Document And Entity Information
Document And Entity Information | 12 Months Ended |
Dec. 31, 2022 shares | |
Document Information Line Items | |
Entity Registrant Name | HITEK GLOBAL INC. |
Trading Symbol | HKIT |
Document Type | 20-F |
Current Fiscal Year End Date | --12-31 |
Entity Common Stock, Shares Outstanding | 10,987,679 |
Amendment Flag | false |
Entity Central Index Key | 0001742341 |
Entity Current Reporting Status | Yes |
Entity Voluntary Filers | No |
Entity Filer Category | Non-accelerated Filer |
Entity Well-known Seasoned Issuer | No |
Document Period End Date | Dec. 31, 2022 |
Document Fiscal Year Focus | 2022 |
Document Fiscal Period Focus | FY |
Entity Emerging Growth Company | true |
Entity Shell Company | false |
Entity Ex Transition Period | false |
ICFR Auditor Attestation Flag | false |
Document Registration Statement | false |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Entity File Number | 001-39339 |
Entity Incorporation, State or Country Code | E9 |
Entity Address, Address Line One | Unit 304 |
Entity Address, Address Line Two | No. 30 Guanri Road |
Entity Address, Address Line Three | Siming District |
Entity Address, City or Town | Xiamen City, Fujian Province |
Entity Address, Country | CN |
Title of 12(b) Security | Ordinary shares, par value US$0.0001 per share |
Security Exchange Name | NASDAQ |
Entity Interactive Data Current | Yes |
Document Accounting Standard | U.S. GAAP |
Auditor Firm ID | 1195 |
Auditor Name | UHY LLP |
Auditor Location | New York, New York |
Entity Address, Postal Zip Code | 361008 |
Business Contact | |
Document Information Line Items | |
Entity Address, Address Line One | Unit 304 |
Entity Address, Address Line Two | No. 30 Guanri Road |
Entity Address, Address Line Three | Siming District |
Entity Address, City or Town | Xiaoyang Huang |
Entity Address, Country | CN |
City Area Code | +86 592 |
Local Phone Number | 5395967 |
Contact Personnel Name | Xiamen City, Fujian Province |
Entity Address, Postal Zip Code | 361008 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | |
Current assets | |||
Cash | $ 1,203,160 | $ 2,091,308 | |
Short-term investments | 4,290,348 | 5,197,015 | |
Accounts receivable, net | 3,271,218 | 2,357,114 | |
Accounts receivable - related party, net | 399,465 | 414,639 | |
Advances to suppliers, net | 481,769 | 1,110,923 | |
Inventories, net | 430,670 | 409,021 | |
Deferred offering cost | 917,446 | 1,026,567 | |
Loan receivable | 1,013,157 | 204,441 | |
Prepaid expenses and other current assets | 94,925 | 156,111 | |
Total current assets | 12,102,158 | 12,967,139 | |
Non-current assets | |||
Non-current accounts receivable | 4,209,546 | 3,134,361 | |
Non-current accounts receivable - related party | 548,395 | ||
Non-current advance to a third party | 421,679 | 333,717 | |
Non-current loan receivable | 4,342,100 | ||
Property, equipment and software, net | 122,967 | 156,761 | |
Operating lease right-of-use assets | 6,641 | ||
Total non-current assets | 9,102,933 | 4,173,234 | |
Total Assets | 21,205,091 | 17,140,373 | |
Current liabilities | |||
Accounts payable | 696,734 | 518,739 | |
Loan payable | 506,578 | ||
Deferred revenue | 977,054 | 784,530 | |
Taxes payable | 1,671,322 | 1,299,147 | |
Due to related parties | 598 | 4,163 | |
Accrued expenses and other current liabilities | 348,167 | 181,925 | |
Operating lease liabilities | 3,242 | ||
Total current liabilities | 4,203,695 | 2,788,504 | |
Non-current Liabilities | |||
Loan payable, non-current | 2,171,050 | ||
Deferred income tax liabilities, non-current | 1,300,421 | 1,225,641 | |
Operating lease liabilities, non-current | 3,399 | ||
Total non-current liabilities | 3,474,870 | 1,225,641 | |
Total Liabilities | 7,678,565 | 4,014,145 | |
Commitments and Contingencies | |||
Shareholders’ Equity | |||
Ordinary Shares*, par value $0.0001 per share, 490,000,000 shares authorized; 10,987,679 shares issued and outstanding | [1] | 1,099 | 1,099 |
Additional paid-in capital | 2,628,356 | 2,628,356 | |
Statutory reserve | 836,215 | 767,207 | |
Retained earnings | 10,340,107 | 8,993,370 | |
Accumulated other comprehensive (loss) income | (279,251) | 736,196 | |
Total Shareholders’ Equity | 13,526,526 | 13,126,228 | |
Total Liabilities and Shareholders’ Equity | $ 21,205,091 | $ 17,140,373 | |
[1] Retrospectively restated for effect of Reverse Split. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Ordinary shares, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Ordinary shares, authorized | 490,000,000 | 490,000,000 |
Ordinary shares, issued | 10,987,679 | 10,987,679 |
Ordinary shares, outstanding | 10,987,679 | 10,987,679 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Income Statement [Abstract] | |||
Revenues | $ 6,428,608 | $ 6,461,163 | $ 5,804,727 |
Cost of revenues | (2,891,565) | (2,581,218) | (2,633,455) |
Gross profit | 3,537,043 | 3,879,945 | 3,171,272 |
Operating expenses: | |||
General and administrative | 1,472,648 | 1,699,934 | 1,415,484 |
Selling | 437,185 | 76,477 | 2,012 |
Total operating expenses | 1,909,833 | 1,776,411 | 1,417,496 |
Operating income | 1,627,210 | 2,103,534 | 1,753,776 |
Other income (expense) | |||
Government subsidies | 9,838 | 6,883 | 101,965 |
Net investment (loss) income | (19,363) | 103,375 | 99,574 |
Financial income (expense), net | 250,172 | (2,190) | 2,607 |
Other, net | 1,106 | 608 | 179 |
Total other income | 241,753 | 108,676 | 204,325 |
Net Income before provision for income taxes | 1,868,963 | 2,212,210 | 1,958,101 |
Income tax expense | 453,218 | 542,853 | 269,242 |
Net income | 1,415,745 | 1,669,357 | 1,688,859 |
Comprehensive income | |||
Net income | 1,415,745 | 1,669,357 | 1,688,859 |
Foreign currency translation (loss) gain | (1,015,447) | 290,407 | 521,914 |
Comprehensive income | $ 400,298 | $ 1,959,764 | $ 2,210,773 |
Earnings per ordinary share | |||
Earnings per ordinary share basic (in Dollars per share) | $ 0.13 | $ 0.15 | $ 0.15 |
Weighted average number of ordinary shares outstanding | |||
Weighted average number of ordinary shares outstanding basic (in Shares) | 10,987,679 | 10,987,679 | 10,987,679 |
Consolidated Statements of Op_2
Consolidated Statements of Operations and Comprehensive Income (Parentheticals) - $ / shares | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Income Statement [Abstract] | |||
Earnings per ordinary share diluted | $ 0.13 | $ 0.15 | $ 0.15 |
Weighted average number of ordinary shares outstanding diluted | 10,987,679 | 10,987,679 | 10,987,679 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders’ Equity - USD ($) | Ordinary Shares | Additional paid-in capital | Statutory reserve | Retained Earnings | Accumulated other comprehensive (loss) income | Total | ||
Balance at Dec. 31, 2019 | $ 1,099 | [1] | $ 2,628,356 | $ 664,747 | $ 5,737,614 | $ (76,125) | $ 8,955,691 | |
Balance (in Shares) at Dec. 31, 2019 | [1] | 10,987,679 | ||||||
Foreign currency translation adjustment | 521,914 | 521,914 | ||||||
Net income | 1,688,859 | 1,688,859 | ||||||
Appropriation of Statutory reserve | 48,990 | (48,990) | ||||||
Balance at Dec. 31, 2020 | $ 1,099 | [1] | 2,628,356 | 713,737 | 7,377,483 | 445,789 | 11,166,464 | |
Balance (in Shares) at Dec. 31, 2020 | [1] | 10,987,679 | ||||||
Foreign currency translation adjustment | 290,407 | 290,407 | ||||||
Net income | 1,669,357 | 1,669,357 | ||||||
Appropriation of Statutory reserve | 53,470 | (53,470) | ||||||
Balance at Dec. 31, 2021 | $ 1,099 | [1] | 2,628,356 | 767,207 | 8,993,370 | 736,196 | 13,126,228 | |
Balance (in Shares) at Dec. 31, 2021 | [1] | 10,987,679 | ||||||
Foreign currency translation adjustment | (1,015,447) | (1,015,447) | ||||||
Net income | 1,415,745 | 1,415,745 | ||||||
Appropriation of Statutory reserve | 69,008 | (69,008) | ||||||
Balance at Dec. 31, 2022 | $ 1,099 | [1] | $ 2,628,356 | $ 836,215 | $ 10,340,107 | $ (279,251) | $ 13,526,526 | |
Balance (in Shares) at Dec. 31, 2022 | [1] | 10,987,679 | ||||||
[1] Retrospectively restated for effect of Reverse Split. |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Operating Activities | |||
Net income | $ 1,415,745 | $ 1,669,357 | $ 1,688,859 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||
Depreciation and amortization | 21,881 | 355,738 | 378,594 |
Loss on disposal of property, plant and equipment | 94 | ||
Interest income | (21,699) | (6,525) | (6,522) |
Net investment loss (gain) | 19,363 | (103,375) | (99,574) |
(Reversal of) doubtful accounts of receivables and advances to suppliers | (6,442) | (123,754) | (33,519) |
(Reversal of) provision for obsolete inventories | 2,217 | (5,317) | 6,783 |
Deferred income tax | 177,029 | 340,624 | 242,296 |
Changes in operating assets and liabilities: | |||
Short-term investment –trading securities | 2,418,675 | (2,625,216) | (174,379) |
Accounts receivable | (2,490,725) | (1,100,056) | 934,525 |
Accounts receivable - related party | 499,933 | 578,157 | 186,223 |
Advances to suppliers | 560,352 | (184,369) | (848,649) |
Deferred offering cost | 60,000 | 155,915 | (335,898) |
Inventory | (57,899) | (276,672) | 397,603 |
Prepaid expenses and other current assets | 89,583 | 769,913 | (673,019) |
Due from related party | 708 | ||
Accounts payable | 225,198 | 127,422 | 172,025 |
Deferred revenue | 261,856 | 12,089 | (58,463) |
Taxes payable | 488,419 | 327,807 | 159,464 |
Due to related parties | (3,320) | 1,062 | 2,843 |
Accrued expenses and other current liabilities | 163,884 | (127,375) | (7,144) |
Net cash provided by (used in) operating activities | 3,824,050 | (214,575) | 1,932,850 |
Investing Activities | |||
Advance payment for software development | (117,617) | (25,582) | (285,346) |
Loans to third parties | (5,498,997) | (356,595) | (144,925) |
Repayment from third-party loans | 199,463 | 317,059 | |
Purchases of held-to-maturity investments | (1,932,080) | (1,240,329) | (2,463,732) |
Redemption of held-to-maturity Investments | 1,705,453 | 2,028,956 | |
Net cash (used in) provided by investing activities | (7,349,231) | 400,006 | (865,047) |
Financing activities: | |||
Borrowing from third parties | 2,749,498 | ||
Net cash provided by financing activities | 2,749,498 | ||
Effect of exchange rate changes on cash and equivalents | (112,465) | 44,323 | 17,531 |
Net (decrease) increase in cash | (888,148) | 229,754 | 1,085,334 |
Cash and equivalents at beginning of year | 2,091,308 | 1,861,554 | 776,220 |
Cash and equivalents at end of year | 1,203,160 | 2,091,308 | 1,861,554 |
Supplemental disclosures of cash flow information: | |||
Cash paid for income taxes | 45,002 | 32,646 | $ 26,300 |
Non-cash transactions: | |||
Operating right-of-use assets recognized for related operating lease liabilities | $ 6,820 |
Nature of Operations
Nature of Operations | 12 Months Ended |
Dec. 31, 2022 | |
Nature of Operations [Abstract] | |
NATURE OF OPERATIONS | NOTE 1 – NATURE OF OPERATIONS HiTek Global Inc. (the “Company”) was incorporated under the laws of the Cayman Islands on November 3, 2017 in anticipation of an initial public offering. The Company through its variable interest entity (“VIE”) and VIE’s subsidiaries provide hardware sales, software sales, Information Technology (“IT”) maintenance services and tax devices and services in the People’s Republic of China (the “PRC”). The Company issued 10,987,679 ordinary shares to Fortune Enterprise Holdings Limited, an entity 100% owned by Shenping Yin, and eight other shareholders on November 3, 2017 and December 16, 2017. Of the 10,987,679 ordinary shares, 74.55% was owned by Fortune Enterprise Holdings Limited. On November 20, 2017, the Company formed its wholly-owned subsidiary, HiTek Hong Kong Limited (“HiTek HK”) in Hong Kong. On March 15, 2018, HiTek HK formed its wholly-owned subsidiary, Tian Dahai (Xiamen) Information Technology Co. Ltd. (“WFOE”) in PRC. Xiamen Hengda HiTek Computer Network Co., Ltd. (“HiTek”), was established in January 1996 by Shenping Yin, Xiaoyang Huang (the spouse of Shenping Yin) and nine other shareholders, who held 29.83%, 44.74% and 25.43% of its equity interests, respectively, in Xiamen, Fujian Province, PRC pursuant to PRC laws. The Company entered into a series of contractual arrangements with HiTek which were effective in March 2018, and its equity holders through WFOE to obtain control and became the primary beneficiary of HiTek for accounting purpose. In September 1999, Xiamen Huasheng HiTek Computer Network Co., Ltd (“Huasheng”), a wholly owned subsidiary of HiTek was incorporated under the laws of the PRC. In September 2017, Huoerguosi Hengda Information Technology Co., Ltd (“Huoerguosi”), a wholly owned subsidiary of HiTek was established in XinJiang Province, PRC. In April 2021, Xiamen Haitian Weilai Technology Co., Ltd. (“Haitian Weilai”), a wholly owned subsidiary of WFOE was incorporated under the laws of the PRC. As all the above mentioned companies presented were under common control, the series of contractual arrangements between the Company and HiTek in March 2018 constituted a reorganization under common control and were required to be retrospectively applied to the consolidated financial statements (“CFS”) at their historical amounts. The CFS are prepared as if the existing corporate structure had been in existence throughout all periods. This includes a retrospective presentation for all equity related disclosures, including share and per share, which have been revised to reflect the effects of the reorganization. |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Information The accounting and financial reporting policies of the Company conform to generally accepted accounting principles (“GAAP”) in the United States and the preparation of the CFS is in conformity with GAAP which requires management to make estimates and assumptions that affect reported amounts and disclosures. Reclassification Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. According to the significance thresholds, the previously issued Consolidated Balance Sheet as of December 31, 2021 was reclassified certain amount of prepaid expenses and other current assets into loan receivable. These reclassifications had no effect on the reported results of operations. The item was reclassified as follows. Previously reported December 31, 2021 (Decrease)/ Increase December 31, 2021 (Reclassified) Consolidated Balance Sheets Current assets: Loan receivable $ - $ 204,441 $ 204,441 Prepaid expenses and other current assets $ 360,552 $ (204,441 ) $ 156,111 Principles of Consolidation The accompanying consolidated financial statements include financial information related to the Company and its wholly-owned subsidiaries and those variable interest entities (“VIEs”) where the Company is the primary beneficiary. In preparing the CFS, all significant inter-company accounts and transactions were eliminated. Assets held in an agency or fiduciary capacity are not included in the CFS. VIE Agreements with HiTek Due to PRC legal restrictions of foreign ownership in certain sectors, neither we nor our subsidiaries own any equity interest in HiTek. Instead, WFOE, HiTek and HiTek’s shareholders entered into a series of contractual arrangements (“VIE Agreements”) on March 31, 2018, which have not been tested in a court of law. The VIE Agreements by and among WFOE, HiTek, and HiTek’s shareholders include (i) certain power of attorney agreements and equity interest pledge agreement, which provide WFOE effective control over HiTek; (ii) an exclusive technical consulting and service agreement which allows WFOE to receive substantially all of the economic benefits from HiTek; and (iii) certain exclusive equity interest purchase agreements which provide WFOE with an exclusive option to purchase all or part of the equity interests in and/or assets of HiTek when and to the extent permitted by PRC laws. Accordingly, the Company is considered the primary beneficiary of VIE for accounting purpose and has consolidated the VIE and the VIE’s subsidiaries’ assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements. Each of the VIE Agreements is described in detail below: Exclusive Technical Consulting and Service Agreement Pursuant to the Exclusive Technical Consulting and Service Agreement between HiTek and WFOE, WFOE provides HiTek with technical support, consulting services and other management services relating to its day-to-day business operations and management, on an exclusive basis. The Exclusive Technical Consulting and Service Agreement has come into effect as of March 31, 2018. For services rendered to HiTek by WFOE under this agreement, WFOE is entitled to collect a service fee that shall be paid per quarter of 100% of HiTek’s quarterly profit. The term of the Exclusive Technical Consulting and Service Agreement is ten years unless it is terminated by WFOE with 30-day prior notice. Equity Interest Pledge Agreement WFOE, HiTek and HiTek shareholders entered into an Equity Interest Pledge Agreement, pursuant to which HiTek shareholders pledged all of their equity interests in HiTek to WFOE in order to guarantee the performance of HiTek’s obligations under the Exclusive Technical Consulting and Service Agreement as described above. The Equity Interest Pledge Agreement has come into effect as of March 31, 2018. During the term of the pledge, WFOE is entitled to receive any dividends declared on the pledged equity interests of HiTek. The Equity Interest Pledge Agreement ends when all contractual obligations under the Exclusive Technical Consulting and Service Agreement have been fully performed. Exclusive Equity Interests Purchase Agreement Under the Exclusive Equity Interests Purchase Agreement, the HiTek Shareholders granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, part or all of their equity interests in HiTek. The option price is equal to the capital paid in by the HiTek Shareholders subject to any appraisal or restrictions required by applicable PRC laws and regulations. The Exclusive Equity Interests Purchase Agreement remains effective for a term of ten years and may be renewed at WFOE’s election. Power of Attorney Each shareholder of the HiTek has executed an irrevocable power of attorney in favor of WFOE. Pursuant to this power of attorney, the WFOE has full power and authority to exercise all of such shareholders’ rights with respect to their equity interest in the VIE Companies, including HiTek, Huasheng and Huoerguosi. The power of attorney will remain in force for so long as the shareholder remains a shareholder of HiTek. During the years ended December 31, 2022, 2021 and 2020, there were no transactions in HiTek Global Inc. and HiTek HK besides minimal capital transactions and professional fee payments. As of December 31, 2022, our VIEs accounted for 96% and 98% of our total assets and total liabilities, respectively. As of December 31, 2021, our VIEs accounted for 93% and 100% of our total assets and total liabilities, respectively. As of December 31, 2022 and 2021, $955,941 and $1,557,325 of cash and equivalents were denominated in RMB, respectively. Use of Estimates and Assumptions The preparation of the CFS in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the CFS and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s CFS include allowance for doubtful accounts, inventory obsolescence, deferred taxes, and the useful lives of property and equipment. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Fair Values of Financial Instruments The U.S. GAAP accounting standards regarding FV (“FV”) of financial instruments and related FV measurements define FV, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring FV. The three levels of inputs are defined as follows: Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to the valuation methodology are unobservable. ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at FV (FV option). The FV option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the FV option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the FV option to any outstanding instruments. The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, accounts receivable – related party, advances to suppliers, deferred offering costs, prepaid expenses and other, accounts payable and accrued liabilities, income taxes payable, VAT and other taxes payable, and due to related parties approximate their FV based on the short-term maturity of these instruments. The Company’s investments measured at FV on a recurring basis consist of trading securities and held-to-maturity debt securities. The valuation for the Level 1 position is based on quoted prices in active markets. The following table presents information about our assets and liabilities that are measured at FV on a recurring basis as of December 31, 2022 and 2021 and indicates the FV hierarchy of the valuation techniques we utilized to determine such FV. The valuation techniques are based on the FV measurement on a recurring basis of trading securities and held-to-maturity debt securities. Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2022 (Level 1) (Level 2) (Level 3) Trading securities $ 2,408,772 $ 2,408,772 $ - $ - Held-to-maturity debt securities 1,881,576 1,881,576 - - Total $ 4,290,348 $ 4,290,348 $ - $ - Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2021 (Level 1) (Level 2) (Level 3) Trading securities $ 5,197,015 $ 188,208 $ 5,008,807 $ - Total $ 5,197,015 $ 188,208 $ 5,008,807 $ - Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted-average number of ordinary shares and dilutive potential ordinary shares outstanding during the period. For the years ended December 31, 2022, 2021 and 2020, there were no other contracts to issue ordinary shares, such as options, warrants or conversion rights, which would have a dilutive effect on EPS. Cash Cash consists of cash on hand and cash in banks. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains cash with various financial institutions in the PRC. As of December 31, 2022 and 2021, cash balances held in PRC banks are uninsured. The Company has not experienced any losses in bank accounts during the years ended December 31, 2022 and 2021. Concentrations of Credit Risk Currently, all of the Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, short-term investments, trade accounts receivable, and accounts receivable from related parties and advances to suppliers. A portion of the Company’s sales are credit sales which are to the customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. Impact of COVID-19 As of the date of this report, the COVID-19 pandemic is generally considered under control in China. In light of the current circumstances, in the absence of long-term local lockdown, the Company estimates its financial results will not be adversely affected in year 2023. The Company is closely monitoring the development of the COVID-19 pandemic and continuously evaluating any further potential impact on its business, results of operations and financial condition. If the outbreak persists or escalates, the Company may be subject to further negative impact on its business operations and financial condition. Short-term Investments Short-term investments consist of trading stock and debt securities, which include mutual funds and wealth management products issued by commercial banks. The Company accounts for short term investment in accordance with FASB ASC Topic 320 “Investments — Debt and Equity Securities.” Dividend and interest income, including amortization of the premium and discount arising at acquisition, for all categories of investments in securities is included in Consolidated Statements of Operations. Net realized and unrealized holding gains and losses for short term investments are included in Consolidated Statements of Operations. If a security is acquired with the intent of selling it within hours or days, the security is classified as a trading security. The Company classifies investments in trading stock and mutual funds as trading securities. Unrealized holding gains and losses for trading securities are included in earnings. If the Company has positive intent and ability to hold to maturity, the security is classified as held-to-maturity security. The Company classifies investments in wealth management products issued by commercial banks as held-to-maturity securities as the Company intends to hold these investments in wealth management products until maturity and the maturity terms of these investments are within one year. Due to the short-term maturity, the investments in wealth management products are valued at carrying value, which approximates the amortized cost. For individual securities classified as held-to-maturity securities, the Company evaluates whether a decline in FV below the amortized cost basis is other-than-temporary, in accordance with ASC 320. Other-than-temporary impairment loss is recognized in earnings equal to the entire excess of the debt security’s amortized cost basis over its FV at the balance sheet date of the reporting period for which the assessment is made. Accounts Receivable, Accounts Receivable from Related Party and Concentration of Risk Accounts receivable is presented net of an allowance for doubtful accounts. If any, the Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company reviews the collectability of its receivables on an ongoing basis. After all attempts to collect a receivable have failed. The receivable is written off against the allowance. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. The Company considers the following factors where determining whether to permit a longer payment period: ● the customer’s past payment history; ● the customer’s general risk profile, including factors such as the customer’s size, age and public or private status; ● macroeconomic conditions that may affect a customer’s ability to pay; and ● the relative importance of the customer relationship to the Company’s business. The normal payment period is approximately six months to one year after the customers received goods or are served. The Company gives customers different credit period considering the above factors. For the large customers such as large-scale oil and coal mine customers, the Company gives a two-year credit period. For IT outsourcing customers, the Company gives a year and half credit period. For small and medium customers, the Company gives a half year credit period. In accordance with ASC 210-10-45, the non-current accounts receivable and non-current accounts receivable from related parties represent the amounts that the Company does not reasonably expect to be realized during the normal operating cycle of the Company based on the Company’s best estimates and customers’ historical payment behaviors. The Company uses approximately one-year time period as the basis to the separation of current and non-current assets. Advances to Suppliers Advances to suppliers represent amounts prepaid to suppliers for purchases of inventory. In evaluating the recoverability of such advances, the Company mainly considers the age of the balance and ability of the suppliers to perform the related obligations. As of December 31, 2022 and 2021, advances to suppliers consisted of the following: 2022 2021 Advances to suppliers - Inventories $ 483,435 $ 751,301 Advances to suppliers - Services - 366,903 Less: reserve for amount not recoverable (1,666 ) (7,281 ) Total $ 481,769 $ 1,110,923 As of December 31, 2021, advances to third-party suppliers for services were $366,903, which includes $304,592 of advances for outsourcing software service, and $62,311 of advances for sales commission. As of December 31, 2022, there was no advance to service suppliers as the related outsourcing software service contract had expired. Deferred Offering Costs The Company complies with ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Proposed Public Offering. Deferred offering costs will be charged to shareholders’ equity upon the completion of the Proposed Public Offering. Should the Proposed Public Offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations. Inventories Inventories are stated at the lower of cost (weighted average basis) or net realizable value. The methods of determining inventory costs are used consistently from year to year. Allowance for inventory obsolescence is provided when the market value of certain inventory items is lower than the cost. Property, Equipment and Software Property, equipment and software are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gains or losses are included in the statement of operations in the year of disposition. The Company examines the possibility of decreases in the value of property, equipment and software, when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Estimated useful lives are as follows, taking into account the assets’ estimated residual value: Classification Estimated Furniture and office equipment 2-3 years Computer equipment 2-3 years Transportation equipment 5 years Buildings and improvements 20 years Software 3 years Impairment of Long-lived Assets In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated FV and its book value. The Company did not record any impairment charge for the years ended December 31, 2022, 2021 and 2020. 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. In accordance with ASC 606, revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company generates its revenues primarily from three sources: (1) hardware sales, (2) software sales, and (3) tax devices and services. The Company recognizes revenue when performance obligations under the terms of a contract with its customers are satisfied. This occurs when the control of the goods and services have been transferred to the customer. ● Hardware sales Hardware revenues are generated primarily from the sale of computer and network hardware to end users. The products include computers, printers, internet cables, certain internet servers, cameras and monitors. The sales of hardware represent a single performance obligation. The Company usually recognizes the revenue at the point in time when ownership is transferred to end customers. The Company’s revenue derived from sales of hardware is reported on a gross basis since the Company is primarily obligated in the transaction, bears inventory and credit risk and has discretion in establishing the prices. Hardware sales are classified as “Revenue-Hardware” on the Company’s consolidated statements of operations. ● Software sales HiTek also does business in software sales and focuses on the perpetual licenses sales for one of the self-developed software Communication Interface System(“CIS”). CIS is based on LINUX, which is a general embedded interface system used in petrochemical and coal enterprises. The system is used to communicate the RCTX-X module, collect the work diagram, the electricity diagram, the pressure temperature and other measures, and can extract the data and import it to the software of the windows platform to display analysis. Performance Obligations - Software contracts with customers include multiple performance obligations such as sale of software license, installation of software, operation training service and warranty. The installation and operation training are essential to the functionality of the software which are provided to the clients prior to the acceptance of the software. The Company provides one-year warranty which mainly telephone supports. The Company estimates that costs associated with warranty are de minimis to the overall contract. Therefore, the Company does not further allocate transaction price. The Company recognizes revenue when the software is accepted by the customer. Revenues from software sales contracts are classified as “Revenue-Software” on the Company’s consolidated statements of operations. ● Tax Devices and Services Before January 21, 2021, all VAT general taxpayer businesses in China are required to purchase the Anti-Counterfeiting Tax Control System (“ACTCS” or Golden Tax Disk or GTD) tax devices to issue the VAT Invoice and for quarterly VAT filing. HiTek is authorized to carry out the implementation of ACTCS specialty hardware retailing. The price of GTD and related supporting services are determined by the National Development and Reform Commission. From January 21, 2021, the new taxpayers can receive electronic tax control ukey for free from the Tax authority. HiTek could provide supporting services to the new taxpayers. Performance Obligations - Tax devices and services contracts with customers include multiple performance obligations such as delivery of products, installation and after-sales supporting services, tax control system risk investigation service, and tax invoicing management service, such as training service on issuing electronic invoice, complete tax declaration automatically and back up data online. Revenue from the sales of GTD devices is recognized when ownership is transferred to end customers. The Company provides the tax device after-sales supporting services and tax invoicing management service, charging the service fee on an annual basis because the service period is usually one year. Revenue related to its service is recognized as the services are performed and amounts are earned, using the straight-line method over the term of the related services agreement. The Company also charges a one-time service charge for each investigation request. Revenue related to tax control system risk investigation service is recognized at the point in time when the services are performed. Revenue is recognized based on each performance obligation’s standalone selling price that are sold separately and charged to customers at contract inception. The Company’s revenue derived from its gross billings is reported on a gross basis since the Company is primarily obligated in the transaction, is subject to inventory and credit risk and has several but not all of the indications that revenue should be recorded on the gross basis. Revenue was comprised of the followings. Years Ended December 31, 2022 2021 2020 Revenues Hardware $ 2,504,426 $ 2,434,694 $ 2,360,362 Tax devices and service 1,803,650 1,970,363 2,254,176 Software 2,120,532 2,056,106 1,053,467 IT services - - 136,722 Total revenues $ 6,428,608 $ 6,461,163 $ 5,804,727 ● Contract balances Prepayments received from customers prior to the services being performed are recorded as deferred revenue. Deferred revenue consists of the annual service fees for Golden Tax Disk and tax invoicing management service received from customers while the services have not yet been performed. The Company recognizes the service fees amount as revenue on a straight-line basis in accordance with the service periods. ● Practical expedients and exemptions The Company generally expenses sales commissions as incurred because the amortization period would have been one year or less. Deferred Revenue Deferred revenue consists of the annual service fees for Golden Tax Disk (defined below) received from customers but the services have not yet been performed. The Company recognizes the service amount as revenue on a straight-line basis in accordance with the service periods. Deferred revenue as of December 31, 2022 and 2021 was $977,054 and $784,530, respectively. For the years ended December 31, 2022, 2021 and 2020, the Company recognized revenue of $784,530, $752,286 and $763,191, respectively, that was included in the deferred revenue balance at the beginning of each year. Cost of Revenue 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; and (iv) compensation for the employees who handle the products and other costs that are necessary for us to provide the services to our customers. Selling Expenses Selling expenses consists of primarily shipping and handling costs for products sold and advertisement, marketing expenses for promotion of our products. During the year ended December 31, 2022 and 2021, selling expenses also included sales commission paid to a third party for obtaining contracts with customers. General and Administrative Expenses General and administrative expenses consist primarily of costs in salary and welfare expenses for our general administrative and management staff, facilities costs, depreciation and amortization expenses, professional fees, accounting fees, meals and entertainment, utilities, and other miscellaneous expenses incurred in connection with general operations. All depreciation and amortization expenses were recorded in general and administrative expenses because fixed assets are mainly for sales and administrative purpose. Government Subsidies Grants are given by the government to mainly support the Company for the increase in production and social insurance compensation for rural laborers. Grants are recognized as government subsidies income in the consolidated statements of operations when received. Research and Development Expenses The Company follows FASB ASC 985-20, Cost of Software to Be Sold, Leased or Marketed, regarding software development costs to be sold, leased, or otherwise marketed. FASB ASC 985-20-25 requires research and development costs for software development to be expensed as incurred until the software model is technologically feasible. Technological feasibility is established when the enterprise has completed all planning, designing, coding, testing, and identification of risks activities necessary to establish that the product can be produced to meet its design specifications, features, functions, technical performance requirements. A certain amount of judgment and estimation is required to assess when technological feasibility Is established, as well as the ongoing assessment of the recoverability of capitalized costs. The Company’s products reach technological feasibility shortly before the products are released and sold to the public. Therefore, research and development (“R&D”) costs are generally expensed as incurred. The Company expenses R&D expenses as incurred and are included as part of general and administrative expenses. R&D expenses for the years ended December 31, 2022, 2021 and 2020 were $42,052, $43,661 and 35,904, respectively. The Company defers certain costs related to the software development activities associated with certain software which the Company has determined have future economic benefit. Management periodically reviews and revises, when necessary, its estimate of the future benefit of these costs and expenses them if it deems there no longer is a future benefit. The Company has two software (for internal use) (Finance and Taxation Service Platform Mobile Application and Corporate Full-Service Platform Mobile Application) and they are fully amortized as of December 31, 2022. Income Taxes The Company is governed by the Income Tax Law of the PRC. The Company accounts for income taxes using the asset/liability method prescribed by ASC 740, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. The Company applied the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes,” which provides clarification related to the process associated with accounting for uncertain tax positions recognized in the Company’s CFS. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. Value Added Taxes (“VAT”) Starting from April 1, 2019, the VAT rate for revenue generated from providing products was changed from 16% to 13%. VAT is reported as a deduction of revenue when incurred. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable. Foreign Currency Translation The functional currency of the Company’s operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The CFS are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for re |
Short-Term Investment
Short-Term Investment | 12 Months Ended |
Dec. 31, 2022 | |
Short-term Investments [Abstract] | |
SHORT-TERM INVESTMENT | NOTE 3 – SHORT-TERM INVESTMENT Short-term investments consisted of the following. Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2022 (Level 1) (Level 2) (Level 3) Trading securities $ 2,408,772 $ 2,408,772 $ - $ - Held-to-maturity debt securities 1,881,576 1,881,576 - - Total $ 4,290,348 $ 4,290,348 $ - $ - Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2021 (Level 1) (Level 2) (Level 3) Trading securities $ 5,197,015 $ 188,208 $ 5,008,807 $ - Total $ 5,197,015 $ 188,208 $ 5,008,807 $ - Net investment (loss) income for the years ended December 31, 2022, 2021 and 2020 consists of the following. December 31, 2022 2021 2020 (Loss) Gain from sales of short-term investments: Trading securities $ (30,848 ) $ 3,945 $ 46,492 Held-to-maturity debt securities - 17,189 32,093 Unrealized holding income: Trading securities (2,722 ) 82,241 20,989 Held-to-maturity debt securities 14,207 - - Net investment (loss) income $ (19,363 ) $ 103,375 $ 99,574 |
Accounts Receivable, Net
Accounts Receivable, Net | 12 Months Ended |
Dec. 31, 2022 | |
Accounts Receivable, Net [Abstract] | |
ACCOUNTS RECEIVABLE, NET | NOTE 4 – accounts receivable, Net At December 31, 2022 and 2021, accounts receivable, net consisted of the following. 2022 2021 Accounts receivable $ 3,435,340 $ 2,536,589 Less: allowance for doubtful accounts (164,122 ) $ (179,475 ) Accounts receivable, net $ 3,271,218 $ 2,357,114 Accounts receivable – related party, net $ 399,465 $ 414,639 Non-current accounts receivable $ 4,209,546 $ 3,134,361 Non-current accounts receivable-related party $ - $ 548,395 The following table describes the movements in the allowance for doubtful accounts during the years ended December 31, 2022 and 2021. Balance at January 1, 2021 $ 298,224 Decrease in allowance for doubtful accounts (124,881 ) Foreign exchange difference 6,132 Balance at December 31, 2021 179,475 Decrease in allowance for doubtful accounts (1,087 ) Foreign exchange difference (14,266 ) Balance at December 31, 2022 $ 164,122 The Company reviews the outstanding receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. For the years ended December 31, 2022, 2021 and 2020, doubtful accounts recovery for accounts receivable was $1,087 and $124,881and $27,696, respectively. |
Inventories, Net
Inventories, Net | 12 Months Ended |
Dec. 31, 2022 | |
Inventories, Net [Abstract] | |
INVENTORIES, NET | NOTE 5 – INVENTORIES, NET At December 31, 2022 and 2021, inventories consisted of the following. 2022 2021 Inventory $ 442,681 $ 419,726 Less: reserve for obsolete inventories (12,011 ) (10,705 ) Total $ 430,670 $ 409,021 Inventory includes computer, network hardware, and Golden Tax Disks. The Company reviews its inventories periodically to determine if any reserves are necessary for potential obsolescence or if a write-down is necessary if the carrying value exceeds net realizable value. For the year ended December 31, 2022, reserve for obsolete inventories was $2,217. For the year ended December 31, 2021, recovery for obsolete inventories was $5,317. For the year ended December 31, 2020, reserve for obsolete inventories was $6,783. |
Prepaid Expenses and Other Curr
Prepaid Expenses and Other Current Assets | 12 Months Ended |
Dec. 31, 2022 | |
Prepaid Expenses and Other Current Assets [Abstract] | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS At December 31, 2022 and 2021, prepaid expenses and current assets consisted of the following. 2022 2021 Other receivables, net $ 48,320 $ 105,623 Interest receivable 42,263 6,619 Prepaid expenses 4,342 43,869 Total $ 94,925 $ 156,111 |
Loan Receivable
Loan Receivable | 12 Months Ended |
Dec. 31, 2022 | |
Loan Receivable [Abstract] | |
LOAN RECEIVABLE | NOTE 7 – LOAN RECEIVABLE At December 31, 2022 and 2021, loan receivable consisted of the following. 2022 2021 Short-term loan receivable $ 1,013,157 $ 204,441 Long-term loan receivable 4,342,100 - Total $ 5,355,257 $ 204,441 On April 12, 2021, the Company entered into a loan agreement of RMB1,300,000 ($204,441) to an unrelated party, which was restricted for its operating activities, to improve the utilization and efficiency of the Company’s free cashflows. The loan was due by March 31, 2022 at 4.5%. The principal and the accrued interest related to such loan were repaid in full by March 31, 2022. On January 21, 2022, March 28, 2022 and June 14, 2022, the Company entered into three loan agreements RMB30,000,000 ($4,342,100 with an exchange rate of 0.1447 as of December 31, 2022), RMB3,000,000 ($434,210 with an exchange rate of 0.1447 as of December 31, 2022) and RMB7,000,000 ($1,013,157 with an exchange rate of 0.1447 as of December 31, 2022) to a third party, which was restricted for its operating activities, to improve the utilization and efficiency of the Company’s free cashflows. The loans are due by January 20, 2024, July 27, 2022 and June 13, 2023, and they carry an interest at 12%, respectively. RMB 3,000,000 ($434,210) of the principal and RMB120,000 ($17,368) of the interest have been repaid by August 5, 2022. Pursuant to a mining right pledge agreement dated August 5, 2022 between HiTek, as representative of the Lenders, and the Borrower, these three loans are secured by the Borrower’s coal mining permit that was issued by Bobai County Natural Resources Bureau, which grants the Borrower a 20-year mining rights for certain building granite mine in Daguang Village, Shuiming Town, Bobai County, Guangxi Province, for a production of 1.306 million cubic meters per year. Interest income for the years ended December 31, 2022, 2021 and 2020 was $555,789, $7,343 and $6,395 respectively, which was accrued as interest receivable (see Note 6). |
Non-Current Advance to a Third
Non-Current Advance to a Third Party | 12 Months Ended |
Dec. 31, 2022 | |
Non-Current Advance to a Third Party [Abstract] | |
NON-CURRENT ADVANCE TO A THIRD PARTY | NOTE 8 – NON-CURRENT ADVANCE TO A THIRD PARTY In 2020, the Company signed a software development contract (for internal use) (Corporate Full-Service Platform Mobile Application) which the software development company obligated to perform certain specific software development activities on September 10, 2020. The scope of the work includes analyzing and confirming the application requirements checklist provided by the Company, designing under user interface, coding, arranging/locating the servers, and launching. As of December 31, 2022, the total contract price was approximately $434,000 and shall be paid using installment payment method (30% within 30 working days after the signing of this contract, 50% within 30 working days upon launching of the official version, and 20% within 90 working days upon launching of the official version). The ownership of the final product belongs to the Company and the copyrights will be shared with the software development company. As of December 31, 2022, product development costs capitalized totaled $421,679 (recorded in non-current advances to a third party) and the Company’s commitments to additional costs under software development contracts amounted to $12,531 as of December 31, 2022. In March 2021, the Company signed a supplementary agreement to postpone the official launch after closing of the Company’s initial public offering. It will be transferred to property, equipment and software, net under appropriate conditions. The Company will restart the project and make the final payment of $12,531 in 2023. |
Property, Equipment and Softwar
Property, Equipment and Software, Net | 12 Months Ended |
Dec. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, EQUIPMENT AND SOFTWARE, NET | NOTE 9 – PROPERTY, equipment AND SOFTWARE, net At December 31, 2022 and 2021, property, equipment and software consisted of the following. 2022 2021 Office furniture $ 2,576 $ 2,798 Computer equipment 6,545 7,111 Transportation equipment 67,580 73,429 Buildings and improvements 448,607 487,430 Software 1,068,156 1,160,596 1,593,464 1,731,364 Less: accumulated depreciation and amortization (1,470,497 ) (1,574,603 ) $ 122,967 $ 156,761 For the years ended December 31, 2022, 2021 and 2020, depreciation expenses were $21,881, $355,738 and 378,594, respectively. |
Taxes payable
Taxes payable | 12 Months Ended |
Dec. 31, 2022 | |
Taxes payable [Abstract] | |
TAXES PAYABLE | NOTE 10 – Taxes payable At December 31, 2022 and 2021 taxes payable consisted of the following. 2022 2021 Value-added tax payable $ 1,135,002 $ 990,173 Income tax payable 404,617 198,130 Other taxes payable 131,703 110,844 Total $ 1,671,322 $ 1,299,147 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 11 – RELATED PARTY TRANSACTIONS The following are related party balances as of December 31, 2022 and 2021. 2022 2021 Accounts receivable Beijing Zhongzhe Yuantong Technology Co., Ltd. (1) $ 399,465 $ 414,639 $ 399,465 $ 414,639 Non-current accounts receivable-related parties Beijing Zhongzhe Yuantong Technology Co., Ltd. (1) $ - $ 548,395 $ - $ 548,395 2022 2021 Due to related parties Fengqi (Beijing) Zhineng Technology Co., Ltd. (2) $ 598 $ 4,163 $ 598 $ 4,163 The following are related party transactions for the years ended December 31, 2022, 2021 and 2020. 2022 2021 2020 Revenue Beijing Zhongzhe Yuantong Technology Co., Ltd. (1) $ - $ - $ 609,321 $ - $ - $ 609,321 Cost of revenues Fengqi (Beijing) Zhineng Technology Co., Ltd. (2) $ 11,830 $ 52,961 $ - $ 11,830 $ 52,961 $ - (1) Beijing Zhongzhe Yuantong Technology Co., Ltd. (“Beijing Zhongzhe”) and one of the minority shareholders of HiTek are under common control. The Company generated sales revenues from Beijing Zhongzhe Yuantong Technology Co., Ltd., in hardware sales of $ nil nil (2) Mr. Yin is the director and a minority shareholder of Fengqi (Beijing) Zhineng Technology Co., Ltd. The Company purchased from Fengqi (Beijing) Zhineng Technology Co., Ltd., in hardware of $11,830, $52,961 and $ nil |
Leases
Leases | 12 Months Ended |
Dec. 31, 2022 | |
Leases [Abstract] | |
Leases | NOTE 12 – Leases A summary of supplemental information related to operating leases as of December 31, 2022 is as follows. Operating lease ROU assets $ 6,641 Operating lease liabilities-current $ 3,242 Operating lease liabilities-non current 3,399 Total operating lease liabilities $ 6,641 Weighted average remaining lease term 2.0 years Weighted average discount rate 4.8 % The following table represents the maturity of lease liabilities as of December 31, 2022. 12 months ending December 31, 2023 $ 3,474 2024 3,474 Total lease payments 6,948 Less: interest (307 ) Present value of lease liabilities $ 6,641 |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses and Other Current Liabilities [Abstract] | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 13 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES At December 31, 2022 and 2021 accrued expenses and other current liabilities consisted of the following. 2022 2021 Payroll $ 253,212 $ 180,855 Interest payable 21,132 - Other payable 73,823 1,070 Total $ 348,167 $ 181,925 |
Borrowings
Borrowings | 12 Months Ended |
Dec. 31, 2022 | |
Borrowings [Abstract] | |
BORROWINGS | NOTE 14 – BORROWINGS At December 31, 2022 and 2021, borrowings consisted of the following. 2022 2021 Short-term borrowings $ 506,578 $ - Long-term borrowings 2,171,050 - Total $ 2,677,628 $ - On January 21, March 28 and June 14, 2022, the Company entered into three borrowing agreements of RMB15,000,000 ($2,171,050 with an exchange rate of 0.1447 as of December 31, 2022), RMB1,500,000 ($217,205 with an exchange rate of 0.1447 as of December 31, 2022) and RMB3,500,000 ($506,578 with an exchange rate of 0.1447 as of December 31, 2022) from another third party in a normal course of business. The loan is a credit loan. The loans will be due by January 20, 2024, July 27, 2022 and June 13, 2023, at 12%, respectively. RMB1,500,000 ($217,205) of the principal was repaid as of December 31, 2022. The interest expense for the years ended December 31, 2022, 2021 and 2020 was $277,894, $ nil nil |
Statutory Reserve
Statutory Reserve | 12 Months Ended |
Dec. 31, 2022 | |
Statutory Reserve [Abstract] | |
STATUTORY RESERVE | NOTE 15 – STATUTORY RESERVE Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). As of December 31, 2022 and 2021, the balance of total statutory reserves was $836,215 and $767,207, respectively. |
Ordinary Shares
Ordinary Shares | 12 Months Ended |
Dec. 31, 2022 | |
Ordinary Shares [Abstract] | |
ORDINARY SHARES | NOTE 16 – ORDINARY SHARES The Company is authorized to issue 500,000,000 ordinary shares of $0.0001 par value. On November 3, 2017 and December 16, 2017, the Company issued 10,987,679 ordinary shares to nine shareholders. On July 15, 2021, the Company approved and adopted the amended and restated memorandum and articles of association. The amended and restated memorandum and articles of association provide that, the Company’ s authorized share capital upon completion of the offering will be $50,000 divided into 500,000,000 shares of a par value of $0.0001, comprised of 490,000,000 ordinary Shares, and 10,000,000 preference shares. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 17 – INCOME TAXES The entities within the Company file separate tax returns in the respective tax jurisdictions in which they operate. Cayman Islands The Company is a tax-exempt entity incorporated in Cayman Islands. Hong Kong HiTek Hong Kong Limited was incorporated in Hong Kong and does not conduct any substantial operations of its own. No provision for Hong Kong profits tax has been made in the CFS as HiTek Hong Kong Limited has no assessable profits for the years ended December 31, 2022, 2021 and 2020. PRC The Company’s PRC operating subsidiary and VIEs, being incorporated in the PRC, are governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). The EIT rate of PRC is 25%, which applies to both domestic and foreign invested enterprises. One of the Company’s subsidiaries located in the Xinjiang Huoerguosi special development zones, Huoerguosi, is currently exempt from corporate income tax in China from January 1, 2017 to December 31, 2021. Since the beginning of 2022, Huoerguosi did not enjoy the above preferential tax policy. The Company’s income (loss) before income taxes includes the following for the years ended December 31. 2022 2021 2020 Non-PRC operations $ (385,297 ) $ (328,672 ) $ (46,483 ) PRC operations 2,254,260 2,540,883 2,004,584 Total income before income taxes $ 1,868,963 $ 2,212,211 $ 1,958,101 Income tax expense was comprised of the followings for the years ended December 31. 2022 2021 2020 Current tax expense PRC $ 276,190 $ 202,229 $ 26,946 Deferred tax expense PRC 177,028 340,624 242,296 Total income tax expense $ 453,218 $ 542,853 $ 269,242 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The cumulative tax effect at the expected rate of 25% of significant items comprising the net deferred tax amount is at December 31, 2022 and 2021 as follows. 2022 2021 Deferred tax assets Net operating loss $ 5,313 $ 8,060 Deferred revenue 205,605 147,876 Unbilled cost 355,461 225,242 Unbilled interest expenses 34,592 - Software amortization 267,039 290,149 Allowance for doubtful accounts 8,308 15,270 Inventories obsolescence 7,043 1,759 Unrealized losses on trading securities 1,809 1,966 Accrued Bonus 62,441 40,377 Other 31,819 27,491 Total deferred tax assets 979,430 758,190 Deferred tax liabilities Unbilled revenue (2,149,169 ) (1,880,466 ) Unbilled interest income (69,149 ) - Deferred government subsidiary income (42,806 ) (46,511 ) Unrealized gain on short-term investment (2,796 ) (23,742 ) Other (4,462 ) (13,977 ) Total deferred tax liabilities (2,268,382 ) (1,964,696 ) Valuation allowance (11,469 ) (19,135 ) Net deferred tax liabilities $ (1,300,421 ) $ (1,225,641 ) Following is a reconciliation of income tax expense at the effective rate to income tax at the calculated statutory rates for the years ended December 31. 2022 2021 2020 PRC statutory tax rate 25.0 % 25.0 % 25.0 % Effect of different tax rates in different jurisdictions 5.2 % 3.7 % - % Permanent difference For inventory loss - - 0.1 % For deferred offering costs 0.0 % 0.7 % (2.5 )% For others (0.1 )% 0.4 % 0.8 % Tax holiday effect (5.9 )% (5.3 )% (9.6 )% Effective tax rate 24.2 % 24.5 % 13.8 % Uncertain Tax Positions The Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of and for the years ended December 31, 2022 and 2021. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | NOTE 18 – EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31. 2022 2021 2020 Numerator: Net income $ 1,415,745 $ 1,669,357 $ 1,688,859 Denominator: Weighted-average shares used in computing basic and diluted net income per share 10,987,679 10,987,679 10,987,679 Net income per share of ordinary shares: -basic and diluted $ 0.13 $ 0.15 $ 0.15 |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2022 | |
Concentrations [Abstract] | |
CONCENTRATIONS | NOTE 19 – CONCENTRATIONS Major Customers Details of customers accounted for 10% or more of the Company’s total revenues are as follows. Years Ended December 31, 2022 2021 2020 Custom A $ 2,291,651 36 % $ 1,784,738 28 % $ 1,254,945 22 % Custom B 834,911 13 % 896,220 14 % - - % Custom C - - % - - % 609,322 10 % Total $ 3,126,562 49 % $ 2,680,958 42 % $ 1,864,267 32 % Details of customers accounted for 10% or more of the Company’s accounts receivable are as follows. December 31, 2022 2021 2020 Custom A $ 5,274,060 67 % $ 4,256,804 66 % $ 3,001,818 53 % Custom B 1,864,208 24 % 1,027,238 16 % - - % Custom C - - % 963,034 15 % 1,509,383 27 % Total $ 7,138,268 91 % $ 6,247,076 97 % $ 4,511,201 80 % Major Suppliers Details of suppliers accounted for 10% or more of the Company’s total purchases are as follows. Years Ended December 31, 2022 2021 2020 Supplier A $ - - % $ 295,283 11 % $ 563,653 22 % Supplier B - - % - - % 415,779 16 % Supplier C 472,988 16 % - - % - - % Supplier D 430,744 15 % 267,933 10 % - - % Supplier E 366,115 13 % - - % - - % Supplier F 326,836 11 % - - % - - % Total $ 1,596,683 55 % $ 563,216 21 % $ 979,432 38 % Details of suppliers accounted for 10% or more of the Company’s accounts payable are as follows. December 31, 2022 2021 2020 Supplier G $ 131,661 19 % $ - - % $ 51,472 14 % Supplier H 79,605 11 % 86,494 17 % 49,788 13 % Supplier I - - % - - % 45,827 12 % Supplier J - % - - % 40,039 11 % Supplier E 155,990 22 % - - % - - % Supplier K - - % 84,671 16 % - - % Supplier L - - % 66,068 13 % - - % Total $ 367,256 52 % $ 237,233 46 % $ 187,126 50 % |
Commitments and Contingency
Commitments and Contingency | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingency [Abstract] | |
COMMITMENTS AND CONTINGENCY | NOTE 20 – COMMITMENTS AND CONTINGENCY Contingencies The Company may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. As of December 31, 2022 and 2021, the Company was not aware of any litigation or proceedings against it. Underwriter Agreement On November 10, 2020, the Company entered into an engagement with R.F. Lafferty & Co., Inc. and US Tiger Securities, Inc. (the “Underwriters”). The agreement expired on November 9, 2021 and it was amended by all parties to extend the service termination date to December 31, 2022. On August 16, 2022, US Tiger Securities, Inc. terminated the underwriter agreement with the Company that was executed on November 10, 2020 and amended on November 9, 2021. On August 25, 2022, the Company entered into an engagement with R.F. Lafferty & Co., Inc. and Pacific Century Securities, LLC. (the “New Underwriters”). The agreement will expire on the earlier of August 24, 2023 or the final closing of an Offering. Under the engagement, the Company agrees to pay the following fees: 1) Cash retainer: $100,000 which is refundable to the extent that the New Underwriters’ incurred expenses are less than the retainer paid. 2) Cash fee: At the closing of the IPO, the New Underwriters will receive a commission equal to eight and one-half percent (8.5%) of the gross proceeds received. 3) Non-Accountable expenses: $150,000 payable at the closing of the IPO which is intended to cover the New Underwriters’ legal and road show expenses associated with the IPO. The engagement letter also states that, for purposes of covering over-allotments, if any, the Company shall grant the Underwriters an option, exercisable within 45 days after the closing of the Offering, to acquire up to an additional 15.0% of the total number of Securities to be offered by the Company, on the same terms as the Securities sold in the Offering. Risks in relation to the VIE structure It is possible that the Company’s operation of certain of its operations and businesses through its VIE could be found by PRC authorities to be in violation of PRC law and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. 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 VIE within the scope of entities that could be considered to be foreign invested enterprises (or “FIEs”) that would be subject to restrictions under existing PRC law on foreign investment in certain categories of industry. Specifically, the Draft FIE Law introduces the concept of “actual control” for determining whether an entity is considered to be an FIE. 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 explicitly subject to the current restrictions on foreign investment in certain categories of industry. 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. 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. In addition, it is possible that the contracts among WFOE, HiTek and HiTek’s shareholders would not be enforceable in China if PRC government authorities or courts were to find that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event that 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 consolidated financial statements. If such were the case, the Company’s cash flows, financial position, and operating performance would be materially adversely affected. The Company’s contractual arrangements WFOE, HiTek and HiTek’s shareholders are approved and in place. Management believes that 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. The Company’s operations and businesses rely on the operations and businesses of its VIEs, which hold certain recognized revenue-producing assets. The VIEs also have an assembled workforce, focused primarily on research and development, whose costs are expensed as incurred. The Company’s operations and businesses may be adversely impacted if the Company loses the ability to use and enjoy assets held by its VIE. VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. Summary information regarding consolidated VIEs and their subsidiaries is as follows. As of December 31, 2022 2021 Current assets $ 11,276,852 $ 11,779,996 Total non-current assets $ 9,102,933 $ 4,173,234 Total Assets $ 20,379,785 $ 15,953,230 Total liabilities $ 5,329,843 $ 3,793,609 Years Ended December 31, 2022 2021 2020 Revenues $ 6,228,595 $ 6,473,638 $ 5,804,727 Net income $ 1,684,991 $ 2,061,517 $ 1,735,340 Years Ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ 4,016,852 $ (757,861 ) $ 3,025,193 Net cash (used in) provided by investing activities $ (7,349,231 ) $ 400,006 $ (865,047 ) Net cash provided by financing activities $ 2,749,498 $ - $ - |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2022 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 21 – SUBSEQUENT EVENTS On March 31, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Pacific Century Securities, LLC and R.F. Lafferty & Co., Inc., as the representatives of the underwriters relating to the Company’s initial public offering (the “IPO”) of 3,680,000 ordinary shares, par value $0.0001 per share (the “Ordinary Shares”), including 480,000 Ordinary Shares issuable upon the full exercise of the underwriters’ over-allotment option. In April 2023, the Company completed initial public offering in which the Company issued and sold 3,200,000 Ordinary Shares, at $5.00 per share for $16 million. The net proceeds raised from the initial public offering were $13,523,140 after deducting underwriting discounts and the offering expenses payable by the Company. The following table sets forth the pro forma condensed balance sheet as of December 31, 2022 on an actual basis; and on a pro forma as adjusted basis to reflect the issuance and sale of 3,200,000 Ordinary Shares at a price of US$5.00 per Ordinary Share, after deducting the underwriting discounts, and the estimated offering expenses payable. December 31, 2022 Actual Pro Forma US$ US$ Assets (unaudited) Current assets Cash (1) $ 1,203,160 $ 17,203,160 Short-term investments 4,290,348 4,290,348 Accounts receivable, net 3,271,218 3,271,218 Accounts receivable - related party, net 399,465 399,465 Advances to suppliers, net 481,769 481,769 Inventories, net 430,670 430,670 Deferred offering cost (2) 917,446 - Loan receivable 1,013,157 1,013,157 Prepaid expenses and other current assets 94,925 94,925 Total current assets 12,102,158 27,184,712 Non-current assets Non-current accounts receivable 4,209,546 4,209,546 Non-current advance to a third party 421,679 421,679 Non-current loan receivable 4,342,100 4,342,100 Property, equipment and software, net 122,967 122,967 Operating lease right-of-use assets 6,641 6,641 Total non-current assets 9,102,933 9,102,933 Total Assets $ 21,205,091 $ 36,287,645 Liabilities and Shareholders’ Equity Current l Accounts payable $ 696,734 $ 696,734 Loan payable 506,578 506,578 Deferred revenue 977,054 977,054 Taxes payable 1,671,322 1,671,322 Due to related parties 598 598 Accrued expenses and other current liabilities (3) 348,167 1,907,581 Operating lease liabilities 3,242 3,242 Total current liabilities 4,203,695 5,763,109 Non-current Liabilities Loan payable, non-current 2,171,050 2,171,050 Deferred income tax liabilities, non-current 1,300,421 1,300,421 Operating lease liabilities, non-current 3,399 3,399 Total non-current liabilities 3,474,870 3,474,870 Total Liabilities 7,678,565 9,237,979 Commitments and Contingencies Shareholders’ Equity Ordinary Shares US$0.0001 par value; 10,987,679 outstanding on an actual basis, 14,187,679 issued and outstanding on a pro forma as adjusted basis 1,099 1,419 Additional paid-in capital () 2,628,356 16,151,176 Statutory reserve 836,215 836,215 Retained earnings 10,340,107 10,340,107 Accumulated other comprehensive (loss) income (279,251 ) (279,251 ) Total Shareholders’ Equity 13,526,526 27,049,666 Total Liabilities and Shareholders’ Equity $ 21,205,091 $ 36,287,645 (1) Pro forma cash reflects $16,000,000 offering proceeds. (2) Pro forma deferred offering cost reflects charged against the gross proceeds of the offering. (3) Pro forma accrued expenses and other current liabilities reflects $1,360,000 of underwriting discount and additional offering expenses of $199,414. (4) Pro forma additional paid in capital reflects the net proceeds the Company expects to receive, after deducting underwriting fee, underwriters’ expense allowance and other expenses. The Company expects to receive net proceeds of $13,523,140 ($16,000,000 offering gross proceeds, less underwriting discounts of $1,360,000, and estimated offering expenses of $1,116,860). |
Accounting Policies, by Policy
Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Financial Information | Basis of Financial Information The accounting and financial reporting policies of the Company conform to generally accepted accounting principles (“GAAP”) in the United States and the preparation of the CFS is in conformity with GAAP which requires management to make estimates and assumptions that affect reported amounts and disclosures. |
Reclassification | Reclassification Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. According to the significance thresholds, the previously issued Consolidated Balance Sheet as of December 31, 2021 was reclassified certain amount of prepaid expenses and other current assets into loan receivable. These reclassifications had no effect on the reported results of operations. The item was reclassified as follows. Previously reported December 31, 2021 (Decrease)/ Increase December 31, 2021 (Reclassified) Consolidated Balance Sheets Current assets: Loan receivable $ - $ 204,441 $ 204,441 Prepaid expenses and other current assets $ 360,552 $ (204,441 ) $ 156,111 |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include financial information related to the Company and its wholly-owned subsidiaries and those variable interest entities (“VIEs”) where the Company is the primary beneficiary. In preparing the CFS, all significant inter-company accounts and transactions were eliminated. Assets held in an agency or fiduciary capacity are not included in the CFS. |
VIE Agreements with HiTek | VIE Agreements with HiTek Due to PRC legal restrictions of foreign ownership in certain sectors, neither we nor our subsidiaries own any equity interest in HiTek. Instead, WFOE, HiTek and HiTek’s shareholders entered into a series of contractual arrangements (“VIE Agreements”) on March 31, 2018, which have not been tested in a court of law. The VIE Agreements by and among WFOE, HiTek, and HiTek’s shareholders include (i) certain power of attorney agreements and equity interest pledge agreement, which provide WFOE effective control over HiTek; (ii) an exclusive technical consulting and service agreement which allows WFOE to receive substantially all of the economic benefits from HiTek; and (iii) certain exclusive equity interest purchase agreements which provide WFOE with an exclusive option to purchase all or part of the equity interests in and/or assets of HiTek when and to the extent permitted by PRC laws. Accordingly, the Company is considered the primary beneficiary of VIE for accounting purpose and has consolidated the VIE and the VIE’s subsidiaries’ assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements. Each of the VIE Agreements is described in detail below: Exclusive Technical Consulting and Service Agreement Pursuant to the Exclusive Technical Consulting and Service Agreement between HiTek and WFOE, WFOE provides HiTek with technical support, consulting services and other management services relating to its day-to-day business operations and management, on an exclusive basis. The Exclusive Technical Consulting and Service Agreement has come into effect as of March 31, 2018. For services rendered to HiTek by WFOE under this agreement, WFOE is entitled to collect a service fee that shall be paid per quarter of 100% of HiTek’s quarterly profit. The term of the Exclusive Technical Consulting and Service Agreement is ten years unless it is terminated by WFOE with 30-day prior notice. Equity Interest Pledge Agreement WFOE, HiTek and HiTek shareholders entered into an Equity Interest Pledge Agreement, pursuant to which HiTek shareholders pledged all of their equity interests in HiTek to WFOE in order to guarantee the performance of HiTek’s obligations under the Exclusive Technical Consulting and Service Agreement as described above. The Equity Interest Pledge Agreement has come into effect as of March 31, 2018. During the term of the pledge, WFOE is entitled to receive any dividends declared on the pledged equity interests of HiTek. The Equity Interest Pledge Agreement ends when all contractual obligations under the Exclusive Technical Consulting and Service Agreement have been fully performed. Exclusive Equity Interests Purchase Agreement Under the Exclusive Equity Interests Purchase Agreement, the HiTek Shareholders granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, part or all of their equity interests in HiTek. The option price is equal to the capital paid in by the HiTek Shareholders subject to any appraisal or restrictions required by applicable PRC laws and regulations. The Exclusive Equity Interests Purchase Agreement remains effective for a term of ten years and may be renewed at WFOE’s election. Power of Attorney Each shareholder of the HiTek has executed an irrevocable power of attorney in favor of WFOE. Pursuant to this power of attorney, the WFOE has full power and authority to exercise all of such shareholders’ rights with respect to their equity interest in the VIE Companies, including HiTek, Huasheng and Huoerguosi. The power of attorney will remain in force for so long as the shareholder remains a shareholder of HiTek. During the years ended December 31, 2022, 2021 and 2020, there were no transactions in HiTek Global Inc. and HiTek HK besides minimal capital transactions and professional fee payments. As of December 31, 2022, our VIEs accounted for 96% and 98% of our total assets and total liabilities, respectively. As of December 31, 2021, our VIEs accounted for 93% and 100% of our total assets and total liabilities, respectively. As of December 31, 2022 and 2021, $955,941 and $1,557,325 of cash and equivalents were denominated in RMB, respectively. |
Use of Estimates and Assumptions | Use of Estimates and Assumptions The preparation of the CFS in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the CFS and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in the Company’s CFS include allowance for doubtful accounts, inventory obsolescence, deferred taxes, and the useful lives of property and equipment. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. |
Fair Values of Financial Instruments | Fair Values of Financial Instruments The U.S. GAAP accounting standards regarding FV (“FV”) of financial instruments and related FV measurements define FV, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring FV. The three levels of inputs are defined as follows: Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to the valuation methodology are unobservable. ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at FV (FV option). The FV option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the FV option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the FV option to any outstanding instruments. The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, accounts receivable – related party, advances to suppliers, deferred offering costs, prepaid expenses and other, accounts payable and accrued liabilities, income taxes payable, VAT and other taxes payable, and due to related parties approximate their FV based on the short-term maturity of these instruments. The Company’s investments measured at FV on a recurring basis consist of trading securities and held-to-maturity debt securities. The valuation for the Level 1 position is based on quoted prices in active markets. The following table presents information about our assets and liabilities that are measured at FV on a recurring basis as of December 31, 2022 and 2021 and indicates the FV hierarchy of the valuation techniques we utilized to determine such FV. The valuation techniques are based on the FV measurement on a recurring basis of trading securities and held-to-maturity debt securities. Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2022 (Level 1) (Level 2) (Level 3) Trading securities $ 2,408,772 $ 2,408,772 $ - $ - Held-to-maturity debt securities 1,881,576 1,881,576 - - Total $ 4,290,348 $ 4,290,348 $ - $ - Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2021 (Level 1) (Level 2) (Level 3) Trading securities $ 5,197,015 $ 188,208 $ 5,008,807 $ - Total $ 5,197,015 $ 188,208 $ 5,008,807 $ - |
Earnings Per Share (“EPS”) | Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted-average number of ordinary shares and dilutive potential ordinary shares outstanding during the period. For the years ended December 31, 2022, 2021 and 2020, there were no other contracts to issue ordinary shares, such as options, warrants or conversion rights, which would have a dilutive effect on EPS. |
Cash | Cash Cash consists of cash on hand and cash in banks. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains cash with various financial institutions in the PRC. As of December 31, 2022 and 2021, cash balances held in PRC banks are uninsured. The Company has not experienced any losses in bank accounts during the years ended December 31, 2022 and 2021. |
Concentrations of Credit Risk | Concentrations of Credit Risk Currently, all of the Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, short-term investments, trade accounts receivable, and accounts receivable from related parties and advances to suppliers. A portion of the Company’s sales are credit sales which are to the customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. |
Impact of COVID-19 | Impact of COVID-19 As of the date of this report, the COVID-19 pandemic is generally considered under control in China. In light of the current circumstances, in the absence of long-term local lockdown, the Company estimates its financial results will not be adversely affected in year 2023. The Company is closely monitoring the development of the COVID-19 pandemic and continuously evaluating any further potential impact on its business, results of operations and financial condition. If the outbreak persists or escalates, the Company may be subject to further negative impact on its business operations and financial condition. |
Short-term Investments | Short-term Investments Short-term investments consist of trading stock and debt securities, which include mutual funds and wealth management products issued by commercial banks. The Company accounts for short term investment in accordance with FASB ASC Topic 320 “Investments — Debt and Equity Securities.” Dividend and interest income, including amortization of the premium and discount arising at acquisition, for all categories of investments in securities is included in Consolidated Statements of Operations. Net realized and unrealized holding gains and losses for short term investments are included in Consolidated Statements of Operations. If a security is acquired with the intent of selling it within hours or days, the security is classified as a trading security. The Company classifies investments in trading stock and mutual funds as trading securities. Unrealized holding gains and losses for trading securities are included in earnings. If the Company has positive intent and ability to hold to maturity, the security is classified as held-to-maturity security. The Company classifies investments in wealth management products issued by commercial banks as held-to-maturity securities as the Company intends to hold these investments in wealth management products until maturity and the maturity terms of these investments are within one year. Due to the short-term maturity, the investments in wealth management products are valued at carrying value, which approximates the amortized cost. For individual securities classified as held-to-maturity securities, the Company evaluates whether a decline in FV below the amortized cost basis is other-than-temporary, in accordance with ASC 320. Other-than-temporary impairment loss is recognized in earnings equal to the entire excess of the debt security’s amortized cost basis over its FV at the balance sheet date of the reporting period for which the assessment is made. |
Accounts Receivable, Accounts Receivable from Related Party and Concentration of Risk | Accounts Receivable, Accounts Receivable from Related Party and Concentration of Risk Accounts receivable is presented net of an allowance for doubtful accounts. If any, the Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company reviews the collectability of its receivables on an ongoing basis. After all attempts to collect a receivable have failed. The receivable is written off against the allowance. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. The Company considers the following factors where determining whether to permit a longer payment period: ● the customer’s past payment history; ● the customer’s general risk profile, including factors such as the customer’s size, age and public or private status; ● macroeconomic conditions that may affect a customer’s ability to pay; and ● the relative importance of the customer relationship to the Company’s business. The normal payment period is approximately six months to one year after the customers received goods or are served. The Company gives customers different credit period considering the above factors. For the large customers such as large-scale oil and coal mine customers, the Company gives a two-year credit period. For IT outsourcing customers, the Company gives a year and half credit period. For small and medium customers, the Company gives a half year credit period. In accordance with ASC 210-10-45, the non-current accounts receivable and non-current accounts receivable from related parties represent the amounts that the Company does not reasonably expect to be realized during the normal operating cycle of the Company based on the Company’s best estimates and customers’ historical payment behaviors. The Company uses approximately one-year time period as the basis to the separation of current and non-current assets. |
Advances to Suppliers | Advances to Suppliers Advances to suppliers represent amounts prepaid to suppliers for purchases of inventory. In evaluating the recoverability of such advances, the Company mainly considers the age of the balance and ability of the suppliers to perform the related obligations. As of December 31, 2022 and 2021, advances to suppliers consisted of the following: 2022 2021 Advances to suppliers - Inventories $ 483,435 $ 751,301 Advances to suppliers - Services - 366,903 Less: reserve for amount not recoverable (1,666 ) (7,281 ) Total $ 481,769 $ 1,110,923 As of December 31, 2021, advances to third-party suppliers for services were $366,903, which includes $304,592 of advances for outsourcing software service, and $62,311 of advances for sales commission. As of December 31, 2022, there was no advance to service suppliers as the related outsourcing software service contract had expired. |
Deferred Offering Costs | Deferred Offering Costs The Company complies with ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Proposed Public Offering. Deferred offering costs will be charged to shareholders’ equity upon the completion of the Proposed Public Offering. Should the Proposed Public Offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations. |
Inventories | Inventories Inventories are stated at the lower of cost (weighted average basis) or net realizable value. The methods of determining inventory costs are used consistently from year to year. Allowance for inventory obsolescence is provided when the market value of certain inventory items is lower than the cost. |
Property, Equipment and Software | Property, Equipment and Software Property, equipment and software are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gains or losses are included in the statement of operations in the year of disposition. The Company examines the possibility of decreases in the value of property, equipment and software, when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Estimated useful lives are as follows, taking into account the assets’ estimated residual value: Classification Estimated Furniture and office equipment 2-3 years Computer equipment 2-3 years Transportation equipment 5 years Buildings and improvements 20 years Software 3 years |
Impairment of Long-lived Assets | Impairment of Long-lived Assets In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated FV and its book value. The Company did not record any impairment charge for the years ended December 31, 2022, 2021 and 2020. |
Revenue Recognition | 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. In accordance with ASC 606, revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company generates its revenues primarily from three sources: (1) hardware sales, (2) software sales, and (3) tax devices and services. The Company recognizes revenue when performance obligations under the terms of a contract with its customers are satisfied. This occurs when the control of the goods and services have been transferred to the customer. ● Hardware sales Hardware revenues are generated primarily from the sale of computer and network hardware to end users. The products include computers, printers, internet cables, certain internet servers, cameras and monitors. The sales of hardware represent a single performance obligation. The Company usually recognizes the revenue at the point in time when ownership is transferred to end customers. The Company’s revenue derived from sales of hardware is reported on a gross basis since the Company is primarily obligated in the transaction, bears inventory and credit risk and has discretion in establishing the prices. Hardware sales are classified as “Revenue-Hardware” on the Company’s consolidated statements of operations. ● Software sales HiTek also does business in software sales and focuses on the perpetual licenses sales for one of the self-developed software Communication Interface System(“CIS”). CIS is based on LINUX, which is a general embedded interface system used in petrochemical and coal enterprises. The system is used to communicate the RCTX-X module, collect the work diagram, the electricity diagram, the pressure temperature and other measures, and can extract the data and import it to the software of the windows platform to display analysis. Performance Obligations - Software contracts with customers include multiple performance obligations such as sale of software license, installation of software, operation training service and warranty. The installation and operation training are essential to the functionality of the software which are provided to the clients prior to the acceptance of the software. The Company provides one-year warranty which mainly telephone supports. The Company estimates that costs associated with warranty are de minimis to the overall contract. Therefore, the Company does not further allocate transaction price. The Company recognizes revenue when the software is accepted by the customer. Revenues from software sales contracts are classified as “Revenue-Software” on the Company’s consolidated statements of operations. ● Tax Devices and Services Before January 21, 2021, all VAT general taxpayer businesses in China are required to purchase the Anti-Counterfeiting Tax Control System (“ACTCS” or Golden Tax Disk or GTD) tax devices to issue the VAT Invoice and for quarterly VAT filing. HiTek is authorized to carry out the implementation of ACTCS specialty hardware retailing. The price of GTD and related supporting services are determined by the National Development and Reform Commission. From January 21, 2021, the new taxpayers can receive electronic tax control ukey for free from the Tax authority. HiTek could provide supporting services to the new taxpayers. Performance Obligations - Tax devices and services contracts with customers include multiple performance obligations such as delivery of products, installation and after-sales supporting services, tax control system risk investigation service, and tax invoicing management service, such as training service on issuing electronic invoice, complete tax declaration automatically and back up data online. Revenue from the sales of GTD devices is recognized when ownership is transferred to end customers. The Company provides the tax device after-sales supporting services and tax invoicing management service, charging the service fee on an annual basis because the service period is usually one year. Revenue related to its service is recognized as the services are performed and amounts are earned, using the straight-line method over the term of the related services agreement. The Company also charges a one-time service charge for each investigation request. Revenue related to tax control system risk investigation service is recognized at the point in time when the services are performed. Revenue is recognized based on each performance obligation’s standalone selling price that are sold separately and charged to customers at contract inception. The Company’s revenue derived from its gross billings is reported on a gross basis since the Company is primarily obligated in the transaction, is subject to inventory and credit risk and has several but not all of the indications that revenue should be recorded on the gross basis. Revenue was comprised of the followings. Years Ended December 31, 2022 2021 2020 Revenues Hardware $ 2,504,426 $ 2,434,694 $ 2,360,362 Tax devices and service 1,803,650 1,970,363 2,254,176 Software 2,120,532 2,056,106 1,053,467 IT services - - 136,722 Total revenues $ 6,428,608 $ 6,461,163 $ 5,804,727 ● Contract balances Prepayments received from customers prior to the services being performed are recorded as deferred revenue. Deferred revenue consists of the annual service fees for Golden Tax Disk and tax invoicing management service received from customers while the services have not yet been performed. The Company recognizes the service fees amount as revenue on a straight-line basis in accordance with the service periods. ● Practical expedients and exemptions The Company generally expenses sales commissions as incurred because the amortization period would have been one year or less. |
Deferred Revenue | Deferred Revenue Deferred revenue consists of the annual service fees for Golden Tax Disk (defined below) received from customers but the services have not yet been performed. The Company recognizes the service amount as revenue on a straight-line basis in accordance with the service periods. Deferred revenue as of December 31, 2022 and 2021 was $977,054 and $784,530, respectively. For the years ended December 31, 2022, 2021 and 2020, the Company recognized revenue of $784,530, $752,286 and $763,191, respectively, that was included in the deferred revenue balance at the beginning of each year. |
Cost of Revenue | Cost of Revenue 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; and (iv) compensation for the employees who handle the products and other costs that are necessary for us to provide the services to our customers. |
Selling Expenses | Selling Expenses Selling expenses consists of primarily shipping and handling costs for products sold and advertisement, marketing expenses for promotion of our products. During the year ended December 31, 2022 and 2021, selling expenses also included sales commission paid to a third party for obtaining contracts with customers. |
General and Administrative Expenses | General and Administrative Expenses General and administrative expenses consist primarily of costs in salary and welfare expenses for our general administrative and management staff, facilities costs, depreciation and amortization expenses, professional fees, accounting fees, meals and entertainment, utilities, and other miscellaneous expenses incurred in connection with general operations. All depreciation and amortization expenses were recorded in general and administrative expenses because fixed assets are mainly for sales and administrative purpose. |
Government Subsidies | Government Subsidies Grants are given by the government to mainly support the Company for the increase in production and social insurance compensation for rural laborers. Grants are recognized as government subsidies income in the consolidated statements of operations when received. |
Research and Development Expenses | Research and Development Expenses The Company follows FASB ASC 985-20, Cost of Software to Be Sold, Leased or Marketed, regarding software development costs to be sold, leased, or otherwise marketed. FASB ASC 985-20-25 requires research and development costs for software development to be expensed as incurred until the software model is technologically feasible. Technological feasibility is established when the enterprise has completed all planning, designing, coding, testing, and identification of risks activities necessary to establish that the product can be produced to meet its design specifications, features, functions, technical performance requirements. A certain amount of judgment and estimation is required to assess when technological feasibility Is established, as well as the ongoing assessment of the recoverability of capitalized costs. The Company’s products reach technological feasibility shortly before the products are released and sold to the public. Therefore, research and development (“R&D”) costs are generally expensed as incurred. The Company expenses R&D expenses as incurred and are included as part of general and administrative expenses. R&D expenses for the years ended December 31, 2022, 2021 and 2020 were $42,052, $43,661 and 35,904, respectively. The Company defers certain costs related to the software development activities associated with certain software which the Company has determined have future economic benefit. Management periodically reviews and revises, when necessary, its estimate of the future benefit of these costs and expenses them if it deems there no longer is a future benefit. The Company has two software (for internal use) (Finance and Taxation Service Platform Mobile Application and Corporate Full-Service Platform Mobile Application) and they are fully amortized as of December 31, 2022. |
Income Taxes | Income Taxes The Company is governed by the Income Tax Law of the PRC. The Company accounts for income taxes using the asset/liability method prescribed by ASC 740, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. The Company applied the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes,” which provides clarification related to the process associated with accounting for uncertain tax positions recognized in the Company’s CFS. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. |
Value Added Taxes (“VAT”) | Value Added Taxes (“VAT”) Starting from April 1, 2019, the VAT rate for revenue generated from providing products was changed from 16% to 13%. VAT is reported as a deduction of revenue when incurred. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable. |
Foreign Currency Translation | Foreign Currency Translation The functional currency of the Company’s operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The CFS are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for revenues and expenses and cash flows. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income / loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. All of the Company’s revenue transactions are transacted in its functional currency. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company. The exchange rates as of December 31, 2022 and 2021 and for the year ended December 31, 2022 and 2021 are as follows: December 31, Years Ended 2022 2021 2022 2021 Foreign currency Balance Sheet Balance Sheet Profits/Loss Profits/Loss RMB:1USD 6.9091 6.3588 6.7285 6.4499 |
Comprehensive Income | Comprehensive Income Comprehensive income is comprised of net income and all changes to the statements of shareholders’ equity, except those due to investments by shareholders and changes in paid-in capital. For the Company, comprehensive income for the years ended December 31, 2022, 2021 and 2020 consisted of net income and unrealized income (loss) from foreign currency translation adjustment. |
Related Parties | Related Parties A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. |
Segment reporting | Segment reporting ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers. The Company follows ASC 280 in evaluating the internal organization and reporting used by the Company’s chief operating decision maker (that is the Company’s CEO) for making decisions, allocating resources and assessing performance. Since the Company’s assets are substantially all located in the PRC and substantially all of the Company’s revenues and expenses are derived in the PRC, the Company has determined that it has only one operating segment and therefore one reportable segment as defined by ASC 280. |
Leases | Leases On December 31, 2022, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (as amended by ASU 2018-01, 2018-10, 2018-11, 2018-20, and 2019-01, collectively “ASC 842”), using the modified retrospective method. The Company elected the transition method which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, previously reported financial information has not been restated to reflect the application of the new standard to the comparative periods presented. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allows the Company to carry forward certain historical conclusions reached under ASC Topic 840 regarding lease identification, classification, and the accounting treatment of initial direct costs. The Company elected not to record assets and liabilities on its consolidated balance sheet for new or existing lease arrangements with terms of 12 months or less. The Company recognizes lease expenses for such lease on a straight-line basis over the lease term. The most significant impact upon adoption relates to the recognition of Right-of-use (“ROU”) assets and lease liabilities on the Company’s consolidated balance sheets for office and warehouse space leases. At the commencement date of a lease, the Company recognizes a lease liability for future fixed lease payments and a right-of-use (“ROU”) asset representing the right to use the underlying asset during the lease term. The lease liability is initially measured as the present value of the future fixed lease payments that will be made over the lease term. The lease term includes periods for which it’s reasonably certain that the renewal options will be exercised and periods for which it’s reasonably certain that the termination options will not be exercised. The future fixed lease payments are discounted using the rate implicit in the lease, if available, or the incremental borrowing rate (“IBR”). The Company will evaluate the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group. If the carrying value of the asset group is determined to not be recoverable and is in excess of the estimated fair value, the Company will record an impairment loss in other expenses in the consolidated statements of operations. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently issued accounting pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. The standard will replace the “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of adoption of this guidance on its CFS. The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on its CFS. |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Schedule of prepaid expenses and other current assets | Previously reported December 31, 2021 (Decrease)/ Increase December 31, 2021 (Reclassified) Consolidated Balance Sheets Current assets: Loan receivable $ - $ 204,441 $ 204,441 Prepaid expenses and other current assets $ 360,552 $ (204,441 ) $ 156,111 |
Schedule of fair value measurement recurring basis | Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2022 (Level 1) (Level 2) (Level 3) Trading securities $ 2,408,772 $ 2,408,772 $ - $ - Held-to-maturity debt securities 1,881,576 1,881,576 - - Total $ 4,290,348 $ 4,290,348 $ - $ - Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2021 (Level 1) (Level 2) (Level 3) Trading securities $ 5,197,015 $ 188,208 $ 5,008,807 $ - Total $ 5,197,015 $ 188,208 $ 5,008,807 $ - |
Schedule of advances to suppliers | 2022 2021 Advances to suppliers - Inventories $ 483,435 $ 751,301 Advances to suppliers - Services - 366,903 Less: reserve for amount not recoverable (1,666 ) (7,281 ) Total $ 481,769 $ 1,110,923 |
Schedule of estimated useful lives | Classification Estimated Furniture and office equipment 2-3 years Computer equipment 2-3 years Transportation equipment 5 years Buildings and improvements 20 years Software 3 years |
Schedule of revenue | Years Ended December 31, 2022 2021 2020 Revenues Hardware $ 2,504,426 $ 2,434,694 $ 2,360,362 Tax devices and service 1,803,650 1,970,363 2,254,176 Software 2,120,532 2,056,106 1,053,467 IT services - - 136,722 Total revenues $ 6,428,608 $ 6,461,163 $ 5,804,727 |
Schedule of exchange rates | December 31, Years Ended 2022 2021 2022 2021 Foreign currency Balance Sheet Balance Sheet Profits/Loss Profits/Loss RMB:1USD 6.9091 6.3588 6.7285 6.4499 |
Short-Term Investment (Tables)
Short-Term Investment (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Short-term Investments [Abstract] | |
Schedule of short-term investments | Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2022 (Level 1) (Level 2) (Level 3) Trading securities $ 2,408,772 $ 2,408,772 $ - $ - Held-to-maturity debt securities 1,881,576 1,881,576 - - Total $ 4,290,348 $ 4,290,348 $ - $ - Quoted Significant Significant Prices in Other Other Active Observable Unobservable December 31, Markets Inputs Inputs 2021 (Level 1) (Level 2) (Level 3) Trading securities $ 5,197,015 $ 188,208 $ 5,008,807 $ - Total $ 5,197,015 $ 188,208 $ 5,008,807 $ - |
Schedule of investment income | December 31, 2022 2021 2020 (Loss) Gain from sales of short-term investments: Trading securities $ (30,848 ) $ 3,945 $ 46,492 Held-to-maturity debt securities - 17,189 32,093 Unrealized holding income: Trading securities (2,722 ) 82,241 20,989 Held-to-maturity debt securities 14,207 - - Net investment (loss) income $ (19,363 ) $ 103,375 $ 99,574 |
Accounts Receivable, Net (Table
Accounts Receivable, Net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accounts Receivable, Net [Abstract] | |
Schedule of accounts receivable | 2022 2021 Accounts receivable $ 3,435,340 $ 2,536,589 Less: allowance for doubtful accounts (164,122 ) $ (179,475 ) Accounts receivable, net $ 3,271,218 $ 2,357,114 Accounts receivable – related party, net $ 399,465 $ 414,639 Non-current accounts receivable $ 4,209,546 $ 3,134,361 Non-current accounts receivable-related party $ - $ 548,395 |
Schedule of the allowance for doubtful accounts | Balance at January 1, 2021 $ 298,224 Decrease in allowance for doubtful accounts (124,881 ) Foreign exchange difference 6,132 Balance at December 31, 2021 179,475 Decrease in allowance for doubtful accounts (1,087 ) Foreign exchange difference (14,266 ) Balance at December 31, 2022 $ 164,122 |
Inventories, Net (Tables)
Inventories, Net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Inventories, Net [Abstract] | |
Schedule of inventories | 2022 2021 Inventory $ 442,681 $ 419,726 Less: reserve for obsolete inventories (12,011 ) (10,705 ) Total $ 430,670 $ 409,021 |
Prepaid Expenses and Other Cu_2
Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Prepaid Expenses and Other Current Assets [Abstract] | |
Schedule of prepaid expenses and current assets | 2022 2021 Other receivables, net $ 48,320 $ 105,623 Interest receivable 42,263 6,619 Prepaid expenses 4,342 43,869 Total $ 94,925 $ 156,111 |
Loan Receivable (Tables)
Loan Receivable (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Loan Receivable [Abstract] | |
Schedule of loan receivable | 2022 2021 Short-term loan receivable $ 1,013,157 $ 204,441 Long-term loan receivable 4,342,100 - Total $ 5,355,257 $ 204,441 |
Property, Equipment and Softw_2
Property, Equipment and Software, Net (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, equipment and software | 2022 2021 Office furniture $ 2,576 $ 2,798 Computer equipment 6,545 7,111 Transportation equipment 67,580 73,429 Buildings and improvements 448,607 487,430 Software 1,068,156 1,160,596 1,593,464 1,731,364 Less: accumulated depreciation and amortization (1,470,497 ) (1,574,603 ) $ 122,967 $ 156,761 |
Taxes payable (Tables)
Taxes payable (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Taxes payable [Abstract] | |
Schedule of taxes payable | 2022 2021 Value-added tax payable $ 1,135,002 $ 990,173 Income tax payable 404,617 198,130 Other taxes payable 131,703 110,844 Total $ 1,671,322 $ 1,299,147 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
Schedule of related party balances | 2022 2021 Accounts receivable Beijing Zhongzhe Yuantong Technology Co., Ltd. (1) $ 399,465 $ 414,639 $ 399,465 $ 414,639 Non-current accounts receivable-related parties Beijing Zhongzhe Yuantong Technology Co., Ltd. (1) $ - $ 548,395 $ - $ 548,395 2022 2021 Due to related parties Fengqi (Beijing) Zhineng Technology Co., Ltd. (2) $ 598 $ 4,163 $ 598 $ 4,163 2022 2021 2020 Revenue Beijing Zhongzhe Yuantong Technology Co., Ltd. (1) $ - $ - $ 609,321 $ - $ - $ 609,321 Cost of revenues Fengqi (Beijing) Zhineng Technology Co., Ltd. (2) $ 11,830 $ 52,961 $ - $ 11,830 $ 52,961 $ - (1) Beijing Zhongzhe Yuantong Technology Co., Ltd. (“Beijing Zhongzhe”) and one of the minority shareholders of HiTek are under common control. The Company generated sales revenues from Beijing Zhongzhe Yuantong Technology Co., Ltd., in hardware sales of $ nil nil (2) Mr. Yin is the director and a minority shareholder of Fengqi (Beijing) Zhineng Technology Co., Ltd. The Company purchased from Fengqi (Beijing) Zhineng Technology Co., Ltd., in hardware of $11,830, $52,961 and $ nil |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Leases [Abstract] | |
Schedule of operating leases | Operating lease ROU assets $ 6,641 Operating lease liabilities-current $ 3,242 Operating lease liabilities-non current 3,399 Total operating lease liabilities $ 6,641 Weighted average remaining lease term 2.0 years Weighted average discount rate 4.8 % |
Schedule of maturity of lease liabilities | 12 months ending December 31, 2023 $ 3,474 2024 3,474 Total lease payments 6,948 Less: interest (307 ) Present value of lease liabilities $ 6,641 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses and Other Current Liabilities [Abstract] | |
Schedule of accrued expenses and other current liabilities | 2022 2021 Payroll $ 253,212 $ 180,855 Interest payable 21,132 - Other payable 73,823 1,070 Total $ 348,167 $ 181,925 |
Borrowings (Tables)
Borrowings (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Borrowings [Abstract] | |
Schedule of borrowings | 2022 2021 Short-term borrowings $ 506,578 $ - Long-term borrowings 2,171,050 - Total $ 2,677,628 $ - |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Schedule of income (loss) before income taxes | 2022 2021 2020 Non-PRC operations $ (385,297 ) $ (328,672 ) $ (46,483 ) PRC operations 2,254,260 2,540,883 2,004,584 Total income before income taxes $ 1,868,963 $ 2,212,211 $ 1,958,101 |
Schedule of income tax expense | 2022 2021 2020 Current tax expense PRC $ 276,190 $ 202,229 $ 26,946 Deferred tax expense PRC 177,028 340,624 242,296 Total income tax expense $ 453,218 $ 542,853 $ 269,242 |
Schedule of deferred tax assets and liabilities | 2022 2021 Deferred tax assets Net operating loss $ 5,313 $ 8,060 Deferred revenue 205,605 147,876 Unbilled cost 355,461 225,242 Unbilled interest expenses 34,592 - Software amortization 267,039 290,149 Allowance for doubtful accounts 8,308 15,270 Inventories obsolescence 7,043 1,759 Unrealized losses on trading securities 1,809 1,966 Accrued Bonus 62,441 40,377 Other 31,819 27,491 Total deferred tax assets 979,430 758,190 Deferred tax liabilities Unbilled revenue (2,149,169 ) (1,880,466 ) Unbilled interest income (69,149 ) - Deferred government subsidiary income (42,806 ) (46,511 ) Unrealized gain on short-term investment (2,796 ) (23,742 ) Other (4,462 ) (13,977 ) Total deferred tax liabilities (2,268,382 ) (1,964,696 ) Valuation allowance (11,469 ) (19,135 ) Net deferred tax liabilities $ (1,300,421 ) $ (1,225,641 ) |
Schedule of a reconciliation of income tax expense | 2022 2021 2020 PRC statutory tax rate 25.0 % 25.0 % 25.0 % Effect of different tax rates in different jurisdictions 5.2 % 3.7 % - % Permanent difference For inventory loss - - 0.1 % For deferred offering costs 0.0 % 0.7 % (2.5 )% For others (0.1 )% 0.4 % 0.8 % Tax holiday effect (5.9 )% (5.3 )% (9.6 )% Effective tax rate 24.2 % 24.5 % 13.8 % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted earnings per share | 2022 2021 2020 Numerator: Net income $ 1,415,745 $ 1,669,357 $ 1,688,859 Denominator: Weighted-average shares used in computing basic and diluted net income per share 10,987,679 10,987,679 10,987,679 Net income per share of ordinary shares: -basic and diluted $ 0.13 $ 0.15 $ 0.15 |
Concentrations (Tables)
Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Concentrations [Abstract] | |
Schedule of details of customers total revenues | Years Ended December 31, 2022 2021 2020 Custom A $ 2,291,651 36 % $ 1,784,738 28 % $ 1,254,945 22 % Custom B 834,911 13 % 896,220 14 % - - % Custom C - - % - - % 609,322 10 % Total $ 3,126,562 49 % $ 2,680,958 42 % $ 1,864,267 32 % |
Schedule of details of customers accounts receivable | December 31, 2022 2021 2020 Custom A $ 5,274,060 67 % $ 4,256,804 66 % $ 3,001,818 53 % Custom B 1,864,208 24 % 1,027,238 16 % - - % Custom C - - % 963,034 15 % 1,509,383 27 % Total $ 7,138,268 91 % $ 6,247,076 97 % $ 4,511,201 80 % |
Schedule of details of suppliers total purchases | Years Ended December 31, 2022 2021 2020 Supplier A $ - - % $ 295,283 11 % $ 563,653 22 % Supplier B - - % - - % 415,779 16 % Supplier C 472,988 16 % - - % - - % Supplier D 430,744 15 % 267,933 10 % - - % Supplier E 366,115 13 % - - % - - % Supplier F 326,836 11 % - - % - - % Total $ 1,596,683 55 % $ 563,216 21 % $ 979,432 38 % |
Schedule of details of suppliers accounts payable | December 31, 2022 2021 2020 Supplier G $ 131,661 19 % $ - - % $ 51,472 14 % Supplier H 79,605 11 % 86,494 17 % 49,788 13 % Supplier I - - % - - % 45,827 12 % Supplier J - % - - % 40,039 11 % Supplier E 155,990 22 % - - % - - % Supplier K - - % 84,671 16 % - - % Supplier L - - % 66,068 13 % - - % Total $ 367,256 52 % $ 237,233 46 % $ 187,126 50 % |
Commitments and Contingency (Ta
Commitments and Contingency (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingency [Abstract] | |
Schedule of balance sheets | As of December 31, 2022 2021 Current assets $ 11,276,852 $ 11,779,996 Total non-current assets $ 9,102,933 $ 4,173,234 Total Assets $ 20,379,785 $ 15,953,230 Total liabilities $ 5,329,843 $ 3,793,609 |
Schedule of operations | Years Ended December 31, 2022 2021 2020 Revenues $ 6,228,595 $ 6,473,638 $ 5,804,727 Net income $ 1,684,991 $ 2,061,517 $ 1,735,340 |
Schedule of cash flows | Years Ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ 4,016,852 $ (757,861 ) $ 3,025,193 Net cash (used in) provided by investing activities $ (7,349,231 ) $ 400,006 $ (865,047 ) Net cash provided by financing activities $ 2,749,498 $ - $ - |
Subsequent Events (Tables)
Subsequent Events (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Subsequent Events [Abstract] | |
Schedule of the pro forma condensed balance sheet | December 31, 2022 Actual Pro Forma US$ US$ Assets (unaudited) Current assets Cash (1) $ 1,203,160 $ 17,203,160 Short-term investments 4,290,348 4,290,348 Accounts receivable, net 3,271,218 3,271,218 Accounts receivable - related party, net 399,465 399,465 Advances to suppliers, net 481,769 481,769 Inventories, net 430,670 430,670 Deferred offering cost (2) 917,446 - Loan receivable 1,013,157 1,013,157 Prepaid expenses and other current assets 94,925 94,925 Total current assets 12,102,158 27,184,712 Non-current assets Non-current accounts receivable 4,209,546 4,209,546 Non-current advance to a third party 421,679 421,679 Non-current loan receivable 4,342,100 4,342,100 Property, equipment and software, net 122,967 122,967 Operating lease right-of-use assets 6,641 6,641 Total non-current assets 9,102,933 9,102,933 Total Assets $ 21,205,091 $ 36,287,645 Liabilities and Shareholders’ Equity Current l Accounts payable $ 696,734 $ 696,734 Loan payable 506,578 506,578 Deferred revenue 977,054 977,054 Taxes payable 1,671,322 1,671,322 Due to related parties 598 598 Accrued expenses and other current liabilities (3) 348,167 1,907,581 Operating lease liabilities 3,242 3,242 Total current liabilities 4,203,695 5,763,109 Non-current Liabilities Loan payable, non-current 2,171,050 2,171,050 Deferred income tax liabilities, non-current 1,300,421 1,300,421 Operating lease liabilities, non-current 3,399 3,399 Total non-current liabilities 3,474,870 3,474,870 Total Liabilities 7,678,565 9,237,979 Commitments and Contingencies Shareholders’ Equity Ordinary Shares US$0.0001 par value; 10,987,679 outstanding on an actual basis, 14,187,679 issued and outstanding on a pro forma as adjusted basis 1,099 1,419 Additional paid-in capital () 2,628,356 16,151,176 Statutory reserve 836,215 836,215 Retained earnings 10,340,107 10,340,107 Accumulated other comprehensive (loss) income (279,251 ) (279,251 ) Total Shareholders’ Equity 13,526,526 27,049,666 Total Liabilities and Shareholders’ Equity $ 21,205,091 $ 36,287,645 (1) Pro forma cash reflects $16,000,000 offering proceeds. (2) Pro forma deferred offering cost reflects charged against the gross proceeds of the offering. (3) Pro forma accrued expenses and other current liabilities reflects $1,360,000 of underwriting discount and additional offering expenses of $199,414. (4) Pro forma additional paid in capital reflects the net proceeds the Company expects to receive, after deducting underwriting fee, underwriters’ expense allowance and other expenses. The Company expects to receive net proceeds of $13,523,140 ($16,000,000 offering gross proceeds, less underwriting discounts of $1,360,000, and estimated offering expenses of $1,116,860). |
Nature of Operations (Details)
Nature of Operations (Details) - shares | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 16, 2017 | Nov. 03, 2017 | |
Nature of Operations (Details) [Line Items] | ||||
Ordinary shares, shares issued | 10,987,679 | 10,987,679 | 10,987,679 | 10,987,679 |
Ownership, description | Xiamen Hengda HiTek Computer Network Co., Ltd. (“HiTek”), was established in January 1996 by Shenping Yin, Xiaoyang Huang (the spouse of Shenping Yin) and nine other shareholders, who held 29.83%, 44.74% and 25.43% of its equity interests, respectively, in Xiamen, Fujian Province, PRC pursuant to PRC laws. The Company entered into a series of contractual arrangements with HiTek which were effective in March 2018, and its equity holders through WFOE to obtain control and became the primary beneficiary of HiTek | |||
Shenping Yin [Member] | ||||
Nature of Operations (Details) [Line Items] | ||||
Ownership percentage | 74.55% | 100% | 100% |
Basis of Presentation and Sum_3
Basis of Presentation and Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) [Line Items] | |||
Percentage of quarterly profit | 100% | ||
Cash and cash equivalents | $ 955,941 | $ 1,557,325 | |
Advances to third-party suppliers for services | 366,903 | ||
Advances for outsourcing software service | 304,592 | ||
Advances for sales commission | $ 62,311 | ||
Deferred revenue | $977,054 | $784,530 | |
Recognized revenue | $ 784,530 | $ 752,286 | $ 763,191 |
Research and development expenses | $ 42,052 | $ 43,661 | $ 35,904 |
Value added taxes, description | Starting from April 1, 2019, the VAT rate for revenue generated from providing products was changed from 16% to 13%. | ||
Total Assets [Member] | |||
Basis of Presentation and Summary of Significant Accounting Policies (Details) [Line Items] | |||
Variable interest entities, percentage | 96% | 93% | |
Total Liabilities [Member] | |||
Basis of Presentation and Summary of Significant Accounting Policies (Details) [Line Items] | |||
Variable interest entities, percentage | 98% | 100% |
Basis of Presentation and Sum_4
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of prepaid expenses and other current assets | 12 Months Ended |
Dec. 31, 2021 USD ($) | |
Decrease Increase [Member] | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of prepaid expenses and other current assets [Line Items] | |
Loan receivable | $ 204,441 |
Prepaid expenses and other current assets | (204,441) |
Reclassified [Member] | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of prepaid expenses and other current assets [Line Items] | |
Loan receivable | 204,441 |
Prepaid expenses and other current assets | 156,111 |
Previously reported [Member] | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of prepaid expenses and other current assets [Line Items] | |
Prepaid expenses and other current assets | $ 360,552 |
Basis of Presentation and Sum_5
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of fair value measurement recurring basis - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of fair value measurement recurring basis [Line Items] | ||
Trading securities | $ 2,408,772 | $ 5,197,015 |
Held-to-maturity debt securities | 1,881,576 | |
Total | 4,290,348 | 5,197,015 |
Quoted Prices in Active Markets (Level 1) [Member] | ||
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of fair value measurement recurring basis [Line Items] | ||
Trading securities | 2,408,772 | 188,208 |
Held-to-maturity debt securities | 1,881,576 | |
Total | 4,290,348 | 188,208 |
Significant Other Observable Inputs (Level 2) [Member] | ||
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of fair value measurement recurring basis [Line Items] | ||
Trading securities | 5,008,807 | |
Held-to-maturity debt securities | ||
Total | 5,008,807 | |
Significant Other Unobservable Inputs (Level 3) [Member] | ||
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of fair value measurement recurring basis [Line Items] | ||
Trading securities | ||
Held-to-maturity debt securities | ||
Total |
Basis of Presentation and Sum_6
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of advances to suppliers - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule Of Advances To Suppliers Abstract | ||
Advances to suppliers - Inventories | $ 483,435 | $ 751,301 |
Advances to suppliers - Services | 366,903 | |
Less: reserve for amount not recoverable | (1,666) | (7,281) |
Total | $ 481,769 | $ 1,110,923 |
Basis of Presentation and Sum_7
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives | 12 Months Ended |
Dec. 31, 2021 | |
Furniture and office equipment [Member[ | Minimum [Member] | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives [Line Items] | |
Estimated useful lives of assets | 2 years |
Furniture and office equipment [Member[ | Maximum [Member] | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives [Line Items] | |
Estimated useful lives of assets | 3 years |
Computer equipment [Member[ | Minimum [Member] | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives [Line Items] | |
Estimated useful lives of assets | 2 years |
Computer equipment [Member[ | Maximum [Member] | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives [Line Items] | |
Estimated useful lives of assets | 3 years |
Transportation equipment [Member[ | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives [Line Items] | |
Estimated useful lives of assets | 5 years |
Buildings and improvements [Member[ | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives [Line Items] | |
Estimated useful lives of assets | 20 years |
Software [Member[ | |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of estimated useful lives [Line Items] | |
Estimated useful lives of assets | 3 years |
Basis of Presentation and Sum_8
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of revenue - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Revenues | |||
Total revenues | $ 6,428,608 | $ 6,461,163 | $ 5,804,727 |
Hardware [Member] | |||
Revenues | |||
Total revenues | 2,504,426 | 2,434,694 | 2,360,362 |
Tax devices and service [Member] | |||
Revenues | |||
Total revenues | 1,803,650 | 1,970,363 | 2,254,176 |
Software [Member] | |||
Revenues | |||
Total revenues | $ 2,120,532 | $ 2,056,106 | 1,053,467 |
IT services [Member] | |||
Revenues | |||
Total revenues | $ 136,722 |
Basis of Presentation and Sum_9
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of exchange rates | Dec. 31, 2022 | Dec. 31, 2021 |
Balance Sheet [Member] | ||
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of exchange rates [Line Items] | ||
RMB:1USD | 6.9091 | 6.3588 |
Profits/Loss [Member] | ||
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of exchange rates [Line Items] | ||
RMB:1USD | 6.7285 | 6.4499 |
Short-Term Investment (Details)
Short-Term Investment (Details) - Schedule of short-term investments - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Short-Term Investment (Details) - Schedule of short-term investments [Line Items] | ||
Trading securities | $ 2,408,772 | $ 5,197,015 |
Held-to-maturity debt securities | 1,881,576 | |
Total | 4,290,348 | 5,197,015 |
Quoted Prices in Active Markets (Level 1) [Member] | ||
Short-Term Investment (Details) - Schedule of short-term investments [Line Items] | ||
Trading securities | 2,408,772 | 188,208 |
Held-to-maturity debt securities | 1,881,576 | |
Total | 4,290,348 | 188,208 |
Significant Other Observable Inputs (Level 2) [Member] | ||
Short-Term Investment (Details) - Schedule of short-term investments [Line Items] | ||
Trading securities | 5,008,807 | |
Held-to-maturity debt securities | ||
Total | 5,008,807 | |
Significant Other Unobservable Inputs (Level 3) [Member] | ||
Short-Term Investment (Details) - Schedule of short-term investments [Line Items] | ||
Trading securities | ||
Held-to-maturity debt securities | ||
Total |
Short-Term Investment (Detail_2
Short-Term Investment (Details) - Schedule of investment income - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
(Loss) Gain from sales of short-term investments: | |||
Trading securities | $ (30,848) | $ 3,945 | $ 46,492 |
Held-to-maturity debt securities | 17,189 | 32,093 | |
Unrealized holding income: | |||
Trading securities | (2,722) | 82,241 | 20,989 |
Held-to-maturity debt securities | 14,207 | ||
Net investment (loss) income | $ (19,363) | $ 103,375 | $ 99,574 |
Accounts Receivable, Net (Detai
Accounts Receivable, Net (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Accounts receivable, Net [Abstract] | |||
Doubtful accounts recovery for accounts receivable | $ 1,087 | $ 124 | $ 27,696 |
Accounts Receivable, Net (Det_2
Accounts Receivable, Net (Details) - Schedule of accounts receivable - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule Of Accounts Receivable Abstract | ||
Accounts receivable | $ 3,435,340 | $ 2,536,589 |
Less: allowance for doubtful accounts | (164,122) | (179,475) |
Accounts receivable, net | 3,271,218 | 2,357,114 |
Accounts receivable – related party, net | 399,465 | 414,639 |
Non-current accounts receivable | 4,209,546 | 3,134,361 |
Non-current accounts receivable-related party | $ 548,395 |
Accounts Receivable, Net (Det_3
Accounts Receivable, Net (Details) - Schedule of the allowance for doubtful accounts - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Schedule Of The Allowance For Doubtful Accounts Abstract | ||
Balance at beginning | $ 179,475 | $ 298,224 |
Decrease in allowance for doubtful accounts | (1,087) | (124,881) |
Foreign exchange difference | (14,266) | 6,132 |
Balance at ending | $ 164,122 | $ 179,475 |
Inventories, Net (Details)
Inventories, Net (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Inventories, Net [Abstract] | |||
Inventory obsolescence | $ 2,217 | $ (5,317) | $ 6,783 |
Inventories, Net (Details) - Sc
Inventories, Net (Details) - Schedule of inventories - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule Of Inventories Abstract | ||
Inventory | $ 442,681 | $ 419,726 |
Less: reserve for obsolete inventories | (12,011) | (10,705) |
Total | $ 430,670 | $ 409,021 |
Prepaid Expenses and Other Cu_3
Prepaid Expenses and Other Current Assets (Details) - Schedule of prepaid expenses and current assets - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule Of Prepaid Expenses And Current Assets Abstract | ||
Other receivables, net | $ 48,320 | $ 105,623 |
Interest receivable | 42,263 | 6,619 |
Prepaid expenses | 4,342 | 43,869 |
Total | $ 94,925 | $ 156,111 |
Loan Receivable (Details)
Loan Receivable (Details) | 12 Months Ended | ||||||||||||
Aug. 05, 2022 USD ($) | Aug. 05, 2022 CNY (¥) | Jun. 14, 2022 USD ($) | Mar. 28, 2022 USD ($) | Jan. 21, 2022 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2020 USD ($) | Jun. 14, 2022 CNY (¥) | Mar. 28, 2022 CNY (¥) | Jan. 21, 2022 CNY (¥) | Apr. 12, 2021 USD ($) | Apr. 12, 2021 CNY (¥) | |
Loan Receivable (Details) [Line Items] | |||||||||||||
Loan amount | $ 1,013,157 | $ 434,210 | $ 4,342,100 | ¥ 7,000,000 | ¥ 3,000,000 | ¥ 30,000,000 | $ 204,441 | ¥ 1,300,000 | |||||
Loan due date | Jun. 13, 2023 | Jul. 27, 2022 | Jan. 20, 2024 | Mar. 31, 2022 | |||||||||
Interest percentage | 12% | 12% | 12% | 4.50% | 12% | 12% | 12% | ||||||
Principal amount | $ 434,210 | ¥ 3,000,000 | |||||||||||
Interest repaid | 17,368 | ¥ 120,000 | |||||||||||
Production cost per year | $ 1,306,000 | ||||||||||||
Interest income | $ 555,789 | $ 7,343 | $ 6,395 | ||||||||||
Loan One [Member] | |||||||||||||
Loan Receivable (Details) [Line Items] | |||||||||||||
Exchange rate | 0.1447% | ||||||||||||
Loan Two [Member] | |||||||||||||
Loan Receivable (Details) [Line Items] | |||||||||||||
Exchange rate | 0.1447% | ||||||||||||
Loan Three [Member] | |||||||||||||
Loan Receivable (Details) [Line Items] | |||||||||||||
Exchange rate | 0.1447% |
Loan Receivable (Details) - Sch
Loan Receivable (Details) - Schedule of loan receivable - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule of loan receivable [Abstract] | ||
Short-term loan receivable | $ 1,013,157 | $ 204,441 |
Long-term loan receivable | 4,342,100 | |
Total | $ 5,355,257 | $ 204,441 |
Non-Current Advance to a Thir_2
Non-Current Advance to a Third Party (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Non-Current Advance to a Third Party (Details) [Line Items] | ||
Contract price installment payment, description | As of December 31, 2022, the total contract price was approximately $434,000 and shall be paid using installment payment method (30% within 30 working days after the signing of this contract, 50% within 30 working days upon launching of the official version, and 20% within 90 working days upon launching of the official version). | |
Forecast [Member] | ||
Non-Current Advance to a Third Party (Details) [Line Items] | ||
Final payment | $ 12,531 | |
Product Development [Member] | ||
Non-Current Advance to a Third Party (Details) [Line Items] | ||
Development costs | $ 421,679 | |
Software Development [Member] | ||
Non-Current Advance to a Third Party (Details) [Line Items] | ||
Development costs | $ 12,531 |
Property, Equipment and Softw_3
Property, Equipment and Software, Net (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Abstract] | |||
Depreciation expenses | $ 21,881 | $ 355,738 | $ 378,594 |
Property, Equipment and Softw_4
Property, Equipment and Software, Net (Details) - Schedule of property, equipment and software - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,593,464 | $ 1,731,364 |
Less: accumulated depreciation and amortization | (1,470,497) | (1,574,603) |
Property and equipment, net | 122,967 | 156,761 |
Office furniture [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 2,576 | 2,798 |
Computer equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 6,545 | 7,111 |
Transportation equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 67,580 | 73,429 |
Buildings and improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 448,607 | 487,430 |
Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,068,156 | $ 1,160,596 |
Taxes payable (Details) - Sched
Taxes payable (Details) - Schedule of taxes payable - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule Of Taxes Payable [Abstract] | ||
Value-added tax payable | $ 1,135,002 | $ 990,173 |
Income tax payable | 404,617 | 198,130 |
Other taxes payable | 131,703 | 110,844 |
Total | $ 1,671,322 | $ 1,299,147 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Apr. 25, 2023 | |
Related Party Transactions (Details) [Line Items] | ||||
Hardware sales | $ 255,344 | |||
Software sale | 353,977 | |||
Accounts receivable | 399,465 | 963,034 | ||
Purchased amount | 11,830 | 52,961 | ||
Beijing Zhongzhe Yuantong Technology Co., Ltd. [Member] | Forecast [Member] | ||||
Related Party Transactions (Details) [Line Items] | ||||
Subsequently repaid | $ 399,465 | |||
Fengqi Beijing Zhineng Technology Co Ltd [Member] | ||||
Related Party Transactions (Details) [Line Items] | ||||
Purchased amount | $ 598 | $ 4,163 |
Related Party Transactions (D_2
Related Party Transactions (Details) - Schedule of related party balances - USD ($) | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | ||
Related Party Transaction [Line Items] | ||||
Accounts receivable | $ 399,465 | $ 414,639 | ||
Non-current accounts receivable-related parties | 548,395 | |||
Revenue | $ 609,321 | |||
Cost of revenues | 11,830 | 52,961 | ||
Beijing Zhongzhe Yuantong Technology Co., Ltd. [Member] | ||||
Related Party Transaction [Line Items] | ||||
Accounts receivable | [1] | 399,465 | 414,639 | |
Non-current accounts receivable-related parties | [1] | 548,395 | ||
Revenue | [1] | 609,321 | ||
Fengqi (Beijing) Zhineng Technology Co., Ltd. [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | [2] | 598 | 4,163 | |
Cost of revenues | [2] | $ 11,830 | $ 52,961 | |
[1] Beijing Zhongzhe Yuantong Technology Co., Ltd. (“Beijing Zhongzhe”) and one of the minority shareholders of HiTek are under common control. The Company generated sales revenues from Beijing Zhongzhe Yuantong Technology Co., Ltd., in hardware sales of $ nil nil Mr. Yin is the director and a minority shareholder of Fengqi (Beijing) Zhineng Technology Co., Ltd. The Company purchased from Fengqi (Beijing) Zhineng Technology Co., Ltd., in hardware of $11,830, $52,961 and $ nil |
Leases (Details) - Schedule of
Leases (Details) - Schedule of operating leases - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule of operating leases [Abstract] | ||
Operating lease ROU assets | $ 6,641 | |
Operating lease liabilities-current | 3,242 | |
Operating lease liabilities-non current | 3,399 | |
Total operating lease liabilities | $ 6,641 | |
Weighted average remaining lease term | 2 years | |
Weighted average discount rate | 4.80% |
Leases (Details) - Schedule o_2
Leases (Details) - Schedule of maturity of lease liabilities | Dec. 31, 2022 USD ($) |
Schedule of maturity of lease liabilities [Abstract] | |
2023 | $ 3,474 |
2024 | 3,474 |
Total lease payments | 6,948 |
Less: interest | (307) |
Present value of lease liabilities | $ 6,641 |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - Schedule of accrued expenses and other current liabilities - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule of Accrued Expenses And Other Current Liabilities [Abstract] | ||
Payroll | $ 253,212 | $ 180,855 |
Interest payable | 21,132 | |
Other payable | 73,823 | 1,070 |
Total | $ 348,167 | $ 181,925 |
Borrowings (Details)
Borrowings (Details) | 1 Months Ended | 12 Months Ended | |||||
Jun. 14, 2022 CNY (¥) | Mar. 28, 2022 CNY (¥) | Jan. 21, 2022 CNY (¥) | Dec. 31, 2022 USD ($) $ / shares | Dec. 31, 2021 USD ($) | Dec. 31, 2020 USD ($) | Dec. 31, 2022 CNY (¥) | |
Borrowings (Details) [Line Items] | |||||||
Borrowing agreements | ¥ | ¥ 3,500,000 | ¥ 1,500,000 | ¥ 15,000,000 | ||||
Loan rate of percentage | 12% | ||||||
Principal amount | $ 217,205 | ¥ 1,500,000 | |||||
Interest expense | 277,894 | ||||||
One Borrowing Agreement [Member] | |||||||
Borrowings (Details) [Line Items] | |||||||
Borrowing agreements | $ 2,171,050 | ||||||
Exchange rate (in Dollars per share) | $ / shares | $ 0.1447 | ||||||
Two Borrowing Agreement [Member] | |||||||
Borrowings (Details) [Line Items] | |||||||
Borrowing agreements | $ 217,205 | ||||||
Exchange rate (in Dollars per share) | $ / shares | $ 0.1447 | ||||||
Three Borrowing Agreement [Member] | |||||||
Borrowings (Details) [Line Items] | |||||||
Borrowing agreements | $ 506,578 | ||||||
Exchange rate (in Dollars per share) | $ / shares | $ 0.1447 |
Borrowings (Details) - Schedule
Borrowings (Details) - Schedule of borrowings - Borrowings [Member] - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Borrowings (Details) - Schedule of borrowings [Line Items] | ||
Short-term borrowings | $ 506,578 | |
Long-term borrowings | 2,171,050 | |
Total | $ 2,677,628 |
Statutory Reserve (Details)
Statutory Reserve (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Statutory Reserve [Abstract] | ||
Statutory reserve, description | Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). | |
Statutory reserve | $ 836,215 | $ 767,207 |
Ordinary Shares (Details)
Ordinary Shares (Details) | Jul. 15, 2021 USD ($) $ / shares shares | Dec. 31, 2022 $ / shares shares | Dec. 31, 2021 $ / shares | Dec. 16, 2017 shares | Nov. 03, 2017 shares |
Ordinary Shares (Details) [Line Items] | |||||
Ordinary shares, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Ordinary share issued | 10,987,679 | 10,987,679 | |||
Number of shareholders | 9 | 9 | |||
Offering cost (in Dollars) | $ | $ 50,000 | ||||
Shares offered | 500,000,000 | ||||
Ordinary shares comprised | 490,000,000 | ||||
Preference shares comprised | 10,000,000 | ||||
Common Stock [Member] | |||||
Ordinary Shares (Details) [Line Items] | |||||
Ordinary shares, authorized | 500,000,000 |
Income Taxes (Details)
Income Taxes (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes (Details) [Line Items] | |
Cumulative tax effect, percentage | 25% |
PRC [Member] | |
Income Taxes (Details) [Line Items] | |
Income tax EIT rate percentage | 25% |
Income Taxes (Details) - Schedu
Income Taxes (Details) - Schedule of income (loss) before income taxes - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Income Taxes (Details) - Schedule of income (loss) before income taxes [Line Items] | |||
Total income before income taxes | $ 1,868,963 | $ 2,212,211 | $ 1,958,101 |
Non-PRC operations [Member] | |||
Income Taxes (Details) - Schedule of income (loss) before income taxes [Line Items] | |||
Total income before income taxes | (385,297) | (328,672) | (46,483) |
PRC operations [Member] | |||
Income Taxes (Details) - Schedule of income (loss) before income taxes [Line Items] | |||
Total income before income taxes | $ 2,254,260 | $ 2,540,883 | $ 2,004,584 |
Income Taxes (Details) - Sche_2
Income Taxes (Details) - Schedule of income tax expense - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Deferred tax expense | |||
Total income tax expense | $ 453,218 | $ 542,853 | $ 269,242 |
PRC [Member] | |||
Current tax expense | |||
Current tax expense | 276,190 | 202,229 | 26,946 |
Deferred tax expense | |||
Deferred tax expense | $ 177,028 | $ 340,624 | $ 242,296 |
Income Taxes (Details) - Sche_3
Income Taxes (Details) - Schedule of deferred tax assets and liabilities - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets | ||
Net operating loss | $ 5,313 | $ 8,060 |
Deferred revenue | 205,605 | 147,876 |
Unbilled cost | 355,461 | 225,242 |
Unbilled interest expenses | 34,592 | |
Software amortization | 267,039 | 290,149 |
Allowance for doubtful accounts | 8,308 | 15,270 |
Inventories obsolescence | 7,043 | 1,759 |
Unrealized losses on trading securities | 1,809 | 1,966,000,000 |
Accrued Bonus | 62,441 | 40,377 |
Other | 31,819 | 27,491 |
Total deferred tax assets | 979,430 | 758,190 |
Deferred tax liabilities | ||
Unbilled revenue | (2,149,169) | (1,880,466) |
Unbilled interest income | (69,149) | |
Deferred government subsidiary income | (42,806) | (46,511) |
Unrealized gain on short-term investment | (2,796) | (23,742) |
Other | (4,462) | (13,977) |
Total deferred tax liabilities | (2,268,382) | (1,964,696) |
Valuation allowance | (11,469) | (19,135,000,000) |
Net deferred tax liabilities | $ (1,300,421) | $ (1,225,641) |
Income Taxes (Details) - Sche_4
Income Taxes (Details) - Schedule of a reconciliation of income tax expense | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Schedule of A Reconciliation Of Income Tax Expense [Abstract] | |||
PRC statutory tax rate | 25% | 25% | 25% |
Effect of different tax rates in different jurisdictions | 5.20% | 3.70% | |
Permanent difference | |||
For inventory loss | 0.10% | ||
For deferred offering costs | 0% | 0.70% | (2.50%) |
For others | (0.10%) | 0.40% | 0.80% |
Tax holiday effect | (5.90%) | (5.30%) | (9.60%) |
Effective tax rate | 24.20% | 24.50% | 13.80% |
Earnings Per Share (Details) -
Earnings Per Share (Details) - Schedule of basic and diluted earnings per share - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Numerator: | |||
Net income | $ 1,415,745 | $ 1,669,357 | $ 1,688,859 |
Denominator: | |||
Weighted-average shares used in computing basic and diluted net income per share | 10,987,679 | 10,987,679 | 10,987,679 |
Net income per share of ordinary shares: -basic and diluted | $ 0.13 | $ 0.15 | $ 0.15 |
Earnings Per Share (Details) _2
Earnings Per Share (Details) - Schedule of basic and diluted earnings per share (Parentheticals) - $ / shares | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Schedule of Basic and Diluted Earnings Per Share [Abstract] | |||
Weighted-average shares used in computing diluted net income per share | 10,987,679 | 10,987,679 | 10,987,679 |
Net income per share of ordinary shares diluted | $ 0.13 | $ 0.15 | $ 0.15 |
Concentrations (Details)
Concentrations (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Total Revenue [Member] | |
Concentrations (Details) [Line Items] | |
Concentration risk, percentage | 10% |
Accounts Receivable [Member] | |
Concentrations (Details) [Line Items] | |
Concentration risk, percentage | 10% |
Supplier [Member] | |
Concentrations (Details) [Line Items] | |
Concentration risk, percentage | 10% |
Accounts Payable [Member] | |
Concentrations (Details) [Line Items] | |
Concentration risk, percentage | 10% |
Concentrations (Details) - Sche
Concentrations (Details) - Schedule of details of customers total revenues - Total Revenue [Member] - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue, Major Customer [Line Items] | |||
Total Revenue, Amount | $ 3,126,562 | $ 2,680,958 | $ 1,864,267 |
Total Revenue, Percentage | 49% | 42% | 32% |
Customer A [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total Revenue, Amount | $ 2,291,651 | $ 1,784,738 | $ 1,254,945 |
Total Revenue, Percentage | 36% | 28% | 22% |
Customer B [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total Revenue, Amount | $ 834,911 | $ 896,220 | |
Total Revenue, Percentage | 13% | 14% | |
Customer C [Member] | |||
Revenue, Major Customer [Line Items] | |||
Total Revenue, Amount | $ 609,322 | ||
Total Revenue, Percentage | 10% |
Concentrations (Details) - Sc_2
Concentrations (Details) - Schedule of details of customers accounts receivable - Accounts Receivable [Member] - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Concentrations (Details) - Schedule of details of customers accounts receivable [Line Items] | |||
Accounts receivable, Amount | $ 7,138,268 | $ 6,247,076 | $ 4,511,201 |
Accounts receivable, Percentage | 91% | 97% | 80% |
Customer A [Member] | |||
Concentrations (Details) - Schedule of details of customers accounts receivable [Line Items] | |||
Accounts receivable, Amount | $ 5,274,060 | $ 4,256,804 | $ 3,001,818 |
Accounts receivable, Percentage | 67% | 66% | 53% |
Customer B [Member] | |||
Concentrations (Details) - Schedule of details of customers accounts receivable [Line Items] | |||
Accounts receivable, Amount | $ 1,864,208 | $ 1,027,238 | |
Accounts receivable, Percentage | 24% | 16% | |
Customer C [Member] | |||
Concentrations (Details) - Schedule of details of customers accounts receivable [Line Items] | |||
Accounts receivable, Amount | $ 963,034 | $ 1,509,383 | |
Accounts receivable, Percentage | 15% | 27% |
Concentrations (Details) - Sc_3
Concentrations (Details) - Schedule of details of suppliers total purchases - Total Purchase [Member] - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Concentrations (Details) - Schedule of details of suppliers total purchases [Line Items] | |||
Total purchase, Amount | $ 1,596,683 | $ 563,216 | $ 979,432 |
Total purchase, Percentage | 55% | 21% | 38% |
Supplier A [Member] | |||
Concentrations (Details) - Schedule of details of suppliers total purchases [Line Items] | |||
Total purchase, Amount | $ 295,283 | $ 563,653 | |
Total purchase, Percentage | 11% | 22% | |
Supplier B [Member] | |||
Concentrations (Details) - Schedule of details of suppliers total purchases [Line Items] | |||
Total purchase, Amount | $ 415,779 | ||
Total purchase, Percentage | 16% | ||
Supplier C [Member] | |||
Concentrations (Details) - Schedule of details of suppliers total purchases [Line Items] | |||
Total purchase, Amount | $ 472,988 | ||
Total purchase, Percentage | 16% | ||
Supplier D [Member] | |||
Concentrations (Details) - Schedule of details of suppliers total purchases [Line Items] | |||
Total purchase, Amount | $ 430,744 | $ 267,933 | |
Total purchase, Percentage | 15% | 10% | |
Supplier E [Member] | |||
Concentrations (Details) - Schedule of details of suppliers total purchases [Line Items] | |||
Total purchase, Amount | $ 366,115 | ||
Total purchase, Percentage | 13% | ||
Supplier F [Member] | |||
Concentrations (Details) - Schedule of details of suppliers total purchases [Line Items] | |||
Total purchase, Amount | $ 326,836 | ||
Total purchase, Percentage | 11% |
Concentrations (Details) - Sc_4
Concentrations (Details) - Schedule of details of suppliers accounts payable - Accounts Payable [Member] - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 367,256 | $ 237,233 | $ 187,126 |
Total accounts payable, Percentage | 52% | 46% | 50% |
Supplier G [Member] | |||
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 131,661 | $ 51,472 | |
Total accounts payable, Percentage | 19% | 14% | |
Supplier H [Member] | |||
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 79,605 | $ 86,494 | $ 49,788 |
Total accounts payable, Percentage | 11% | 17% | 13% |
Supplier I [Member] | |||
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 45,827 | ||
Total accounts payable, Percentage | 12% | ||
Supplier J [Member] | |||
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 40,039 | ||
Total accounts payable, Percentage | 11% | ||
Supplier E [Member] | |||
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 155,990 | ||
Total accounts payable, Percentage | 22% | ||
Supplier K [Member] | |||
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 84,671 | ||
Total accounts payable, Percentage | 16% | ||
Supplier L [Member] | |||
Concentrations (Details) - Schedule of details of suppliers accounts payable [Line Items] | |||
Total accounts payable, Amount | $ 66,068 | ||
Total accounts payable, Percentage | 13% |
Commitments and Contingency (De
Commitments and Contingency (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingency [Abstract] | |
Underwriter agreement description | November 10, 2020, the Company entered into an engagement with R.F. Lafferty & Co., Inc. and US Tiger Securities, Inc. (the “Underwriters”). |
Lease agreement description | The agreement expired on November 9, 2021 and it was amended by all parties to extend the service termination date to December 31, 2022.On August 16, 2022, US Tiger Securities, Inc. terminated the underwriter agreement with the Company that was executed on November 10, 2020 and amended on November 9, 2021. On August 25, 2022, the Company entered into an engagement with R.F. Lafferty & Co., Inc. and Pacific Century Securities, LLC. (the “New Underwriters”). The agreement will expire on the earlier of August 24, 2023 or the final closing of an Offering. Under the engagement, the Company agrees to pay the following fees: 1) Cash retainer: $100,000 which is refundable to the extent that the New Underwriters’ incurred expenses are less than the retainer paid. 2) Cash fee: At the closing of the IPO, the New Underwriters will receive a commission equal to eight and one-half percent (8.5%) of the gross proceeds received. 3) Non-Accountable expenses: $150,000 payable at the closing of the IPO which is intended to cover the New Underwriters’ legal and road show expenses associated with the IPO. |
Acquire to additional percentage | 15% |
Commitments and Contingency (_2
Commitments and Contingency (Details) - Schedule of balance sheets - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Schedule of selected condensed consolidating balance sheets [Abstract] | ||
Current assets | $ 11,276,852 | $ 11,779,996 |
Total non-current assets | 9,102,933 | 4,173,234 |
Total Assets | 20,379,785 | 15,953,230 |
Total liabilities | $ 5,329,843 | $ 3,793,609 |
Commitments and Contingency (_3
Commitments and Contingency (Details) - Schedule of operations - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Schedule of operations [Abstract] | |||
Revenues | $ 6,228,595 | $ 6,473,638 | $ 5,804,727 |
Net income | $ 1,684,991 | $ 2,061,517 | $ 1,735,340 |
Commitments and Contingency (_4
Commitments and Contingency (Details) - Schedule of cash flows - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Schedule of cash flows [Abstract] | |||
Net cash provided by (used in) operating activities | $ 4,016,852 | $ (757,861) | $ 3,025,193 |
Net cash (used in) provided by investing activities | (7,349,231) | 400,006 | (865,047) |
Net cash provided by financing activities | $ 2,749,498 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | 12 Months Ended | |||
Apr. 30, 2023 | Dec. 31, 2022 | Mar. 31, 2023 | Jul. 15, 2021 | |
Subsequent Events (Details) [Line Items] | ||||
Ordinary share, issued (in Shares) | 500,000,000 | |||
Net proceeds | $ 13,523,140 | |||
Offering proceeds | 16,000,000 | |||
Accrued expenses | 1,360,000 | |||
Additional offering expenses | 199,414 | |||
Offering gross proceeds | 16,000,000 | |||
Underwriting discounts | 1,360,000 | |||
Offering expenses | $ 1,116,860 | |||
Ordinary Shares [Member] | ||||
Subsequent Events (Details) [Line Items] | ||||
Sale of ordinary shares (in Shares) | 3,200,000 | |||
Price per share (in Dollars per share) | $ 5 | |||
Initial Public Offering [Member] | ||||
Subsequent Events (Details) [Line Items] | ||||
Net proceeds | $ 13,523,140 | |||
Forecast [Member] | Initial Public Offering [Member] | ||||
Subsequent Events (Details) [Line Items] | ||||
Ordinary share, issued (in Shares) | 3,200,000 | 3,680,000 | ||
Ordinary shares, par value (in Dollars per share) | $ 5 | $ 0.0001 | ||
Sale of aggregate ordinary shares value | $ 16,000,000 | |||
Forecast [Member] | Over-Allotment Option [Member] | ||||
Subsequent Events (Details) [Line Items] | ||||
Ordinary share, issued (in Shares) | 480,000 |
Subsequent Events (Details) - S
Subsequent Events (Details) - Schedule of the pro forma condensed balance sheet | Dec. 31, 2022 USD ($) | |
Actual [Member] | ||
Current assets | ||
Cash | $ 1,203,160 | [1] |
Short-term investments | 4,290,348 | |
Accounts receivable, net | 3,271,218 | |
Accounts receivable - related party, net | 399,465 | |
Advances to suppliers, net | 481,769 | |
Inventories, net | 430,670 | |
Deferred offering cost | 917,446 | [2] |
Loan receivable | 1,013,157 | |
Prepaid expenses and other current assets | 94,925 | |
Total current assets | 12,102,158 | |
Non-current assets | ||
Non-current accounts receivable | 4,209,546 | |
Non-current advance to a third party | 421,679 | |
Non-current loan receivable | 4,342,100 | |
Property, equipment and software, net | 122,967 | |
Operating lease right-of-use assets | 6,641 | |
Total non-current assets | 9,102,933 | |
Total Assets | 21,205,091 | |
Current liabilities | ||
Accounts payable | 696,734 | |
Loan payable | 506,578 | |
Deferred revenue | 977,054 | |
Taxes payable | 1,671,322 | |
Due to related parties | 598 | |
Accrued expenses and other current liabilities | 348,167 | [3] |
Operating lease liabilities | 3,242 | |
Total current liabilities | 4,203,695 | |
Non-current Liabilities | ||
Loan payable, non-current | 2,171,050 | |
Deferred income tax liabilities, non-current | 1,300,421 | |
Operating lease liabilities, non-current | 3,399 | |
Total non-current liabilities | 3,474,870 | |
Total Liabilities | 7,678,565 | |
Commitments and Contingencies | ||
Shareholders’ Equity | ||
Ordinary Shares US$0.0001 par value; 10,987,679 outstanding on an actual basis, 14,187,679 issued and outstanding on a pro forma as adjusted basis | 1,099 | |
Additional paid-in capital | 2,628,356 | |
Statutory reserve | 836,215 | |
Retained earnings | 10,340,107 | |
Accumulated other comprehensive (loss) income | (279,251) | |
Total Shareholders’ Equity | 13,526,526 | |
Total Liabilities and Shareholders’ Equity | 21,205,091 | |
Pro Forma As Adjusted [Member] | ||
Current assets | ||
Cash | 17,203,160 | [1] |
Short-term investments | 4,290,348 | |
Accounts receivable, net | 3,271,218 | |
Accounts receivable - related party, net | 399,465 | |
Advances to suppliers, net | 481,769 | |
Inventories, net | 430,670 | |
Deferred offering cost | [2] | |
Loan receivable | 1,013,157 | |
Prepaid expenses and other current assets | 94,925 | |
Total current assets | 27,184,712 | |
Non-current assets | ||
Non-current accounts receivable | 4,209,546 | |
Non-current advance to a third party | 421,679 | |
Non-current loan receivable | 4,342,100 | |
Property, equipment and software, net | 122,967 | |
Operating lease right-of-use assets | 6,641 | |
Total non-current assets | 9,102,933 | |
Total Assets | 36,287,645 | |
Current liabilities | ||
Accounts payable | 696,734 | |
Loan payable | 506,578 | |
Deferred revenue | 977,054 | |
Taxes payable | 1,671,322 | |
Due to related parties | 598 | |
Accrued expenses and other current liabilities | 1,907,581 | [3] |
Operating lease liabilities | 3,242 | |
Total current liabilities | 5,763,109 | |
Non-current Liabilities | ||
Loan payable, non-current | 2,171,050 | |
Deferred income tax liabilities, non-current | 1,300,421 | |
Operating lease liabilities, non-current | 3,399 | |
Total non-current liabilities | 3,474,870 | |
Total Liabilities | 9,237,979 | |
Commitments and Contingencies | ||
Shareholders’ Equity | ||
Ordinary Shares US$0.0001 par value; 10,987,679 outstanding on an actual basis, 14,187,679 issued and outstanding on a pro forma as adjusted basis | 1,419 | |
Additional paid-in capital | 16,151,176 | |
Statutory reserve | 836,215 | |
Retained earnings | 10,340,107 | |
Accumulated other comprehensive (loss) income | (279,251) | |
Total Shareholders’ Equity | 27,049,666 | |
Total Liabilities and Shareholders’ Equity | $ 36,287,645 | |
[1] Pro forma cash reflects $16,000,000 offering proceeds. Pro forma deferred offering cost reflects charged against the gross proceeds of the offering. Pro forma accrued expenses and other current liabilities reflects $1,360,000 of underwriting discount and additional offering expenses of $199,414. |
Subsequent Events (Details) -_2
Subsequent Events (Details) - Schedule of the pro forma condensed balance sheet (Parentheticals) | Dec. 31, 2022 $ / shares shares |
Actual [Member] | |
Condensed Balance Sheet Statements, Captions [Line Items] | |
Ordinary shares par value (in Dollars per share) | $ / shares | $ 0.0001 |
Ordinary shares, outstanding | 10,987,679 |
Pro Forma As Adjusted [Member] | |
Condensed Balance Sheet Statements, Captions [Line Items] | |
Ordinary shares par value (in Dollars per share) | $ / shares | $ 0.0001 |
Ordinary shares, issued | 14,187,679 |
Ordinary shares, outstanding | 14,187,679 |