Hitek Global Inc. Announces Fiscal Year 2022 Financial Results

XIAMEN,China,April 28,2023 -- Hitek Global Inc. (Nasdaq: HKIT) (the "Company"),a China-based information technology consulting and solutions service provider,today announced its financial results for the fiscal year ended December 31,2022.

Ms. Xiaoyang Huang,Chief Executive Officer and Director of Hitek Global Inc. commented,"During the year of 2022,there were restrictions on the mobility and normal activities in place from time to time in China,in response to the COVID-19 pandemic. However,we maintained our revenue in fiscal year 2022 at the same level as last fiscal year,despite the challenging and uncertain market conditions. We also achieved a stable gross profit margin and a positive profit even after deducting the expenses relating to our initial public offering. With the lifting of pandemic restrictions in China in December 2022,we believe that we are well-positioned to become a future-ready company as we actively seek business opportunities."

Ms. Huang continued,"Currently,China is encouraging self-employment in various ways,and we are exploring opportunities in related markets accordingly. We firmly believe that our accumulated stable experience in serving small and micro enterprises,especially in the field of IT services,will always be the solid foundation for our long-term development. Additionally,we strive to enhance our capabilities to provide more comprehensive IT solutions and expand our service offerings to diversify our income streams in the near future."

Fiscal Year 2022 Financial Results

Revenue

Total revenues were $6.4 million in fiscal year 2022,slightly decreased from $6.5 million in fiscal year 2021,mainly due to decrease in revenue generated from tax devices and services sales,and partially offset by increase in revenue generated from hardware sales and software sales.

Revenue generated from hardware sales was $2.5 million in fiscal year 2022,increased by 2.9% to $2.4 million in fiscal year 2021,the increase was mainly from small retail sales.

Revenue generated from software sales was $2.1 million in fiscal year 2022,increased by 3.1% to $2.0 million in fiscal year 2021,the increase was due to increase of maintenance service revenue.

Revenue generated from tax devices and services was $1.8 million in fiscal year 2022,decreased by 8.5% to $2.0 million in fiscal year 2021. The decrease was due to the decline in demand of our tax devices and services because,according to a new policy effective since January 2021,as a new policy was enacted in January 2021 that the new taxpayers in Xiamen can obtain tax Ukeys (USB security keys) from the PRC tax authorities for free to issue electronic invoices themselves.

Gross Profit and Gross Margin

Gross profit was $3.5 million in fiscal year 2022,decreased by 8.8% from $3.9 million in fiscal year 2021. Gross margin was 55.0% in fiscal year 2022,compared to 60.1% in fiscal year 2021.

Operating Expenses

Operating expenses were $1.9 million in fiscal year 2022,increased by 7.5% from $1.8 million in fiscal year 2021.

Selling expenses were $437,185 in fiscal year 2022,increased by 471.7% from $76,477 in fiscal year 2021. The increase was mainly because of the increase of the Company's sales commission in connection with obtaining new orders.

General and administrative expenses were $1.5 million in fiscal year 2022,decreased by 13.4% from $1.7 million in fiscal year 2021. The decrease was mainly due to the decrease of bad debt recovery of $0.1 million and offset with the decrease of depreciation expense of $0.3 million.

Other Income

Other income was $0.2 million in fiscal year 2022,increased by 122.5% from $0.1 million in fiscal year 2021. The increase was primarily due to the increase of interest income related to the loan receivables in the amount of $0.6 million offset by the increase of interest expense for the borrowings of $0.3 million.

Net Income

Net income was $1.4 million in fiscal year 2022,compared to $1.7 million in fiscal year 2021.

Basic and Diluted Earnings per Share

Basic and diluted earnings per share were $0.13 in fiscal year 2022,compared to $0.15 in fiscal year 2021.

Balance Sheet

As of December 31,2022,the Company had cash of $1.2 million,compared to $2.1 million as of December 31,2021.

Cash Flow

Net cash provided by operating activities was $3.8 million in fiscal year 2022,compared to net cash used in operating activities of $0.2 million in fiscal year 2021.

Net cash used in investing activities was $7.3 million in fiscal year 2022,compared to net cash provided by investing activities of $0.4 million in fiscal year 2021.

Net cash provided by financing activities was $2.7 million in fiscal year 2022. The Company did not have net cash provided by financing activities in fiscal year 2021.

Recent Development

On April 4,2023,the Company completed its initial public offering of 3,200,000 ordinary shares at a public offering price of US$5.00 per ordinary share. The ordinary shares of the Company began trading on the Nasdaq Capital Market on March 31,2023 under the ticker symbol "HKIT."

AboutHitek Global Inc.

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

Forward-Looking Statements

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

For investor and media inquiries please contact:

Ascent Investor Relations LLC

Tina Xiao

Phone: +1 917-609-0333

Email:tina.xiao@ascent-ir.com

HITEK GLOBAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

2022

2021

Assets

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

9,933

4,173,234

Total Assets

$

21,205,091

$

17,140,373

Liabilities and Shareholders' Equity

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

4,695

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

1,641

Total Liabilities

7,678,565

4,014,145

Commitments and Contingencies

Shareholders' Equity

Ordinary Shares*,par value $0.0001 per share,490,000,000 sharesauthorized;

10,987,679 shares issued and outstanding

1,099

1,099

Additional paid-in capital

2,628,356

2,356

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

$

21,373

*

Retrospectively restated for effect of Reverse Split.

HITEK GLOBAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Years Ended December31,

2022

2021

2020

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

3,272

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

$

1,745

$

1,669,357

$

1,688,859

Comprehensive income

Net income

$

1,745

$

1,357

$

1,859

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

– Basic and diluted

$

0.13

$

0.15

$

0.15

Weighted average number of ordinary shares outstanding

– Basic and diluted

10,679

10,679

*

Retrospectively restated for effect of Reverse Split.

HITEK GLOBAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December31,

2022

2021

2020

Operating Activities

Net income

$

1,859

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

(2,725)

(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

(1,080)

(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

2,498

-

-

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

2,308

1,861,554

776,220

Cash and equivalents at end of year

$

1,160

$

2,308

1,554

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

$

-

-