Hitek Global Inc. Announces Fiscal Year 2023 Financial Results
- Revenue declined to $4.6 million in fiscal year 2023 from $6.4 million in 2022 due to governmental policy adjustments affecting tax control business.
- Gross profit decreased by 45% to $1.9 million in fiscal year 2023, with a gross margin of 42.1% compared to 55% in 2022.
- Operating expenses reduced by 5% to $1.8 million in fiscal year 2023.
- Net income dropped to $1.0 million in fiscal year 2023 from $1.4 million in 2022, with basic and diluted earnings per share at $0.08.
- Cash balance stood at $9.3 million as of December 31, 2023, with net cash used in operating activities at $0.06 million.
- Revenue decline due to governmental policy adjustments impacting tax control business.
- Gross profit decrease by 45% to $1.9 million in fiscal year 2023.
- Net income fell to $1.0 million in fiscal year 2023 from $1.4 million in 2022.
- Basic and diluted earnings per share dropped to $0.08 in fiscal year 2023.
- Net cash used in operating activities was $0.06 million in fiscal year 2023.
Insights
Examining Hitek Global Inc.'s financial performance, the stark decrease in total revenue from $6.4 million to $4.6 million signals a notable contraction in the company's core business operations, particularly in tax devices and services. The shift in governmental policy, offering tax Ukeys for free, has directly impacted Hitek's sales, underscoring the risks associated with regulatory changes. The hardware and software sales downturn also suggests a potential loss of competitive edge or market saturation.
The gross margin contraction from 55% to 42.1% raises concerns about cost management and pricing strategies. While operating expenses have seen a marginal decrease, the significant reduction in selling expenses might be a red flag for the company's future growth potential. On the other hand, the substantial increase in other income, including government subsidies and investment income, cushioned the net income, which only saw a moderate decline despite the revenue slump.
The cash position improvement from $1.2 million to $9.3 million is intriguing, especially considering the net cash provided by financing activities. This suggests a successful capital raise or debt financing, which might be aimed at funding new business opportunities as mentioned by the CEO. However, the sustainability of this strategy is questionable if operational revenue continues to decline.
From a market perspective, Hitek Global's performance reflects the challenges IT consulting and solutions providers face in a rapidly changing regulatory environment. The decline in software sales to large customers could indicate a broader industry trend where clients are consolidating vendors or shifting towards in-house solutions. This trend may require Hitek to reevaluate its customer engagement and product differentiation strategies.
Furthermore, the pivot towards exploring new business opportunities is a response to the need for diversification in the IT sector. Hitek's ability to innovate and penetrate new markets will be critical for its long-term viability. Stakeholders should monitor the company's investment in research and development, as well as any strategic partnerships or acquisitions that could signal its direction and potential for recovery.
An economist would highlight the broader economic implications of Hitek Global's financial results. The company's reliance on government policies and subsidies indicates a vulnerability to external economic factors. The free distribution of tax Ukeys by PRC tax authorities reflects policy shifts that can disrupt business models, emphasizing the importance of policy analysis in risk assessment for technology firms operating in China.
The increase in professional service fees and other costs associated with the company's initial public offering suggests an investment in future growth, yet this must be balanced against the operational revenue decline. The cash influx from financing activities could indicate investor confidence or a strategic move to buffer against short-term instabilities, but it also increases the firm's obligations and may affect future profitability.
Ms. Xiaoyang Huang, Chief Executive Officer and Director of Hitek Global Inc. commented, "During the year ended December 31, 2023, due to governmental policy adjustments, the service fee portion of our tax control business has been affected to some extent, resulting in a decline in overall revenue. The Company is exploring new business opportunities to diversify the company's revenue and business."
Fiscal Year 2023 Financial Results
Revenue
Total revenue was
- Revenue generated from hardware sales was
$2.4 million $2.5 million - Revenue generated from software sales was
$0.8 million $2.1 million - Revenue generated from tax devices and services was
$1.4 million $1.8 million
Gross Profit and Gross Margin
Gross profit was
Operating Expenses
Operating expenses were
- Selling expenses were
$648 99% from$437,185 - General and administrative expenses were
$1.8 million 23.6% from$1.5 million $233,458 $36,728 $78,246 $133,492
Other Income
Other income was
Net Income
Net income was
Basic and Diluted Earnings per Share
Basic and diluted earnings per share were
Balance Sheet
As of December 31, 2023, the Company had cash of
Cash Flow
Net cash used by operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
About Hitek Global Inc.
Hitek Global Inc., headquartered in
Forward-Looking Statements
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's registration statement and in its other filings with the SEC.
For Investor and Media Inquiries Please Contact:
Tianyu Xia
Phone: +86 18519770823
Email: xiaty@xmhitek.com
HITEK GLOBAL INC. AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
As of December 31, | |||||||
2023 | 2022 | ||||||
Assets | |||||||
Current assets | |||||||
Cash | $ | 9,311,537 | $ | 1,203,160 | |||
Short-term investments | 8,837,445 | 4,290,348 | |||||
Accounts receivable, net | 2,118,738 | 3,271,218 | |||||
Accounts receivable - related party, net | - | 399,465 | |||||
Advances to suppliers, net | 338,166 | 481,769 | |||||
Inventories, net | 219,505 | 430,670 | |||||
Deferred offering cost | - | 917,446 | |||||
Loan receivable | 3,608,289 | 1,013,157 | |||||
Prepaid expenses and other current assets | 352,919 | 94,925 | |||||
Total current assets | 24,786,599 | 12,102,158 | |||||
Non-current assets | |||||||
Non-current accounts receivable | 4,597,214 | 4,209,546 | |||||
Non-current accounts receivable - related party | - | ||||||
Non-current advance to a third party | 410,509 | 421,679 | |||||
Non-current loan receivable | 4,227,079 | 4,342,100 | |||||
Property, equipment and software, net | 403,330 | 122,967 | |||||
Operating lease right-of-use assets | 3,309 | 6,641 | |||||
Total non-current assets | 10,641,441 | 9,102,933 | |||||
Total Assets | $ | 35,428,040 | $ | 21,205,091 | |||
Liabilities and Shareholders' Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 532,130 | $ | 696,734 | |||
Loan payable | 493,159 | 506,578 | |||||
Deferred revenue | 166,760 | 977,054 | |||||
Taxes payable | 1,917,647 | 1,671,322 | |||||
Due to related parties | - | 598 | |||||
Accrued expenses and other current liabilities | 255,131 | 348,167 | |||||
Operating lease liabilities | - | 3,242 | |||||
Total current liabilities | 3,372,752 | 4,203,695 | |||||
Non-current Liabilities | |||||||
Loan payable, non-current | 2,113,539 | 2,171,050 | |||||
Deferred income tax liabilities, non-current | 1,604,163 | 1,300,421 | |||||
Operating lease liabilities, non-current | - | 3,399 | |||||
Total non-current liabilities | 3,717,702 | 3,474,870 | |||||
Total Liabilities | 7,090,454 | 7,678,565 | |||||
Commitments and Contingencies | |||||||
Shareholders' Equity | |||||||
Ordinary Shares*, par value | 1,099 | 1,099 | |||||
Additional paid-in capital | 2,628,356 | 2,628,356 | |||||
Statutory reserve | 836,215 | 836,215 | |||||
Retained earnings | 11,387,748 | 10,340,107 | |||||
Accumulated other comprehensive (loss) income | (609,367) | (279,251) | |||||
Total Shareholders' Equity | 28,337,586 | 13,526,526 | |||||
Total Liabilities and Shareholders' Equity | $ | 35,428,040 | $ | 21,205,091 | |||
* Retrospectively restated for effect of Reverse Split. | |||||||
HITEK GLOBAL INC. AND SUBSIDIARIES | |||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||||||
Years Ended December 31, | |||||||||||
2023 | 2022 | 2021 | |||||||||
Revenues | $ | 4,563,731 | $ | 6,428,608 | $ | 6,461,163 | |||||
Cost of revenues | (2,642,491) | (2,891,565) | (2,581,218) | ||||||||
Gross profit | 1,921,240 | 3,537,043 | 3,879,945 | ||||||||
Operating expenses: | |||||||||||
General and administrative | 1,819,531 | 1,472,648 | 1,699,934 | ||||||||
Selling | 648 | 437,185 | 76,477 | ||||||||
Total operating expenses | 1,820,179 | 1,909,833 | 1,776,411 | ||||||||
Operating income | 101,061 | 1,627,210 | 2,103,534 | ||||||||
Other income (expense) | |||||||||||
Government subsidies | 569,928 | 9,838 | 6,883 | ||||||||
Net investment (loss) income | 330,552 | (19,363) | 103,575 | ||||||||
Financial income (expense), net | 911,875 | 250,172 | (2,190) | ||||||||
Other, net | (318,890) | 1,106 | 608 | ||||||||
Total other income | 1,493,465 | 241,753 | 108,676 | ||||||||
Net Income before provision for income taxes | 1,594,526 | 1,868,963 | 2,212,210 | ||||||||
Income tax expense | 546,885 | 453,218 | 542,853 | ||||||||
Net income | $ | 1,047,641 | $ | 1,415,745 | $ | 1,669,357 | |||||
Comprehensive income | |||||||||||
Net income | $ | 1,047,641 | $ | 1,415,745 | $ | 1,669,357 | |||||
Foreign currency translation (loss) gain | (330,116) | (1,015,447) | 290,407 | ||||||||
Comprehensive income | $ | 717,525 | $ | 400,298 | $ | 1,959,764 | |||||
Earnings per ordinary share | |||||||||||
– Basic and diluted | $ | 0 | $ | 0 | $ | 0 | |||||
Weighted average number of ordinary shares | |||||||||||
– Basic and diluted | 13,257,469 | 10,987,679 | 10,987,679 | ||||||||
* Retrospectively restated for effect of Reverse Split. | |||||||||||
HITEK GLOBAL INC. AND SUBSIDIARIES | |||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
Years Ended December 31, | |||||||||||
2023 | 2022 | 2021 | |||||||||
Operating Activities | |||||||||||
Net income | $ | 1,047,641 | $ | 1,415,745 | $ | 1,669,357 | |||||
Adjustments to reconcile net income to net | |||||||||||
Depreciation and amortization | 50,662 | 21,881 | 355,738 | ||||||||
Loss on disposal of property, plant and | 1,413 | ||||||||||
Interest income | (102,418) | (21,699) | (6,525) | ||||||||
Net investment loss (gain) | (208,626) | 19,363 | (103,375) | ||||||||
(Reversal of) doubtful accounts of receivables | (2,325) | (6,442) | (123,754) | ||||||||
(Reversal of) provision for obsolete | 5,559 | 2,217 | (5,317) | ||||||||
Deferred income tax | 339,332 | 177,029 | 340,624 | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Short-term investment - trading securities | (1,696,545) | 2,418,675 | (2,625,216) | ||||||||
Accounts receivable | 567,480 | (2,490,725) | (1,100,056) | ||||||||
Accounts receivable - related party | 390,197 | 499,933 | 578,157 | ||||||||
Advances to suppliers | 472,219 | 560,352 | (183,369) | ||||||||
Deferred offering cost | (130,134) | 60,000 | 155,915 | ||||||||
Inventory | 194,872 | (57,899) | (276,672) | ||||||||
Prepaid expenses and other current assets | (13,028) | 89,583 | 769,913 | ||||||||
Due from related party | |||||||||||
Accounts payable | (146,642) | 225,198 | 127,422 | ||||||||
Deferred revenue | (787,062) | 261,856 | 12,089 | ||||||||
Taxes payable | 291,578 | 488,419 | 327,807 | ||||||||
Due to related parties | (584) | (3,320) | 1,062 | ||||||||
Accrued expenses and other current liabilities | (340,133) | 163,884 | (127,735) | ||||||||
Net cash provided by (used in) operating | (61,912) | 3,824,050) | (214,575) | ||||||||
Investing Activities | |||||||||||
Advance payment for software development | (339,309) | (117,617) | (25,582) | ||||||||
Loans to third parties | (11,260,542) | (5,498,997) | (356,595) | ||||||||
Repayment from third-party loans | 8,830,933 | 199,463 | 317,059 | ||||||||
Purchases of held-to-maturity investments | (11,000,000) | (1,932,080) | (1,240,329) | ||||||||
Redemption of held-to-maturity Investments | 7,159,018 | - | 1,705,453 | ||||||||
Net cash (used in) provided by investing | (6,946,555) | (7,349,231) | 400,006 | ||||||||
Financing activities: | |||||||||||
Borrowing from third parties | - | 2,749,498 | |||||||||
Proceeds from issuing ordinary shares | 15,142,902 | ||||||||||
Net cash provided by financing activities | 15,142,902 | 2,749,498 | - | ||||||||
Effect of exchange rate changes on cash and | (26,058) | (112,465) | 44,323 | ||||||||
Net (decrease) increase in cash | 8,108,377 | (888,148) | 229,754 | ||||||||
Cash and equivalents at beginning of year | 1,203,160 | 2,091,308 | 1,861,554 | ||||||||
Cash and equivalents at end of year | $ | 9,311,537 | $ | 1,203,160 | 2,091,308 | ||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid for income taxes | $ | 36,504 | $ | 45,002 | 32,646 | ||||||
Non-cash transactions: | |||||||||||
Operating right-of-use assets recognized for | $ | - | $ | 6,820 | - | ||||||
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SOURCE HITEK GLOBAL INC
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