. Employment Agreements See “Item 6.B — Compensation — Employment Agreements”. C. Interests of experts and counsel. Not applicable. 77
Removed
As of December 31, 2023, it was repaid by the Company. Accounts receivables from related parties As of December 31, 2022, accounts receivable from Beijing Zhongzhe Yuantong Technology Co., Ltd. was $399,465. As of December 31, 2023, it was collected by the Company.
Removed
Cost of revenues from related parties The Company purchased from Fengqi (Beijing) Zhineng Technology Co., Ltd., 3.04% owned by HiTek’s Chairman Mr. Shenping Yin, in hardware of $8,480, $11,830 and $52,961 for the fiscal years ended December 31, 2023, 2022 and 2021. Employment Agreements See “Item 6.B — Compensation — Employment Agreements”. C. Interests of experts and counsel.

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