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</div><!-- Field: Rule-Page --><div style="width: 100%"><div style="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>UNITED STATES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SECURITIES AND EXCHANGE COMMISSION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>WASHINGTON, D.C. 20549</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement"><span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></ix:nonNumeric>&#160;<b>REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport"><span style="font-family: Times New Roman, Times, Serif"><b>&#9746;</b></span></ix:nonNumeric><b>
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the fiscal year ended <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport"><span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></ix:nonNumeric>&#160;<b>TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the transition period from _________ to
_________.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport"><span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></ix:nonNumeric>&#160;<b>SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Date of event requiring this shell company report:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Commission file number: <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-39339</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityRegistrantName"><b>HITEK GLOBAL INC.</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of Registrant as Specified in its Charter)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>N/A</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Translation of Registrant&#8217;s Name into
English)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode"><b>Cayman Islands</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Jurisdiction of Incorporation or Organization)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1">Unit 304</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine2">No. 30 Guanri Road</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine3">Siming District</ix:nonNumeric>,</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown">Xiamen City, Fujian Province</ix:nonNumeric>, People&#8217;s
Republic of <ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>+86 592-5395967</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address of Principal Executive Offices)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressCityOrTown">Xiaoyang Huang</ix:nonNumeric>, Chief Executive Officer</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">+86 592</ix:nonNumeric>-<ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">5395967</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1">Unit 304</ix:nonNumeric>, <ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine2">No. 30 Guanri Road</ix:nonNumeric>, <ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine3">Siming District</ix:nonNumeric>,</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName">Xiamen City, Fujian Province</ix:nonNumeric>, People&#8217;s
Republic of <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Name, Telephone, E-mail and/or Facsimile Number
and Address of Company Contact Person)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Securities registered or to be registered pursuant
to Section 12(b) of the Act:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="white-space: nowrap; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt">Title of Each Class</span></td> <td style="white-space: nowrap; width: 2%; text-align: center">&#160;</td> <td style="white-space: nowrap; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt">Trading Symbol</span></td> <td style="white-space: nowrap; width: 2%; text-align: center">&#160;</td> <td style="white-space: nowrap; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt">Name of Each Exchange On Which Registered</span></td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:Security12bTitle"><span style="font-size: 10pt"><b>Ordinary shares, par value US$0.0001 per share</b></span></ix:nonNumeric></td> <td style="text-align: center">&#160;</td> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-size: 10pt"><b>HKIT</b></span></ix:nonNumeric></td> <td style="text-align: center">&#160;</td> <td style="text-align: center"><span style="font-size: 10pt"><b><ix:nonNumeric contextRef="c0" name="dei:SecurityExchangeName">NASDAQ</ix:nonNumeric> Capital Market</b></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Securities registered or to be registered pursuant
to Section 12(g) of the Act:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-decoration:underline">None</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Title of Class)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-decoration:underline">None</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Title of Class)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The number of outstanding shares of each of the
issuer&#8217;s classes of capital or common stock as of December 31, 2022 was: <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">10,987,679</ix:nonFraction> ordinary shares, par value $0.0001 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span>&#160;&#160;&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric>&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9746;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span>&#160;&#160;&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric>&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9746;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric>&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9746;</b></span>&#160;&#160;&#160;No&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (&#167; 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). </span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif"><b>&#9746;</b></span>&#160;&#160;&#160;No&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of &#8220;accelerated filer and large accelerated
filer&#8221; in Rule 12b-2 of the Exchange Act. (Check one):</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 25%; text-align: justify"><span style="font-size: 10pt">Large accelerated filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 25%; text-align: justify"><span style="font-size: 10pt">Accelerated filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 25%; text-align: justify"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Non-accelerated filer</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span></span></td> <td style="width: 25%; text-align: justify"><span style="font-size: 10pt">Emerging growth company <ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards&#8224; provided pursuant to Section 13(a) of the Exchange
Act.&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityExTransitionPeriod"><span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether the registrant
has filed a report on and attestation to its management&#8217;s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant&#8217;s
executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 5%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></td> <td style="width: 20%; text-align: justify"><ix:nonNumeric contextRef="c0" name="dei:DocumentAccountingStandard"><span style="font-size: 10pt">U.S. GAAP</span></ix:nonNumeric></td> <td style="width: 5%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td style="width: 55%; text-align: justify"><span style="font-size: 10pt">International Financial Reporting Standards as issued by the <br/>
International Accounting Standards Board</span></td> <td style="width: 5%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td style="width: 10%; text-align: justify"><span style="font-size: 10pt">Other </span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If &#8220;Other&#8221; has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Item 17&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span>&#160;&#160;&#160;Item
18&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes&#160;<span style="font-family: Times New Roman, Times, Serif"><b>&#9744;</b></span>&#160;&#160;&#160;No&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany"><span style="font-family: Times New Roman, Times, Serif"><b>&#9746;</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>TABLE OF CONTENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 10%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 78%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="text-align: center; width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"> <b>Page</b></span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Number</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td colspan="3"><a href="#a_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INTRODUCTORY NOTES</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ii</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td colspan="3"><a href="#a_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>FORWARD-LOOKING STATEMENTS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">iii</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><a href="#a_003"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PART I</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 1.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 2.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OFFER STATISTICS AND EXPECTED TIMETABLE</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 3.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>KEY INFORMATION</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"> 1</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 4.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_007"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INFORMATION ON THE COMPANY</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">35</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 4A.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_008"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>UNRESOLVED STAFF COMMENTS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">44</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 5.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_009"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OPERATING AND FINANCIAL REVIEW AND PROSPECTS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">44</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 6.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_010"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">61</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 7.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_011"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">67</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 8.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_012"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>FINANCIAL INFORMATION</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">68</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 9.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_013"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>THE OFFER AND LISTING</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">68</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 10.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_014"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ADDITIONAL INFORMATION</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">68</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 11.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_015"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">81</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 12.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_016"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">81</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><a href="#a_017"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PART II</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">82</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 13.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_018"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">82</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 14.</b></span></td>
    <td>&#160;</td>
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><a href="#a_019">MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</a></b></span></td>
    <td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center">82</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 15.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_020"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONTROLS AND PROCEDURES</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">82</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><b>ITEM 16.</b></td>
    <td>&#160;</td>
    <td><a href="#a_020a"><b>[RESERVED]</b></a></td>
    <td>&#160;</td>
    <td style="text-align: center">83</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16A.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_021"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>AUDIT COMMITTEE FINANCIAL EXPERT</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">83</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16B.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_022"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CODE OF ETHICS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">83</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16C.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_023"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PRINCIPAL ACCOUNTANT FEES AND SERVICES</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">83</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16D.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_024"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">84</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16E.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_025"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">84</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16F.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_026"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANTS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">84</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16G.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_027"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CORPORATE GOVERNANCE</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">84</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16H.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_028"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>MINE SAFETY DISCLOSURE</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">84</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 16I.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_029"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">84</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><a href="#a_030"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PART III</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">85</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 17.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_031"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>FINANCIAL STATEMENTS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">85</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 18.</b></span></td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><a href="#a_032">FINANCIAL STATEMENTS</a></b></span></td>
    <td>&#160;</td>
    <td style="text-align: center">85</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ITEM 19.</b></span></td>
    <td>&#160;</td>
    <td><a href="#a_033"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>EXHIBITS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center">86</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 3; Options: NewSection --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>INTRODUCTORY NOTES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except as otherwise indicated by the context and
for the purposes of this report only, references in this report to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;affiliated entities&#8221;
are to our subsidiaries and variable interest entities (&#8220;VIE&#8221;);</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;China&#8221; or the
&#8220;PRC&#8221; are to the People&#8217;s Republic of China, excluding Taiwan and the special administrative regions of Hong Kong and
Macau for the purposes of this annual report only;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;Haitian Weilai&#8221;
are to Xiamen Haitian Weilai Technology Co., Ltd., a limited liability company organized under the laws of the PRC that is fully owned
by Tian Dahai;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;HiTek HK&#8221; are
to the Company&#8217;s wholly owned subsidiary, HiTek Hong Kong Ltd., a Hong Kong corporation;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;HiTek&#8221;, or &#8220;VIE
entity&#8221;, are to Xiamen Hengda HiTek Computer Network Co., Ltd., a limited liability company organized under the laws of the PRC,
that we control via a series of contractual arrangements between WFOE and HiTek;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;Huasheng&#8221; are
to Xiamen Huasheng HiTek Computer Network Co., Ltd., a limited liability company organized under the laws of the PRC that function as
HiTek&#8217;s operating subsidiary;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;Huoerguosi&#8221; are
to Huoerguosi Hengda Information Technology Co., Ltd., a limited liability company organized under the laws of the PRC that function
as HiTek&#8217;s operating subsidiary;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;Ordinary Shares&#8221;
are to the Ordinary Shares of Hitek Global Inc., par value $0.0001 per share.</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;we&#8221;, &#8220;us&#8221;
or the &#8220;Company&#8221; are to Hitek Global Inc.;</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;WFOE&#8221; are to Tian
Dahai (Xiamen) Information Technology Co. Ltd. (&#8220;Tian Dahai&#8221;), a limited liability company organized under the laws of the
People&#8217;s Republic of China (the &#8220;PRC&#8221;), which is wholly-owned by us through HiTek HK; and</span></td>
</tr></table><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our business is conducted via HiTek, a VIE entity
in the PRC, using RMB, the currency of China. Our consolidated financial statements are presented in United States dollars. In this annual
report, we refer to assets, obligations, commitments and liabilities in our consolidated financial statements in United States dollars.
These dollar references are based on the exchange rate of RMB to United States dollars, determined as of a specific date or for a specific
period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of United States dollars
which may result in an increase or decrease in the amount of our obligations (expressed in dollars) and the value of our assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FORWARD-LOOKING STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This annual report on Form&#160;20-F contains
forward-looking statements that reflect our current expectations and views of future events. These statements are made under the &#8220;safe
harbor&#8221; provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements
by terminology such as &#8220;may,&#8221; &#8220;will,&#8221; &#8220;expect,&#8221; &#8220;anticipate,&#8221; &#8220;aim,&#8221; &#8220;estimate,&#8221;
&#8220;intend,&#8221; &#8220;plan,&#8221; &#8220;believe,&#8221; &#8220;is/are likely to,&#8221; &#8220;potential,&#8221; &#8220;continue&#8221;
or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about
future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial
needs. These forward-looking statements include, but are not limited to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the adverse effects of the COVID-19 pandemic on our business or the market price of our ordinary shares;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our goals and strategies;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our future business development, financial condition and results of operations;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our expectations regarding the market for our concrete products;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our expectations regarding demand for and market acceptance of our nutraceutical and dietary supplements products;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our plans to establish partnerships and develop new businesses;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our plans to invest in our business;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our relationships with our partners;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our future business development, results of operations and financial condition;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">market conditions affecting our equity capital;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">change in macroeconomic conditions;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">competition in our industry; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">relevant government policies and regulations relating to our industry.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We would like to caution you not to place undue
reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in &#8220;Item
3. Key Information&#8212;D. Key Information&#8212;Risk Factors.&#8221; Those risks are not exhaustive. We operate in an evolving environment.
New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of
all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those
contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except
as required under applicable law. You should read this annual report and the documents that we reference in this annual report completely
and with the understanding that our actual future results may be materially different from what we expect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART I</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 3. KEY INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Our Corporate Structure </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are an offshore holding company incorporated
in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by (i) Haitian Weilai,
our indirect subsidiary, (ii) the VIE, Hitek and the VIE&#8217;s subsidiaries, Huasheng and Huoerguosi. Neither we nor our subsidiaries
own any equity interests in the VIE. WFOE, the VIE and the shareholders of the VIE entered into a series of contractual arrangements,
also known as the &#8220;VIE Agreements&#8221;, pursuant to which we are able to consolidate the financial results of the VIE in our consolidated
financial statements because we are deemed as the primary beneficial of the VIE under generally accepted accounting principles in the
U.S. (&#8220;U.S. GAAP&#8221;), and this structure involves unique risks to investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following diagram illustrates our corporate
structure as of the date of this annual report:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_001.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>The VIE Agreements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The VIE Agreements by and among Tian Dahai (Xiamen)
Information Technology Co. Ltd. (the &#8220;WFOE&#8221;), HiTek, and HiTek&#8217;s shareholders include (i) certain power of attorney
agreements and equity interest pledge agreement, pursuant to which shareholders of HiTek pledged all of their equity interests in HiTek
to WFOE guarantee the performance of HiTek&#8217;s obligations under the exclusive technical consulting and service agreement; (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. Through the VIE Agreements among WFOE, HiTek
and HiTek&#8217;s shareholders, we are deemed to have a controlling financial interest in, and be the primary beneficiary of, the VIE
for accounting purposes only and must consolidate the VIE because it met the conditions under U.S. GAAP to consolidate the VIE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each of the VIE Agreements is described in detail below:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-decoration:underline">Exclusive Technical Consulting and Service Agreement</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&#8217;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Equity Interest Pledge Agreement</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">WFOE, HiTek and HiTek shareholders entered into
an Equity Interest Pledge Agreement, pursuant to which HiTek shareholders pledged all of their equity interests&#160;in HiTek to WFOE
in order to guarantee the performance of HiTek&#8217;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Exclusive Equity Interests Purchase Agreement</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 extended for another ten years at WFOE&#8217;s election.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Power of Attorney</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Power of Attorney, each HiTek
Shareholder authorizes WFOE to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders, including
but not limited to: (a) the attendance of the shareholder&#8217;s meeting and the execution of relative shareholder resolution(s) of HiTek;
(b) exercising all the shareholder&#8217;s rights, including voting, that shareholders are entitled to under the laws of China and the
articles of association, including but not limited to the sale or transfer or pledge or disposition of shares in part or in whole; and
(c) designating and appointing on behalf of shareholders the legal representative, the executive director, supervisor, the chief executive
officer and other senior management members of HiTek.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although it is not explicitly stipulated in the
Powers of Attorney, the term of the Powers of Attorney shall be the same as the term of that of the Exclusive Equity Interests Purchase
Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Powers of Attorney are coupled with an interest
and shall be irrevocable and continuously valid from the date of their execution, so long as the relevant HiTek Shareholder is a shareholder
of Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Associated with Our Corporate Structure
and the VIE Agreements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">However, the VIE structure cannot completely replicate
a foreign investment in China-based companies, as the shareholders will not and may never hold equity interests in the Chinese operating
entities. Instead, the VIE structure provides contractual exposure to foreign investment in us.&#160;Because we do not hold equity interests
in the VIE, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including
but not limited to limitation on foreign ownership of internet technology companies, regulatory review of oversea listing of PRC companies
through a special purpose vehicle, and the validity and enforcement of the VIE Agreements as they have not been tested in a court of law.
The VIE Agreements may not be effective in providing control over HiTek. See &#8220;Risk Factors&#160;&#8212;&#160;Risks Relating to Our
Corporate Structure&#8221; starting on page 14 of this annual report, &#8220;Risk Factors&#160;&#8212;&#160;Risks Relating to Doing Business
in the PRC&#8221; starting on page 19 of this annual report for more information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to the risks of uncertainty about
any future actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material
change in our operations and the value of Ordinary Shares may depreciate significantly or become worthless. We are also subject to certain
legal and operational risks associated with the VIE&#8217;s operations in China. PRC laws and regulations governing our current business
operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in the VIE&#8217;s operations,
significant depreciation of the value of our Ordinary Shares, or a complete hindrance of our ability to continue to offer our securities
to investors. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in
China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based
companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews,
and expanding the efforts in anti-monopoly enforcement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the PRC Cybersecurity Law, which was
promulgated by the Standing Committee of the National People&#8217;s Congress on November 7, 2016 and took effect on June 1, 2017, personal
information and important data collected and generated by a critical information infrastructure operator in the course of its operations
in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that
affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China (&#8220;CAC&#8221;).
Due to the lack of further interpretations, the exact scope of &#8220;critical information infrastructure operator&#8221; remains unclear.
On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures (the
&#8220;CAC Revised Measures&#8221;) to replace the original Cybersecurity Review Measures. The CAC Revised Measures took effect on February
15, 2022. Pursuant to the CAC Revised Measures, if critical information infrastructure operators purchase network products and services,
or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to
cybersecurity review. On November 14, 2021, CAC published the Administration Measures for Cyber Data Security (Draft for Public Comments),
or the &#8220;Cyber Data Security Measure (Draft)&#8221;, which requires cyberspace operators with personal information of more than 1
million users who want to list abroad to file a cybersecurity review with the Office of Cybersecurity Review. The cybersecurity review
will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal
information being influenced, controlled or maliciously used by foreign governments and risk of network data security after going public
overseas. As confirmed by our PRC counsel, Jingtian &amp; Gongcheng, we are not subject to cybersecurity review with the CAC in accordance
with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over one million users
and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have
not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure
operator. However, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative
regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will
be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business
operation, the ability to accept foreign investments and list on an U.S. exchange.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 17, 2023, the CSRC promulgated the
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting
guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities
overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures
within three working days following its submission of initial public offerings or listing application. If a PRC company fails to complete
required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may
be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers,
the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and
fines.&#160;In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State
Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives
Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection
and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions
on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came
into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its
application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require
that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity,
publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas
regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval
from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b)&#160;domestic
company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals
and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that,
if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable
national regulations.&#160;As of the date of this annual report, as advised by Jingtian &amp; Gongcheng, our PRC counsel,&#160;as our
post-effective amendment to the registration statement on Form F-1 relating to our initial public offering was declared effective on March
30, 2023 and we have completed our initial public offering and listing prior to September 30, 2023, we are not required to complete the
filing procedures pursuant to the Trial Measures for our initial public offering. If in the future we are going to conduct any offering
or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures. In addition,
we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect our listing on the Nasdaq
Capital Market.&#160;However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory
requirements related to overseas securities offerings and other capital markets activities. Any failure or perceived failure of us to
fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to offer securities
to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and
adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline
or be worthless.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furthermore, as an auditor of companies that are
registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, our auditor, Wei, Wei &amp; Co.
LLP, is headquartered in the United States and is required under the laws of the United States to undergo regular inspections by the U.S.
Public Company Accounting Oversight Board (&#8220;PCAOB&#8221;) to assess their compliance with the laws of the United States and professional
standards. Although we operate through HiTek in mainland China, a jurisdiction where the PCAOB is currently unable to conduct inspections
without the approval of the Chinese government authorities, our auditor is currently inspected fully by the PCAOB. Inspections of other
auditors conducted by the PCAOB outside mainland China have at times identified deficiencies in those auditors&#8217; audit procedures
and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Even though our auditor is based in United
States and under full inspection by the PCAOB and is not currently subject to the determinations announced by the PCAOB on December
16, 2021, if &#160;any PRC law relating to the access of the PCAOB to auditor files were to apply to a company such as HiTek or its
auditor, the PCAOB may be unable to fully inspect our auditor, which may result in our securities being delisted or prohibited from
being traded &#8220;over-the-counter&#8221; pursuant to the Holding Foreign Companies Accountable Act (the &#8220;HFCA Act&#8221;)
and materially and adversely affect the value and/or liquidity of your investment. On August 26, 2022, the China Securities
Regulatory Commission, the Ministry of Finance of the PRC (the &#8220;MOF&#8221;), and the PCAOB signed a Statement of Protocol (the
&#8220;Protocol&#8221;), governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the
first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in
mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the U.S. Securities and Exchange
Commission (the &#8220;SEC&#8221;), the PCAOB shall have independent discretion to select any issuer audits for inspection or
investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined
that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in
mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities
obstruct or otherwise fail to facilitate the PCAOB&#8217;s access in the future, the PCAOB Board will consider the need to issue a
new determination.&#160; See &#8220;Risk Factors&#8212;Risks Related to Doing Business in the PRC&#8221; starting on page 19 of this
annual report for a detailed description of risks related to the PRC. On December 29, 2022, a legislation entitled
&#8220;Consolidated Appropriations Act, 2023&#8221; (the &#8220;Consolidated Appropriations Act&#8221;), was signed into law by
President Biden, which amended the HFCA Act by reducing the number of consecutive non-inspection years required for triggering the
prohibitions under the HFCA Act from three years to two. There are risks and uncertainties which we cannot foresee for the time
being, and rules and regulations in the PRC can change quickly with little or no advance notice. The PRC government may intervene or
influence HiTek&#8217;s future operations in the PRC at any time, or may exert more control over offerings conducted overseas and/or
foreign investment in companies like us. The PRC government may intervene or influence HiTek&#8217;s future operations in the PRC at
any time, or may exert more control over offerings conducted overseas and/or foreign investment in companies like us. In the event
it is later determined that the PCAOB is unable to inspect or investigate completely our auditor, then such lack of inspection could
cause trading in our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities
exchange to delist our securities.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our management monitors the cash position of each
entity within our organization regularly and prepare budgets on a monthly basis to ensure each entity has the necessary funds to fulfill
its obligation for the foreseeable future and to ensure adequate liquidity. As a holding company, we may rely on dividends and other distributions
on equity paid by our subsidiary in Hong Kong, Hitek HK, and the consolidated VIE in mainland China, HiTek, for our cash and financing
requirements. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available
for distribution. In order for us to pay dividends to our shareholders, we will rely on payments made from HiTek to WFOE, pursuant to
VIE Agreements between them, and the distribution of such payments to HiTek HK as dividends from WFOE. Certain payments from our HiTek
to WFOE are subject to PRC taxes, including business taxes and VAT. We intend to keep any future earnings to re-invest in and finance
the expansion of our business, and we do not anticipate that any cash dividends will be paid or any assets will be transferred in the
foreseeable future. As of the date of this annual report, there has been no distribution of dividends or assets among the holding company,
the subsidiary or the consolidated VIE. &#160;In the future, cash proceeds raised from overseas financing activities may be transferred
by us to the consolidated VIE via capital contribution or shareholder loans, as the case may be. Other than the above, we did not adopt
or maintain any cash management policies and procedures as of the date of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Dividend Distributions or Assets Transfer among
the Holding Company, its Subsidiaries and the VIE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We intend to keep any future earnings to re-invest
in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid or any assets will be transferred
in the foreseeable future. As of the date of this annual report, there has been no distribution of dividends or assets among the holding
company, the subsidiary or the consolidated VIE. &#160;Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares
out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company
being unable to pay its debts due in the ordinary course of business. If we determine to pay dividends on any of our Ordinary Shares in
the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, HiTek HK.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Current PRC regulations permit our indirect PRC
subsidiaries to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits
each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China
is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be
set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other
ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve
funds are not distributable as cash dividends except in the event of liquidation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The PRC government also imposes controls on the
conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in
completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits,
if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict
their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations
through the current VIE Agreements, we may be unable to pay dividends on our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash dividends, if any, on our Ordinary Shares
will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas
shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In order for us to pay dividends to our shareholders,
we will rely on payments made from HiTek to WFOE, pursuant to VIE Agreements between them, and the distribution of such payments to HiTek
HK as dividends from WFOE. Certain payments from our HiTek to WFOE are subject to PRC taxes, including business taxes and VAT.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Arrangement between Mainland China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance
Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project.
However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation
that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold
no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current
practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding
tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that
we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding
tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiary to its immediate holding
company, HiTek HK. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong
tax authority. HiTek HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to HiTek HK. See
&#8220;Risk Factors - There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary,
and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Permission or Approval Required from the PRC Authorities for The
VIE&#8217;s Operation </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To operate the general business activities currently
conducted in China, the consolidated VIE is required to obtain a business license from the State Administration for Market Regulation
(&#8220;SAMR&#8221;). HiTek has obtained a valid business license from the SAMR, and no application for any such license has been denied.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are aware, however, recently, the PRC government
initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including
cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable
interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly
enforcement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 6, 2021, the General Office of the Central
Committee of the Communist Party of China and the General Office of the State Council jointly issued the &#8220;Opinions on Severely Cracking
Down on Illegal Securities Activities According to Law,&#8221; or the Opinions. The Opinions emphasized the need to strengthen the administration
over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective
measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept
overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related
implementing rules to be enacted may subject us to compliance requirement in the future. Given the current regulatory environment in the
PRC, we are still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse
to us, which may take place quickly with little advance notice.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 28, 2021, the CAC published the CAC
Revised Measures, which further restates and expands the applicable scope of the cybersecurity review. The CAC Revised Measures took effect
on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding personal information of over one million
users seeks for &#8220;foreign&#8221; listing, it must apply for the cybersecurity review. In addition, operators of critical information
infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities.
Although the CAC Revised Measures provides no further explanation on the extent of &#8220;network platform operator&#8221; and &#8220;foreign&#8221;
listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that
(i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that
we will reach such threshold in the near future; (ii) as of the date of this this annual report, we have not received any notice or determination
from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">That being said, the CAC Revised Measures empowers
the cybersecurity review office to initiate cybersecurity review when they believe any particular data processing activities &#8220;affect
or may affect national security&#8221;. In addition, on November 14, 2021, the CAC promulgated the Regulations on the Administration of
Cyber Data Security (Draft for Comments) (the &#8220;Draft CAC Regulations&#8221;), and according to the Draft CAC Regulations, any data
processors shall, in accordance with relevant state provisions, apply for a cybersecurity review when carrying out, among other things,
&#8220;other data processing activities that affect or may affect national security&#8221;. However, neither the CAC Revised Measures
nor the Draft CAC Regulations provides for any further explanation or interpretation over what constitutes activities that &#8220;affect
or may affect national security&#8221;. Therefore, if any competent government authorities deem that HiTek&#8217;s data processing activities
may affect national security, we may be subject cybersecurity review, and in that scenario, failure to pass such cybersecurity review
and/or to comply with the data privacy and data security requirements raised during such cybersecurity review could subject HiTek to penalties,
damage its reputation and brand, and harm its business and results of operations. See risk factor titled &#8220;in light of recent events
indicating greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, we are subject
to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws
and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, results of operations,
and the offering&#8221; starting on page 26 of this annual report for more information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In summary, we, our subsidiaries, or the VIE are
not required to obtain permission or approval from the PRC authorities including CSRC or CAC for the VIE&#8217;s operation, nor have we,
our subsidiaries, or VIE received any denial for the VIE&#8217;s operation. We are subject to the risks of uncertainty of any future actions
of the PRC government in this regard including the risk that we inadvertently conclude that the permission or approvals discussed here
are not required, that applicable laws, regulations or interpretations change such that we or HiTek is required to obtain approvals in
the future, or that the PRC government could disallow our holding company structure, which would likely result in a material change in
our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign
investments, and continue to offer securities to our investors. These adverse actions could cause the value of our Ordinary Shares to
significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including
the CSRC, if we fail to comply with such rules and regulations, which would likely adversely affect the ability of our securities to be
listed on the U.S. exchange, which would likely cause the value of our securities to significantly decline or become worthless.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. [RESERVED]</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Capitalization and indebtedness.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Reasons for the offer and use of proceeds.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Risk factors.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>An investment in our ordinary shares involves
a high degree of risk. You should carefully consider the risks and uncertainties described below together with all other information contained
in this annual report, including the matters discussed under the headings &#8220;Forward-Looking Statements&#8221; and &#8220;Operating
and Financial Review and Prospects&#8221; before you decide to invest in our ordinary shares. We are a holding company with substantial
operations in China and are subject to a legal and regulatory environment that in many respects differs from the United States. If any
of the following risks, or any other risks and uncertainties that are not presently foreseeable to us, actually occur, our business, financial
condition, results of operations, liquidity and our future growth prospects could be materially and adversely affected.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Related to Our Business Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face risks related to health epidemics
such as the COVID-19, and other outbreaks, which could significantly disrupt our operations and adversely affect our business, financial
condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our business could be materially and adversely
affected by health epidemics such as the COVID-19 and other outbreaks affecting the PRC. Health epidemics may give rise to severe interruptions
to public transportation and usual business operations, which could severely disrupt our operations. Our business operations depend on
overall economy and demand for IT consulting and solutions service in Xiamen area, which could be disrupted by health epidemics. For example,
our office had to shut down from February 3, 2020 to February 23, 2020. Public transportation services in Xiamen city were curtailed over
COVID-19 concerns. For our Tax Devices and Services sector, we have to collect the service fee on-site from those customers who have not
used our online payment platform, which may lead to a delay in collection. The number of our new customers decreased in February 2020.
The COVID-19 outbreak may have the same impact on our IT services sector. As of the date this annual report, there is no clear sign of
slow-down in our hardware and software sales. In early December 2022, China announced a nationwide loosening of its zero-COVID policy,
and the country may face a wave in infections after the lifting of these restrictions. The impact of COVID-19 pandemic still depends on
the future developments of the pandemic, including new information concerning the global severity of and actions taken to contain the
pandemic, or the appearance of new or more severe strains of the virus, which are highly uncertain and unpredictable. Therefore, while
we do not expect the COVID-19 pandemic to negatively impacting our business, results of operations, and financial position, the related
financial impact cannot be reasonably estimated at this time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our future revenues and growth prospects
depend on the ACTCS pricing model mandated by the PRC government. If the PRC government continues to reduce the annual fee per user we
are allowed to charge, our operations and revenues may be negatively impacted. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We sell ACTCS tax devices and provide ACTCS supporting
services to our clients. The prices of GTD and annual service fees are regulated and subject to the State Tax Administration&#8217;s pricing
mandates. In the past 20 years, the annual service fee has undergone three major adjustments -- from RMB 450 per year per user to RMB
370 per year per user, and then further reduced to RMB 330 per year per user. Most recently, the ACTCS annual service fee was again reduced
to RMB 280 per year per user, according to the &#8220;Notice of the National Development and Reform Commission on Relevant Issues Concerning
the Reduction of ACTCS Products and Maintenance Service Fee&#8221; (Development and Reform Commission Case [2017] No. 1243). According
to relevant notice, the small-scale taxpayers for which sales amount did not exceed RMB 100,000 for each month are exempt from ACTCS or
GTD technical service fee since 2019. Besides, the Company provides tax invoicing management services and charges service fee on an annual
basis. The tax invoicing management service period is usually one year for RMB299. Tax invoicing management services is to host customers&#8217;
tax devices, provide training service on using Nuonuo, complete tax declaration automatically and back up data online. Since we do not
control the pricing of the ACTCS services, we cannot guarantee our profit margin will be stable or we will make a profit on such services
at all. We cannot guarantee that the annual service fee will not be further reduced, and therefore our revenues to be derived from ACTCS
supporting services may be subject to significant fluctuation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our future revenues and growth prospects
depend on the growth of new business entities in the Xiamen metropolitan areas, which is not within our control and the growth rate may
decrease. As such, our operations and revenues may be negatively impacted.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The willingness of people to establish business
entities in the Xiamen metropolitan areas is beyond our control. There are multiple reasons people may find appealing to establish a particular
business in the Xiamen metropolitan areas, such as people&#8217;s personal belief and volatility in the Chinese capital markets. To the
extent that people are unwilling to establish new businesses in the Xiamen metropolitan area either due to political or economic climate,
we will not be able to acquire new customers to our ACTCS services. Thus, our ability to generate revenue or operate profitably may be
negatively impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Increased use of electronic invoice will
reduce the number of customers using our ACTCS services. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From 2018, the Chinese tax regulators have been
rolling out the electronic invoicing system. Currently, electronic invoices are mostly used by businesses in the Fast Moving Consumer
Goods (&#8220;FMCG&#8221;) industry such as fast food restaurants and coffee shops. The electronic invoices enable FMCG enterprises to
apply for, issue, transfer and check the invoices through the unified online electronic invoice management system of Chinese tax authorities.
Electronic invoices are very useful in helping business entities reduce operating costs and streamline service process, since they do
not involve printing, storage and postage procedures. Businesses who use electronic invoices still need to purchase tax reporting devices
such as GTD. But they will not need maintenance services. Currently, approximately 1.5% of our SME clients are FMCG business entities.
According to relevant notice, small-scale taxpayers with sales amount not in excess of RMB 100,000 for each month are exempt from ACTCS
or GTD technical service fee since 2019. From January 2021, new taxpayers in Xiamen could receive free tax Ukeys from the Tax authorities.
The increased use of electronic invoices, the exemption of ACTCS technical service fee for small-scale taxpayers and free tax Ukeys for
new tax payers will reduce our annual service fee revenue and thus negatively affect our total revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Future&#160;inflation&#160;in&#160;China&#160;may inhibit
our ability to conduct business in China.</i></b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the past ten years, the Chinese economy
has experienced periods of rapid expansion and highly fluctuating rates of&#160;inflation. During the past ten years, the rate of&#160;inflation&#160;in&#160;China&#160;has
been as high as 3.3% and as low as 1.1%. These factors have led to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the
future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic
activity in China, and thereby harm the market for our products and our company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>The&#160;war&#160;in&#160;Ukraine&#160;could
materially and adversely affect our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The recent outbreak of&#160;war&#160;in&#160;Ukraine&#160;has
already affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this
conflict could result in protracted and/or severe damage to the global economy. Russia&#8217;s recent military interventions in Ukraine
have led to, and may lead to, additional sanctions being levied by the United States, European Union and other countries against Russia.
Russia&#8217;s military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could
affect our customers&#8217; businesses and our business, even though we do not have any direct exposure to Russia or the adjoining geographic
regions. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could
be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described
herein. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly
developing and beyond their control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region
could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business,
financial condition, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Increasing competition within our industry
could have an impact on our business prospects. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While the VAT reporting service industry in China
is a heavily regulated industry where new players must obtain approval by the relevant PRC government agencies before entering this industry,
it is still highly possible that new competitors will enter into the market and have significantly greater financial and other resources
than we have and may offer services that is more attractive and more advanced that we can provide for large business enterprises and SMEs.
Thus, we anticipate increasing competition, which may have a negative impact on both our revenues and our profit margins.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our IT services and hardware and software
sales rely on evolving information technologies to maintain our competitiveness, and any failure to adapt to technological developments
or industry trends could harm our business. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We depend upon the use of sophisticated information
technologies and systems, including technologies and systems utilized for communications, procurement and administrative systems. As our
operations grow in both size and scope, we continuously need to improve and upgrade our systems and infrastructure to offer an increasing
number of clients enhanced products, services, features and functionality, while maintaining the reliability and integrity of our systems
and infrastructure. Our future success in IT services and hardware and software sales also depends on our ability to adapt to rapidly
changing technologies, particularly the increasing use of internet-based products and services, to change our services and infrastructure
so they address evolving industry standards and to improve the performance, features and reliability of our services in response to competitive
service and product offerings in the Chinese software markets and the evolving demands of the IT service markets. If there are technological
impediments to introducing new technological products or maintaining current technologies or other products and services, or if these
products and services do not meet the requirements of our clients&#8217; evolving needs, our business, financial condition or results
of operations may be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the emergence of competitors which
may be able to optimize products, services or strategies that use advanced computing such as cloud computing, as well as other technological
changes and developing technologies, such as machine learning and artificial intelligence, have, and will mandate us to make new and costly
investments. Transitioning to new technologies may be disruptive to resources and the services we provide, and may increase our reliance
on third party service providers. We may not be successful, or may be less successful than our current or new competitors, in developing
technology that operates effectively across multiple devices and platforms and that is appealing to our customers, either of which would
negatively affect our business and financial performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">It is possible that, if we are not able to maintain
existing systems, obtain new technologies and systems, or replace or introduce new technologies and systems as quickly as our competitors
or in a cost-effective manner, our business and operations could be materially adversely affected. Also, we may not achieve the benefits
anticipated or required from any new technology or system, or be able to devote financial resources to new technologies and systems in
the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are dependent upon software, equipment
and services provided by third parties. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are dependent upon software, equipment and
services provided and/or managed by third parties in the operation of our business. In the event that the performance of such software,
equipment or services provided and/or managed by third parties deteriorates or our arrangements with any of these third parties related
to the provision and/or management of software, equipment or services are terminated, we may not be able to find alternative services,
equipment or software on a timely basis or on commercially reasonable terms, or at all, or be able to do so without significant cost or
disruptions to our business, and our relationships with our customers may be adversely impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>A significant portion of our revenue is
concentrated on a few large customers, and we do not have long-term service agreements with our key customers and rely upon our longstanding
relationship with them.&#160;If we lose one or more of our customers, our results of operations may be adversely and materially impacted.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, two customers
accounted for 49% of total HiTek&#8217;s revenues, the largest of which represented 36%. For the year ended December 31, 2021, two customers
accounted for 42% of total HiTek&#8217;s revenues, the largest of which represented 28%. Since we do not have long-term customer supply
agreements with such large customers and rely primarily upon our goodwill and reputation to sustain the business relationship, our results
of operations may be adversely and materially impacted if one or more of these customers stop purchasing from us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Extended payment terms may cause deferred
payments or bad debts, which could negatively affect our business operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company gave a two-year credit period to large
customers such as large-scale oil and coal mining groups. Their collection period is usually longer than other medium or small-sized companies.
An extended credit period will have a potential risk of causing deferred payments or bad debts, which could negatively affect our business
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We source our retail hardware primarily
from a limited number of suppliers. If we lose one or more of the suppliers, our operation may be disrupted, and our results of operations
may be adversely and materially impacted.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, four suppliers
accounted for 16%, 15%, 13% and 11% of the total purchases, respectively. For the year ended December 31, 2021, two suppliers accounted
for 11% and 10% of the total purchases, respectively. If we lose suppliers and are unable to swiftly engage new suppliers, our operations
may be disrupted or suspended, and we may not be able to deliver hardware products to our customers on time. We may also have to pay a
higher price to source from a different supplier on short notice. While we are actively searching for and negotiating with new suppliers,
there is no guarantee that we will be able to locate appropriate new suppliers or supplier merger targets in our desired timeline. As
such, our results of operations may be adversely and materially impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;<b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>We face the risk
that a third party borrower may not repay the loans we made to it. An event of default could have a material adverse effect on our cash
flow, results of operations and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 21, 2022, March 28, 2022, and June
14, 2022, Hitek and HiTek, Beijing Baihengda Petroleum Technology Co., Ltd. (&#8220;Beijing Baihengda,&#8221; together with HiTek, the
&#8220;Lenders&#8221;) and Guangxi Beihengda Mining Co., Ltd. (&#8220;Guangxi Beihengda,&#8221; or the &#8220;Borrower&#8221;) entered
into three loan agreements with similar terms, pursuant to which the Lenders loaned an aggregate amount of RMB 40 million (approximately
US$5.98 million with an exchange rate of 0.1494 as of June 30, 2022) (collectively, the &#8220;Loans&#8221;) to the Borrower at a monthly
interest rate of 1%. Each of HiTek and Baihengda funded RMB 20 million of the Loans (approximately US$2.99 million with an exchange rate
of 0.1494 as of June 30, 2022). &#160;As of the date of this annual report, the aggregate outstanding principal amount of the Loans is
RMB37 million (approximately US $5.36 million with an exchange rate of 0.1447 as of December 31, 2022). All of the Loans have a two-year
term. The Borrower can pre-pay the outstanding loan amount after 12 months without penalty. Pursuant to a mining right pledge agreement
dated August 5, 2022 between HiTek, as representative of the Lenders, and the Borrower, the Loans are secured by the Borrower&#8217;s
coal mining permit, 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the event the Borrower is unable to make full
and timely payments of interest and principal on the Loans when due, our cash flow, results of operations and financial conditions may
be adversely affected. In addition, there is risk that the mining property may decrease in value during the term of the Loans. In the
event the underlying collateral value is less than the loan amount at the time of default, we will suffer a loss.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may need additional capital to fund our
future operations and, if it is not available when needed, we may need to reduce our planned expansion and marketing efforts, which may
reduce our revenue.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that our existing working capital and
cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash
from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional
capital. As a result, we could be required to raise additional capital. To the extent that we raise additional capital through the sale
of equity or convertible debt securities, the issuance of such securities could result in dilution of the shares held by existing shareholders.
If additional funds are raised through the issuance of debt or equity securities, such securities may provide the holders certain rights,
preferences, and privileges senior to those of shareholders holding Ordinary Shares, and the terms of any such debt securities could impose
restrictions on our operations. We cannot assure you that additional capital, if required, will be available on acceptable terms, or at
all. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned product
development and marketing efforts, which could harm our business, financial condition and operating results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we are unable to manage our anticipated
growth effectively, our business could be adversely affected. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To develop our business, we need to hire and retain
key managers and executives in all areas of our operations. Our future operating results depend to a large extent on our ability to develop
and manage expansion and growth successfully. For us to manage such growth, we must put in place legal and accounting systems, and implement
human resource management and other tools. We have taken preliminary steps to put this structure in place. However, there is no assurance
that we will be able to expand our business or successfully manage any growth that may result. Failure to expand our operations or manage
our growth effectively could materially and adversely affect our ability to market our services in multiple venues.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because we rely upon a third party to perform
the payment processing for our clients, the failure or inability of the third party to provide these services could impair our ability
to operate. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because we do not possess an internal payment
method, all payments by participants or customers are processed by third parties such as Alipay and WeChat Pay. The payment processing
business is highly regulated, and it is subject to a number of risks that could materially and adversely affect their abilities to provide
payment processing and escrow services to us, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    <td style="text-align: justify"><span style="font-size: 10pt">increased regulatory focus and the requirement that it comply with numerous complex and evolving laws, rules and regulations;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">dissatisfaction with the third parties&#8217; services;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">a decline in the use of the third parties&#8217; services generally which could result in increases in costs to users such as us and our participants;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the ability of the third parties to maintain adequate security procedures to prevent the hacking or other unauthorized access to account and other information provided by us and the participants who use the system;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">system failures or failure to effectively scale the system to handle large and growing transaction volumes;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the failure or inability of the third parties to manage funds accurately or the loss of funds by the third parties, whether due to employee fraud, security breaches, technical errors or otherwise; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We rely on the convenience and ease of use that
third party&#8217;s payment methods provide to our users. If the quality, utility, convenience or attractiveness of these payment services
declines for any reason, the attractiveness of our services could be materially impaired. If we need to migrate to other third-party payment
services for any reason, the transition could require considerable time and management resources, and the third-party payment services
may not be as effective, efficient or well-received by our clients. Further, our clients may be reluctant to use a different payment system.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our success depends substantially on the
continued retention of certain key personnel and our ability to hire and retain qualified personnel in the future to support our growth
and execute our business strategy. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If one or more of our senior executives or other
key personnel are unable or unwilling to continue in their present positions, our business may be disrupted and our financial condition
and results of operations may be materially and adversely affected. While we depend on the abilities and participation of our current
management team generally, we rely particularly upon Mr. Shenping Yin, Chairman of the Board and Ms. Xiaoyang Huang, our Chief Executive
Officer who is responsible for the development and implementation of our business plan. The loss of the services of Mr. Yin for any reason
could significantly adversely impact our business and results of operations. Competition for senior management and senior technology personnel
in the PRC is intense and the pool of qualified candidates is very limited. We cannot assure you that the services of our senior executives
and other key personnel will continue to be available to us, or that we will be able to find a suitable replacement for them if they were
to leave.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be able to adequately protect
our intellectual property rights, and our competitors may be able to offer similar products and services, which would harm our competitive
position. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our success depends in part upon our intellectual
property rights. We rely primarily on copyright, trade secret laws, confidentiality procedures, license agreements and contractual provisions
to establish and protect our proprietary rights over our products, procedures and services. Other persons could copy or otherwise obtain
and use our technology without authorization, or develop similar IP independently. We may also pursue the registration of our domain names,
trademarks, and service marks in other jurisdictions, including the United States. However, the intellectual property laws in China are
not considered as strong as comparable laws in the United States or the European Union. We cannot assure you that we will be able to protect
our proprietary rights. Further, our competitors may be able to independently develop similar or more advanced technology, duplicate our
products and services or design around any intellectual property rights we hold. Further, our intellectual property rights may be subject
to termination or expirations. The loss of intellectual property protections or the inability to timely regain intellectual property protections
could harm our business and ability to compete.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have engaged in transactions with related
parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of
operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We entered into a number of transactions with
related parties, including our significant shareholder and director. For example, we entered into several transactions with Beijing Zhongzhe
Yuantong Technology Co., Ltd. which is under common control with one minority shareholder of HiTek or business entities affiliated with
or owned by Chairman, Shenping Yin, where we have sales revenues or have advances from these entities. See &#8220;Related Party Transactions&#8221;.
We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties
hold ownership interests.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Transactions with related parties present potential
for conflicts of interest, as the interests of related party may not align with the interests of our shareholders. Although we believe
these transactions were in our best interests, we cannot assure you that these transactions were entered into on terms as favorable to
us as those that could have been obtained in an arms-length transaction. We may also engage in transactions with related parties in the
future. Conflicts of interests arise when we transact business with related parties. These transactions, individually or in the aggregate,
may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Relating to Our Corporate Structure </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We do not have direct ownership of our operating
entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its subsidiaries through VIE
Agreements, which may not be effective in providing control over HiTek. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We do not have direct ownership of our operating
entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its subsidiaries through VIE
Agreements. All of our current revenue and net income is derived from HiTek, the VIE in China. Foreign ownership of internet technology
businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations. For example,
foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except
e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain
a good track record in accordance with the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2020 Version)
promulgated on June 23, 2020 and effective on July 23, 2020, respectively, and other applicable laws and regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To comply with PRC laws and regulations, we do
not intend to have an equity ownership interest in HiTek but rely on VIE Agreements with HiTek to control and operate its business. However,
as discussed above, these VIE Agreements may not be effective under PRC laws in providing us with the necessary control over HiTek and
its operations. Any deficiency in these VIE Agreements may result in our loss of control over the management and operations of HiTek,
which will result in a significant loss in the value of an investment in our company. Because of the practical restrictions on direct
foreign equity ownership imposed by the Fujian provincial government authorities, we must rely on contractual rights through the VIE structure
to effect control over and management of HiTek, which exposes us to the risk of potential breach of contract by the shareholders of HiTek.
In addition, as our Chairman of the Board Mr. Yin and his wife Ms. Xiaoyang Huang, our Chief Executive Officer, holds 29.82% and 44.74%
of HiTek&#8217;s outstanding equity, it may be difficult for us to change our corporate structure if such shareholders refuse to cooperate
with us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because we are an offshore holding company
and our business was conducted through VIE Agreements with HiTek, the VIE in China, if we fail to comply with applicable PRC law, we could
be subject to severe penalties and our business could be adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are an offshore holding company incorporated
in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by our subsidiaries and
through VIE Agreements with HiTek, the VIE in China, the equity of which is owned by Xiaoyang Huang, Shenping Yin, Bo Shi, Zhishuang Wang,
Liuqing Huang, Jingru Li, Mian Tang, Ce Tian, Xianfeng Lin, Inner Mongolia Guangxin Investment Co., Ltd. and Baotou Zhongzhe Hengtong
Technology Co., Ltd. through VIE Agreements, as a result of which, under United States generally accepted accounting principles, the assets
and liabilities of HiTek are treated as our assets and liabilities and the results of operations of HiTek are treated in all respects
as if they were the results of our operations. There are uncertainties regarding the interpretation and application of PRC laws, rules
and regulations, including but not limited to the laws, rules and regulations governing the validity and enforcement of the VIE Agreements
between WFOE and HiTek.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Provisions Regarding Mergers and Acquisitions
of Domestic Projects by Foreign Investors (the &#8220;M&amp;A Rules&#8221;) requires an overseas special purpose vehicle that are controlled
by PRC companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions
of PRC domestic companies using shares of such special purpose vehicle or held by its shareholders as considerations to obtain the approval
of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle&#8217;s securities
on an overseas stock exchange. However, the application of the M&amp;A Rules remains unclear. If CSRC approval is required for future
public offerings in the U.S., it is uncertain whether it would be possible for us to obtain such approval. Any failure to obtain or delay
in obtaining CSRC approval for future public offerings in the U.S. would subject us to sanctions imposed by the CSRC and other PRC regulatory
agencies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furthermore, regulatory requirements on cybersecurity,
data security and data privacy in China are evolving and are subject to varying interpretations or significant changes, resulting in uncertainties
about the scope of HiTek&#8217;s responsibilities in that regard. On June 10, 2021, the Standing Committee of the National People&#8217;s
Congress promulgated the PRC Data Security Law, which took effect September 1, 2021. The Data Security Law provides for a security review
procedure for the data activities that may affect national security. Furthermore, Measures for Cybersecurity Review, which became effective
on June 1, 2020, set forth the cybersecurity review mechanism for critical information infrastructure operators, and provided that critical
information infrastructure operators who intend to purchase internet products and services that affect or may affect national security
shall be subject to a cybersecurity review. On December 28, 2021, the CAC published the CAC Revised Measures which further restates and
expands the applicable scope of the cybersecurity review. The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC
Revised Measures, if a network platform operator holding personal information of over one million users seeks for &#8220;foreign&#8221;
listing, it must apply for the cybersecurity review, and operators of critical information infrastructure purchasing network products
and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the CAC Revised Measures
provides no further explanation on the extent of &#8220;network platform operator&#8221; and &#8220;foreign&#8221; listing, we do not
believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that (i) we are not in
possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such
threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable
PRC governmental authorities identifying it as a critical information infrastructure operator. That being said, considering that the CAC
Revised Measures empowers the cybersecurity review office to initiate cybersecurity review when they believe any particular data processing
activities &#8220;affect or may affect national security&#8221;, and it is uncertain whether the competent government authorities will
deem that HiTek&#8217;s data processing activities may affect national security and thus initiating the cybersecurity review against HiTek&#8217;s
businesses. Failure of cybersecurity, data privacy and data security compliance could subject HiTek to penalties, damage its reputation
and brand, and harm its business and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If WFOE, HiTek or their ownership structure or
the VIE Agreements are determined to be in violation of any existing or future PRC laws, rules or regulations, or WFOE or HiTek fails
to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad
discretion in dealing with such violations, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">revoking the business and operating licenses of WFOE or HiTek;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 72pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">discontinuing or restricting the operations of WFOE or HiTek;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 72pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">imposing conditions or requirements with which we, WFOE, or HiTek may not be able to comply;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 72pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">requiring us, WFOE, or HiTek to restructure the relevant ownership structure or operations which may significantly impair the rights of the holders of our Ordinary Shares in the equity of HiTek;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 72pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">restricting or prohibiting our use of the proceeds from our initial public offering to finance our business and operations in China; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 72pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">imposing fines.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We cannot assure you that the PRC courts or regulatory
authorities may not determine that our corporate structure and VIE Agreements violate PRC laws, rules or regulations. If the PRC courts
or regulatory authorities determine that our contractual arrangements are in violation of applicable PRC laws, rules or regulations, the
VIE Agreements will become invalid or unenforceable, and HiTek will not be treated as a VIE entity and we will not be entitled to treat
HiTek&#8217;s assets, liabilities and results of operations as our assets, liabilities and results of operations, which could effectively
eliminate the assets, revenue and net income of HiTek from our balance sheet, which would most likely require us to cease conducting our
business and would result in the delisting of our Ordinary Shares from Nasdaq Capital Market and a significant impairment in the market
value of our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may have difficulty in enforcing any
rights we may have under the VIE Agreements in PRC. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As all of the VIE Agreements with HiTek are governed
by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with
PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed
as in the United States. As a result, uncertainties in the PRC legal system could further limit our ability to enforce these VIE Agreements.
Furthermore, these VIE Agreements may not be enforceable in China if PRC government authorities or courts take a view that such VIE Agreements
contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce
these VIE Agreements, we may not be able to exert effective control over HiTek, and our ability to conduct our business may be materially
and adversely affected.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The approval of the China Securities Regulatory
Commission and other compliance procedures may be required in connection with the offering of our securities in the U.S., and, if required,
we cannot predict whether we will be able to obtain such approval. As a result, both you and us face uncertainty about future actions
by the PRC government that could significantly affect the operating company&#8217;s financial performance and the enforceability of the
VIE Agreements.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Provisions Regarding Mergers and Acquisitions
of Domestic Projects by Foreign Investors (the &#8220;M&amp;A Rules&#8221;) require an overseas special purpose vehicle that are controlled
by PRC companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions
of PRC domestic companies using shares of such special purpose vehicle or held by its shareholders as considerations to obtain the approval
of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle&#8217;s securities
on an overseas stock exchange. However, the application of the M&amp;A Rules remains unclear. If CSRC approval is required for any of
our future offerings in the U.S., it is uncertain whether it would be possible for us to obtain the approval. Any failure to obtain or
delay in obtaining CSRC approval for our future offerings in the U.S. would subject us to sanctions imposed by the CSRC and other PRC
regulatory agencies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The General Office of the Central Committee of
the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on
Illegal Securities Activities, which was available to the public on July 6, 2021. These opinions emphasized the need to strengthen the
administration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions proposed
to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing
China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. The aforementioned policies and any
related implementation rules to be enacted may subject us to additional compliance requirement in the future. As of the date of this annual
report, we have not received or denied any permission from the PRC authorities regarding our listing on the Nasdaq Capital Market. As
these opinions were recently issued, official guidance and interpretation of the opinions remain unclear in several respects at this time.
Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of these opinions or any future
implementation rules on a timely basis, or at all. We face uncertainty about future actions by the PRC government that could significantly
affect the operating company&#8217;s financial performance and the enforceability of the VIE Agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 17, 2023, the CSRC promulgated the
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting
guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities
overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures
within three working days following its submission of initial public offerings or listing application. If a domestic company fails to
complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic
company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual
controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as
warnings and fines. See &#8220;Regulations&#8212;M&amp;A Rules and Overseas Listings.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued
by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions.
The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of
the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent
with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either
directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including
securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or
working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy
administrative department at the same level; and (b)&#160;domestic company that plans to, either directly or indirectly through its overseas
listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers
and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest,
shall strictly fulfill relevant procedures stipulated by applicable national regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Any failure or perceived failure by the Company,
the Company&#8217;s subsidiaries in China or the VIE to comply with the above confidentiality and archives administration requirements
under the revised Provisions and other PRC laws and regulations may result in that the relevant entities would be held legally liable
by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure you that
we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities. Notwithstanding
the foregoing, as of the date of this annual report, we are not aware of any Chinese laws or regulations in effect requiring that we obtain
permission from any Chinese authority to issue securities to foreign investors, and we have not received any inquiry, notice, warning,
sanction or any regulatory objection to our initial public offering from the CSRC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As advised by Jingtian &amp; Gongcheng, our PRC
counsel,&#160;as our post-effective amendment to the registration statement on Form F-1 relating to our initial public offering was declared
effective on March 30, 2023 and we have completed our initial public offering and listing prior to September 30, 2023, we are not required
to complete the filing procedures pursuant to the Trial Measures for our initial public offering. If in the future we are going to conduct
any offering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures.
.. Based on the above and our understanding of the Chinese laws and regulations currently in effect as of the date of this annual report,
we are not aware of any PRC laws or regulations in effect requiring that we obtain permission or approval from any PRC authorities for
our subsidiaries or the VIE&#8217;s operations and to issue securities to foreign investors, and we have not received any inquiry, notice,
warning, sanction, or any regulatory objection to our offerings from the CSRC, the CAC, or any other PRC authorities that have jurisdiction
over our operations.. However, there remains uncertainty as to the enactment, interpretation and implementation of regulatory requirements
related to overseas securities offerings and other capital markets activities. Any failure to obtain or delay in obtaining such approval,
complete required filing or procedures, or a rescission of any such approval or filing obtained by us, would subject us to sanctions by
the CSRC or other PRC regulatory authorities. These regulatory agencies may impose fines and penalties on our operations in mainland China,
limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds
from our initial public offering into mainland China or take other actions that could have a material adverse effect on our business,
financial condition, results of operations and prospects, as well as the trading price of the Ordinary Shares. In addition, if the CSRC,
or other regulatory agencies later promulgate new rules requiring that we obtain their approvals for our initial public offering, we may
be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties
and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of the Ordinary
Shares.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>PRC laws and regulations governing our current
business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitable.
</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are uncertainties regarding the interpretation
and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement
and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject
to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation
of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected
if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these
laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.
We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 6, 2021, the General Office of the Communist
Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities
in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant
governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over
China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
Since this document is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making
bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated,
if any, and the potential impact such modified or new laws and regulations will have on companies like us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Regulations relating to offshore investment
activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In July 2014, State Administration of Foreign
Exchange, or SAFE, promulgated the Circular on Issues Concerning Foreign Exchange Administration Over the Overseas Investment and Financing
and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or Circular 37, which replaced Relevant Issues Concerning
Foreign Exchange Control on Domestic Residents&#8217; Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles,
or Circular 75. Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment
or indirect control of an offshore entity, referred to in Circular 37 as a &#8220;special purpose vehicle&#8221; for the purpose of holding
domestic or offshore assets or interests. Circular 37 further requires amendment to a PRC resident&#8217;s registration in the event of
any significant changes with respect to the special purpose vehicle, such as an increase or decrease in the capital contributed by PRC
individuals, share transfer or exchange, merger, division or other material event. Under these regulations, PRC residents&#8217; failure
to comply with specified registration procedures may result in restrictions being imposed on the foreign exchange activities of the relevant
PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows
from the offshore entity to the PRC entity, including restrictions on its ability to contribute additional capital to Company&#8217;s
subsidiaries in China or the VIE. Further, failure to comply with the SAFE registration requirements could result in penalties under PRC
law for evasion of foreign exchange regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Shenping Yin and Ms. Xiaoyang Huang, together
with ten other PRC residents, who are our beneficial owners, filed applications for Circular 37 registration, and our PRC counsel believes
there is no substantial legal impediment to the registration of the aforementioned beneficial owners&#8217; Circular 37 registration.
As the promulgation of Circular 37 is relatively recent, it is unclear how these regulations will be interpreted and implemented. We cannot
assure you that our ultimate shareholders who are PRC residents will in the future provide sufficient supporting documents required by
the SAFE or complete the required registration with the SAFE in a timely manner, or at all. Any failure by any of our shareholders who
is a PRC resident, or is controlled by a PRC resident, to comply with relevant requirements under these regulations could subject us to
fines or sanctions imposed by the PRC government, including restrictions on our overseas or cross-border investment activities, restrictions
on WFOE&#8217;s ability to pay dividends or make distributions to us and on our ability to increase our investment in the WFOE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although we believe that our agreements relating
to our structure are in compliance with current PRC regulations, we cannot assure you that the PRC government would agree that these VIE
Agreements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies
that may be adopted in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Uncertainties exist with respect to the
interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure,
corporate governance and business operations. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 15, 2019, the National People&#8217;s
Congress approved the Foreign Investment Law (&#8220;FIL&#8221;), which came into effect on January 1, 2020 and replaced the trio of existing
laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.
The FIL embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international
practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, since
it is relatively new, uncertainties exist in relation to its interpretation and implementation. For instance, under the FIL, &#8220;foreign
investment&#8217;&#8217; refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other
entities in China. Though it does not explicitly classify VIE Agreements as a form of foreign investment, there is no assurance that operations
conducted by foreign investors or foreign-invested enterprises via contractual arrangement would not be interpreted as a type of indirect
foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes
investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the
State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council
to provide for VIE Agreements as a form of foreign investment. In any of these cases, it will be uncertain whether the VIE Agreements
will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore,
if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies
with respect to existing VIE Agreements, we may face substantial uncertainties as to whether we can complete such actions in a timely
manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges
could materially and adversely affect our current corporate structure, corporate governance and business operations</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks Relating to Doing Business in the PRC
</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Although the audit report included in this
annual report is prepared by U.S. auditors which are currently inspected by the PCAOB, there is no guarantee that future audit reports
will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection.
Furthermore, trading in our securities may be prohibited under the HFCA Act, as Amended, if the SEC subsequently determines our audit
work is performed by auditors that the PCAOB is unable to inspect or investigate completely for two consecutive years, and as a result,
U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As an auditor of companies that are registered
with the SEC and publicly traded in the US (&#8220;U.S.&#8221;) and a firm registered with the PCAOB, our auditor is required under the
laws of the U.S. to undergo regular inspections by the PCAOB to assess their compliance with the laws of the U.S. and professional standards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our auditor, the independent registered public
accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly
in the U.S. and a firm registered with the PCAOB, is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections
to assess its compliance with the applicable professional standards. Our auditor is currently subject to PCAOB inspections and PCAOB is
able to inspect our auditor. However, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent
criteria to us after considering the effectiveness of our auditor&#8217;s audit procedures and quality control procedures, adequacy of
personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 20, 2020, the U.S. Senate passed the HFCA
Act, which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to
inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor&#8217;s local jurisdiction.
The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 24, 2021, the SEC adopted interim final
rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. We would be required to comply
with these rules if the SEC identifies us as having a &#8220;non-inspection&#8221; year (as defined in the interim final rules) under
a process to be subsequently established by the SEC. The SEC was assessing how to implement other requirements of the HFCA Act, including
the listing and trading prohibition requirements described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 22, 2021, the PCAOB adopted a final
rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act,
whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction
because of a position taken by one or more authorities in that jurisdiction.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 2, 2021, the SEC issued amendments
to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC
identifies as having filed an annual report with an audit report issued by a registered public accounting firm located in a foreign jurisdiction
and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 16, 2021, SEC announced that the PCAOB
designated China and Hong Kong as the jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections as mandated
under the HFCA Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><br/>
On August 26, 2022, the CSRC, the MOF, and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based
in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public
accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the
SEC the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability
to transfer information to the SEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 15, 2022, the PCAOB Board determined
the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China
and Hong Kong and voted to vacate its previous determinations to the contrary.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 29, 2022, the Consolidated Appropriations
Act was signed into law by President Biden, which amended the HFCA Act by requiring the SEC to prohibit an issuer&#8217;s securities from
trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus
reducing the time period for triggering the prohibition on trading.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">However, should PRC authorities obstruct or otherwise
fail to facilitate the PCAOB&#8217;s access in the future, the PCAOB Board will consider the need to issue a new determination.&#160;Delisting
of our Ordinary Shares would force holders of our Ordinary Shares to sell their Ordinary Shares. The market price of our Ordinary Shares
could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions upon, as well as negative
investor sentiment towards, companies with significant operations in China that are listed in the U.S., regardless of whether these executive
or legislative actions are implemented and regardless of our actual operating performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The recent joint statement by the SEC, proposed
rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional
and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our offering, business
operations, share price and reputation. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators
and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting
irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies
or a lack of adherence thereto and, in many cases, allegations of fraud.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 7, 2018, the SEC and the PCAOB issued
a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed
companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III,
along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or
have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including the difficulty
associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty
of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of fraud, in emerging markets
generally.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 20, 2020, the U.S. Senate passed the HFCA
Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified
reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company&#8217;s
auditors for three consecutive years, the issuer&#8217;s securities are prohibited to trade on a national exchange. On December 2, 2020,
the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 21, 2021, Nasdaq filed three proposals
with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a &#8220;Restrictive Market&#8221;, (ii)
prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and only permit them to list on Nasdaq Global Select
or Nasdaq Global Market in connection with a direct listing and (iii) apply additional and more stringent criteria to an applicant or
listed company based on the qualifications of the company&#8217;s auditors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As discussed in the previous risk factor, our
Ordinary Shares are subject to the risk of being delisted under the HFCA Act and the Consolidated Appropriations Act, in the event that
PCAOB determines it is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign
jurisdiction for two consecutive years. The PCAOB Board determined, on December 15, 2022, that it was able to secure complete access to
inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous
determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB&#8217;s access in the
future, the PCAOB Board will consider the need to issue a new determination.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a result of this scrutiny, criticism and negative
publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, became virtually
worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and
external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity
will have on us, our offering, business and our share price. If we become the subject of any unfavorable allegations, whether such allegations
are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company.
This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven
to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of
our share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Nasdaq may apply additional and more stringent
criteria for our continued listing because we plan to have a small public offering and our insiders will hold a large portion of our listed
securities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Nasdaq Listing Rule 5101 provides Nasdaq with
broad discretionary authority over the initial and continued listing of securities in Nasdaq and Nasdaq may use such discretion to deny
initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend
or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing
of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria
for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion to deny initial or continued listing or to apply
additional and more stringent criteria in the instances, including but not limited to: (i) where the company engaged an auditor that has
not been subject to an inspection by PCAOB, an auditor that PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources,
geographic reach, or experience to adequately perform the company&#8217;s audit; (ii) where the company planned a small public offering,
which would result in insiders holding a large portion of the company&#8217;s listed securities. Nasdaq was concerned that the offering
size was insufficient to establish the company&#8217;s initial valuation, and there would not be sufficient liquidity to support a public
market for the company; and (iii) where the company did not demonstrate sufficient nexus to the U.S. capital market, including having
no U.S. shareholders, operations, or members of the board of directors or management. Our public float is relatively small and the insiders
of our Company hold a large portion of the company&#8217;s listed securities. Therefore, we may be subject to the additional and more
stringent criteria of Nasdaq for our continued listing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>It may be difficult for overseas shareholders
and/or regulators to conduct investigation or collect evidence within China.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shareholder claims or regulatory investigation
that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China,
there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated
outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities
of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory
authorities in the U.S. may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to&#160;Article&#160;177&#160;of
the PRC Securities Law, or&#160;Article&#160;177, which became effective in March 2020, no overseas securities regulator is allowed to
directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or
implementation rules under&#160;Article&#160;177&#160;have yet to be promulgated, the inability for an overseas securities regulator to
directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting
your interests.&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our principal business operation is conducted
in the PRC. If U.S. regulators carry out an investigation of us and there is a need to conduct investigation or collect evidence within
the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC
under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of
judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the
PRC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because we are a Cayman Islands corporation
and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce
any judgment you may obtain. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a company incorporated under the laws of
the Cayman Islands, we conduct substantially all of our operations in China, and substantially all of our assets are located in China.
In addition, all our senior executive officers reside within China for a significant portion of the time and are all PRC nationals. As
a result, it may be difficult for our shareholders to effect service of process upon us or those persons in the Cayman Islands or in China.
In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman
Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these
non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. See &#8220;Enforceability
of Civil Liabilities.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shareholder claims that are common in the U.S.
including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China.
For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations
or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory
cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and
administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in
the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in
March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the
territory of the PRC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, our corporate affairs are governed
by our amended and restated memorandum and articles of association, the Companies Act or the common law of the Cayman Islands. The rights
of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors
to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands
is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions
of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and
the fiduciary responsibilities of our directors under Cayman Islands law are different from statutes or judicial precedent in some jurisdictions
in the U.S.. In particular, the Cayman Islands has a different body of securities laws as compared to the U.S.. In addition, Cayman Islands
companies may not have standing to initiate a shareholder derivative action in a Federal court of the U.S..</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have been advised by our Cayman Islands legal
counsel, Maples and Calder (Cayman) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments
of courts of the U.S. predicated upon the civil liability provisions of the federal securities laws of the U.S. or any state; and (ii)
in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of
the federal securities laws of the U.S. or any state, so far as the liabilities imposed by those provisions are penal in nature. In those
circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the U.S., the courts of the Cayman
Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits
based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for
which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment
must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman
Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement
of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be
held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought
elsewhere.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a result of all of the above, public shareholders
may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or
controlling shareholders than they would as public shareholders of a U.S. company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Economic conditions in China could impact
our business and results of operations in both lines of our business</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The VIE entity and its subsidiaries&#8217; business
and operating results are impacted by Chinese economic conditions, such as a potential general reduction in net disposable income as a
result of fiscal measures adopted by Chinese government to address high levels of budgetary indebtedness, which may adversely affect our
business, results of operations and financial condition. The most recent global financial crisis and recession resulted in large-scale
business failures and tightened credit markets in China, which directly impacts the Chinese IT service market and VAT reporting service
industry. Future adverse economic developments in areas such as employment levels, business conditions, interest rates, tax rates, fuel
and energy costs and other matters could reduce discretionary spending and cause the industries where we operate to contract.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>There may be changes in the regulations
of PRC government bodies and agencies relating to VAT collection procedure and ACTCS business</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">PRC laws, regulations and policies concerning
VAT collection procedures and ACTCS business are evolving and the PRC government authorities may promulgate new laws, regulations and
policies in the future. We cannot assure you that our practices would not be deemed to violate any PRC laws, regulations or policies either
now or in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Moreover, developments in the ACTCS service industry
may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies,
which may limit or restrict the ACTCS hardware and services we offer. Furthermore, we cannot rule out the possibility that the PRC government
will institute a new licensing regime covering services we provide in the future. If such a licensing regime were introduced, we cannot
assure you that we would be able to obtain any newly required license in a timely manner, or at all, which could materially and adversely
affect our business and impede our ability to continue our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Changes in the policies of the PRC government
could have a significant impact upon our ability to operate profitably in the PRC. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conduct all of our operations and all of our
revenue is generated in the PRC. Accordingly, economic, political and legal developments in the PRC will significantly affect our business,
financial condition, results of operations and prospects. Policies of the PRC government can have significant effects on economic conditions
in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the PRC may be adversely affected
by changes in policies by the PRC government, including changes in laws, regulations or their interpretation, particularly those dealing
with the Internet, including censorship and other restriction on material which can be transmitted over the Internet, security, intellectual
property, money laundering, taxation and other laws that affect our ability to operate our website.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>China&#8217;s economic, political and social
conditions, laws and regulations, as well as possible interventions and influences of any government policies and actions are uncertain
and could have a material adverse effect on our business and the value of our Ordinary Shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">China&#8217;s economy differs from the economies
of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control
of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past two to three decades,
growth has been uneven, both geographically and among various sectors of the economy. Although China&#8217;s economy has been transitioning
from a planned economy to a more market oriented economy since the late 1970s, the PRC government continues to play a significant role
in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China&#8217;s
economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting
monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and
regulations could adversely affect the economy in China and could have a material adverse effect on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The PRC government has implemented various measures
to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources. However,
we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have a negative
effect on us, or more specifically, we cannot assure you that the PRC government will not initiate possible governmental actions or scrutiny
to us, which could substantially affect our operation and the value of our Ordinary Shares may depreciate quickly. China&#8217;s economic,
political and social conditions, as well as interventions and influences of any government policies, laws and regulations are uncertain
and could have a material adverse effect on our business.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because our business is dependent upon government
policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate
profitably, if at all. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although the PRC government has pursued been pursuing
a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic
growth in the PRC. Because of the nature of our business, we are dependent upon the PRC government pursuing policies that encourage private
ownership of businesses. Restrictions on private ownership of businesses would affect the VAT filing and collection in general and businesses
using ACTCS in particular. We cannot assure you that the PRC government will pursue policies favoring a market-oriented economy or that
existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption,
or other circumstances affecting political, economic and social life in the PRC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because our business is conducted in RMB
and the price of our Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of
your investments.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our business is conducted in the PRC, our books
and records are maintained in RMB, which is the currency of the PRC, and the financial statements that we file with the SEC and provide
to our shareholders are presented in U.S. dollars. Changes in the exchange rate between the RMB and dollar affect the value of our assets
and the results of our operations in U.S. dollars. The value of the RMB against the U.S. dollar and other currencies may fluctuate and
is affected by, among other things, changes in the PRC&#8217;s political and economic conditions and perceived changes in the economy
of the PRC and the U.S.. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue and financial
condition. Further, our Ordinary Shares offered by this annual report are offered in U.S. dollars, we will need to convert the net proceeds
we receive into RMB in order to use the funds for our business. Changes in the conversion rate between the U.S. dollar and the RMB will
affect that amount of proceeds we will have available for our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Under the PRC Enterprise Income Tax Law,
or the EIT Law, we may be classified as a &#8220;resident enterprise&#8221; of China, which could result in unfavorable tax consequences
to us and our non-PRC shareholders.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The EIT Law and its implementing rules provide
that enterprises established outside of China whose &#8220;de facto management bodies&#8221; are located in China are considered &#8220;resident
enterprises&#8221; under PRC tax laws. The implementing rules promulgated under the EIT Law define the term &#8220;de facto management
bodies&#8221; as a management body which substantially manages, or has control over the business, personnel, finance and assets of an
enterprise. In April 2009, the State Administration of Taxation, or SAT, issued a circular, known as Circular 82, which provides certain
specific criteria for determining whether the &#8220;de facto management bodies&#8221; of a PRC-controlled enterprise that is incorporated
offshore is located in China. However, there are no further detailed rules or precedents governing the procedures and specific criteria
for determining &#8220;de facto management body.&#8221; Although our board of directors and management are located in the PRC, it is unclear
if the PRC tax authorities would determine that we should be classified as a PRC &#8220;resident enterprise.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we are deemed a PRC &#8220;resident enterprise,&#8221;
we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed to
us from our existing subsidiaries in China or the VIE and any other subsidiaries in China or the VIE which we may establish from time
to time could be exempt from the PRC dividend withholding tax due to our PRC &#8220;resident recipient&#8221; status. This could have
a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends, if
any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered
a PRC &#8220;resident enterprise&#8221;, any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our
Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the case of
non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty).
It is unclear whether holders of our Ordinary Shares would be able to claim the benefits of any tax treaties between their country of
tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse effect
on the value of your investment in us and the price of our Ordinary Shares.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>There are significant uncertainties under
the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore
subsidiaries may not qualify to enjoy certain treaty benefits.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the PRC EIT Law and its implementation rules,
the profits of a foreign invested enterprise generated through operations, which are distributed to its immediate holding company outside
the PRC, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and the PRC, such rate
may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Our PRC subsidiary
is wholly-owned by our Hong Kong subsidiary. Moreover, under the Notice of the State Administration of Taxation on Issues regarding the
Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer needs to satisfy certain conditions
to enjoy the benefits under a tax treaty. These conditions include: (1) the taxpayer must be the beneficial owner of the relevant dividends,
and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have continuously met the direct ownership thresholds
during the 12 consecutive months preceding the receipt of the dividends. Further, the State Administration of Taxation promulgated the
Notice on How to Understand and Recognize the &#8220;Beneficial Owner&#8221; in Tax Treaties on October 27, 2009, which limits the &#8220;beneficial
owner&#8221; to individuals, projects or other organizations normally engaged in substantive operations, and sets forth certain detailed
factors in determining the &#8220;beneficial owner&#8221; status. In current practice, a Hong Kong enterprise must obtain a tax resident
certificate from the relevant Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority
will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident
certificate from the relevant Hong Kong tax authority. As of the date of this annual report, we have not commenced the application process
for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that we will be granted
such a Hong Kong tax resident certificate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Even after we obtain the Hong Kong tax resident
certificate, we are required by applicable tax laws and regulations to file required forms and materials with relevant PRC tax authorities
to prove we can enjoy the 5% lower PRC withholding tax rate. HiTek HK intends to obtain the required materials and file with the relevant
tax authorities when it plans to declare and pay dividends, but there is no assurance that the PRC tax authorities will approve the 5%
withholding tax rate on dividends received from HiTek HK.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The disclosures in our reports and other
filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are regulated by the SEC and our reports and
other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities
Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of
any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by CSRC,
a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings
and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings
or any of our other public pronouncements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We operate in an emerging and evolving market.
If our market does not grow as we expect, or if we fail to adapt and respond effectively to rapidly changing technology, evolving industry
standards, changing regulations, and changing customer needs, requirements or preferences, our products and solutions may become less
competitive.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are uncertainties over the size and rate
at which the IT service market will grow, as well as whether our solutions and products will be widely adopted. Moreover, the ACTCS industry
is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements
and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on
a timely basis. If we are unable to develop new solutions and products that satisfy our customers and provide enhancements and new features
for our existing products that keep pace with rapid technological and industry change, our business, results of operations and financial
condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower
prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our platform must also integrate with a variety
of network, hardware, software platforms and technologies, and we need to continuously modify and enhance our products and platform to
adapt to changes and innovation. For example, if customers adopt new software platforms or infrastructure, we may be required to develop
new versions of our products to be compatible with those new software platforms or infrastructure. This development effort may require
significant resources, which would adversely affect our business, results of operations and financial condition. Any failure of our products
and platform to operate effectively with evolving or new software platforms and technologies could reduce the demand for our products.
If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive
or obsolete, and our business, results of operations and financial condition could be adversely affected.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>In light of recent events indicating greater
oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign
exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply
with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition,
results of operations, and the offering.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to various risks and costs associated
with to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information
and other data. This data is wide ranging and relates to our investors, employees, contractors and other counterparties and third parties.
Our compliance obligations include those relating to the Data Protection Act (As Revised) of the Cayman Islands and the relevant PRC laws
in this regard. These PRC laws apply not only to third-party transactions, but also to transfers of information between us, our WFOE,
the VIE, and the VIE&#8217;s subsidiaries, and among us, our WFOE, the VIE, and the VIE&#8217;s subsidiaries, and other parties with which
we have commercial relations. These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future.
Non-compliance could result in penalties or other significant legal liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the PRC Cybersecurity Law, promulgated
by the Standing Committee of the National People&#8217;s Congress on November 7, 2016 and took effect on June 1, 2017, personal information
and important data collected and generated by a critical information infrastructure operator in the course of its operations in China
must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or
may affect national security, it should be subject to cybersecurity review by the CAC. Due to the lack of further interpretations, the
exact scope of &#8220;critical information infrastructure operator&#8221; remains unclear. On December 28, 2021, the CAC published the
CAC Revised Measures which further restates and expands the applicable scope of the cybersecurity review. The CAC Revised Measures took
effect on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding personal information of over
one million users seeks for &#8220;foreign&#8221; listing, it must apply for the cybersecurity review. In addition, operators of critical
information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such
purchasing activities. Although the CAC Revised Measures provides no further explanation on the extent of &#8220;network platform operator&#8221;
and &#8220;foreign&#8221; listing, as confirmed by our PRC counsel, Jingtian &amp; Gongcheng, we are not subject to cybersecurity review
with the CAC , because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also
very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received
any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
However, we cannot guarantee that we will not be subject to cybersecurity review in the future as we offer IT services and sell hardware
and software in China. During such review, we may be required to suspend our operation experience other disruptions to our operations.
Cybersecurity review could also result in negative publicity with respect to our company and diversion of our managerial and financial
resources.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furthermore, if we were found to be in violation
of applicable laws and regulations in China during such review, we could be subject to administrative penalties, such as warnings, fines,
or service suspension. Therefore, cybersecurity review could materially and adversely affect our business, financial condition, and results
of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the PRC Data Security Law, promulgated
by the Standing Committee of the National People&#8217;s Congress on June 10, 2021 and took effect on September 1, 2021, requires data
collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data protection, data processing
activities must be conducted based on data classification and hierarchical protection system for data security. As the Data Security Law
was recently promulgated, we may be required to make further adjustments to our business practices to comply with this law. If our data
processing activities were found to be not in compliance with this law, we could be ordered to make corrections, and under certain serious
circumstances, such as severe data divulgence, we could be subject to penalties, including the revocation of our business licenses or
other permits. Furthermore, the recently issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the
Law require (i) speeding up the revision of the provisions on strengthening the confidentiality and archives management relating to overseas
issuance and listing of securities and (ii) improving the laws and regulations relating to data security, cross-border data flow, and
management of confidential information. As there remain uncertainties regarding the further interpretation and implementation of those
laws and regulations, we cannot assure you that we will be compliant such new regulations in all respects, and we may be ordered to rectify
and terminate any actions that are deemed illegal by the regulatory authorities and become subject to fines and other sanctions. As a
result, we may be required to suspend our relevant businesses, shut down our website, take down our operating applications, or face other
penalties, which may materially and adversely affect our business, financial condition, and results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 20, 2021, the Standing Committee of
the National People&#8217;s Congress of China promulgated the Personal Information Protection Law of the PRC, or the PIPL, which took
effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the
PRC, the PIPL provides, among others, that (i) an individual&#8217;s consent shall be obtained to use sensitive personal information,
such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information
shall notify individuals of the necessity of such use and impact on the individual&#8217;s rights, and (iii) where personal information
operators reject an individual&#8217;s request to exercise his or her rights, the individual may file a lawsuit with a People&#8217;s
Court. As uncertainties remain regarding the interpretation and implementation of the PIPL, we cannot assure you that we will comply with
the PIPL in all respects, we may become subject to fines and/or other penalties which may have material adverse effect on our business,
operations and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While we take measures to comply with all applicable
data privacy and protection laws and regulations, we cannot guarantee the effectiveness of the measures undertaken by us and our business
partners. However, compliance with any additional laws could be expensive, and may place restrictions on our business operations and the
manner in which we interact with our users. In addition, any failure to comply with applicable cybersecurity, privacy, and data protection
laws and regulations could result in proceedings against us by government authorities or others, including notification for rectification,
confiscation of illegal earnings, fines, or other penalties and legal liabilities against us, which could materially and adversely affect
our business, financial condition, results of operations and the value of our Ordinary Shares. In addition, any negative publicity on
our website or platform&#8217;s safety or privacy protection mechanism and policy could harm our public image and reputation and materially
and adversely affect our business, financial condition, and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to anti-corruption, anti-bribery,
and similar laws, and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and
reputation.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to the U.S. Foreign Corrupt Practices
Act of 1977, and other anti-corruption, anti-bribery, anti-money laundering, and similar laws in China and the United States. Anti-corruption
and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees and agents
from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the public
sector. We leverage our business partners, including channel partners, to sell our products and solutions and host many of our facilities
for our network. We may also rely on our business partners to conduct our business abroad. We and our business partners may have direct
or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held
liable for the corrupt or other illegal activities of our business partners and intermediaries, our employees, representatives, contractors,
channel partners and agents, even if we do not explicitly authorize such activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We cannot assure you that all of our employees
and agents have complied with, or in the future will comply with, our policies and applicable law. The investigation of possible violations
of these laws, including internal investigations and compliance reviews that we may conduct from time to time, could have a material adverse
effect on our business. Noncompliance with these laws could subject us to investigations, severe criminal or civil sanctions, settlements,
prosecution, loss of export privileges, suspension or debarment from Chinese government contracts and other contracts, other enforcement
actions, the appointment of a monitor, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions,
whistleblower complaints, adverse media coverage and other consequences. Other internal and government investigations, regulatory proceedings,
or litigation, including private litigation filed by our shareholders, may also follow as a consequence. Any investigations, actions,
or sanctions could materially harm our reputation, business, results of operations, and financial condition. Further, the promulgation
of new laws, rules or regulations or new interpretations of current laws, rules or regulations could impact the way we do business in
other countries, including requiring us to change certain aspects of our business to ensure compliance, which could reduce revenues, increase
costs, or subject us to additional liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to comply with laws and regulations
applicable to our business in China could subject us to fines and penalties and could also cause us to lose customers or otherwise harm
our business. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our business is subject to regulation by various
governmental agencies in China, including agencies responsible for monitoring and enforcing compliance with various legal obligations,
such as value-added telecommunication laws and regulations, privacy and data protection-related laws and regulations, intellectual property
laws, employment and labor laws, workplace safety, environmental laws, consumer protection laws, governmental trade laws, import and export
controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain jurisdictions, these regulatory requirements
may be more stringent than in China. These laws and regulations impose added costs on our business. Noncompliance with applicable regulations
or requirements could subject us to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">mandatory changes to our network and products;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">civil and criminal penalties or injunctions;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">claims for damages by our customers or channel partners;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">termination of contracts;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">loss of intellectual property rights;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">temporary or permanent debarment from sales to public service organizations.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If any governmental sanctions are imposed, or
if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could
be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management&#8217;s attention
and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results of operations,
and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, companies in the technology industry
have recently experienced increased regulatory scrutiny. Any reviews by regulatory agencies or legislatures may result in substantial
regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations.
Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change
our business practices. Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These
factors could negatively affect our business and results of operations in material ways.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Moreover, we are exposed to the risk of misconduct,
errors and failure to functions by our management, employees and parties that we collaborate with, who may from time to time be subject
to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance
with applicable laws and regulations, which could harm our reputation and business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face exposure to foreign currency exchange
rate fluctuations, and such fluctuations could adversely affect our business, results of operations and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The conversion of Renminbi into foreign currencies,
including the U.S. dollar, is based on rates set by the People&#8217;s Bank of China. The Renminbi has fluctuated against the U.S. dollar
and other currencies, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is
affected by changes in China&#8217;s political and economic conditions and by China&#8217;s foreign exchange policies, among other things.
We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar and other currencies
in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi
and U.S. dollar in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Significant revaluation of the Renminbi may have
a material and adverse effect on your investment. For example, to the extent we need to convert U.S. dollars we received from our initial
public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on
the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose
of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi
would have a negative effect on the U.S. dollar amount available to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Very limited hedging options are available in
China to reduce our exposure to exchange rate fluctuations. As of the date of this annual report, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions
in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure,
or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to
convert Renminbi into foreign currency.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Substantially all of our revenues and costs are
denominated in Renminbi. We are a holding company and we rely on dividends paid by our operating subsidiaries in China for our cash needs.
Any significant revaluation of Renminbi may materially and adversely affect our results of operations and financial position reported
in Renminbi when translated into U.S. dollars. To the extent that we need to convert U.S. dollars we received from our initial public
offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi
amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends
on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect
on the U.S. dollar amount.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Increases in labor costs in the PRC may
adversely affect our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">China&#8217;s economy has experienced increases
in labor costs in recent years. China&#8217;s overall economy and the average wage in China are expected to continue to grow. The average
wage level for our employees has also increased in recent years. We expect that our staff costs, including wages and employee benefits,
will continue to increase. Unless we are able to pass on these increased labor costs to our customers by increasing prices for our products
or services, our profitability and results of operations may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, we have been subject to stricter
regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including
housing, pension, medical insurance and unemployment insurance programs to designated government agencies for the benefit of our employees.
Compared with its predecessors, the current Labor Contract Law of the PRC imposes stricter requirements on employers in terms of signing
labor contracts, minimum wages, paying remuneration, determining the term of employees&#8217; probation and unilaterally terminating labor
contracts, further increasing our labor-related costs such as by limiting our ability to terminate some of our employees or otherwise
change our employment or labor practices in a cost-effective manner. In addition, as the interpretation and implementation of labor-related
laws and regulations are still developing, we cannot assure you that our employment practices have been or will at all times be deemed
in compliance with the labor-related laws and regulations in China. If we are subject to severe penalties in connection with labor disputes
or government investigations, our business, financial condition and results of operations will be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Chinese government exerts substantial
influence over the manner in which we must conduct our business activities. Any actions by Chinese government, including any decision
to intervene or influence our operations or to exert control over any offering of securities conducted overseas and/or foreign investment
in China-based issuers, may cause us to make material changes to our operation, may limit or completely hinder our ability to offer or
continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Substantially
all of our operations are located in China. Our ability to operate in China may be harmed by changes in its laws and regulations, including
those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of
these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures
and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional
or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular
regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As such, our business may be subject to various
government and regulatory interference in the provinces in which we operate. We could be subject to regulation by various political and
regulatory entities, including various local and municipal agencies and government sub-divisions. We may incur increased costs necessary
to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furthermore, it is uncertain when and whether
we will be required to obtain permission from the PRC government to offering securities in the U.S. in the future, and even when such
permission is obtained, whether we will be denied or rescinded. Although we are currently not required to obtain permission from any of
the PRC regulatory authorities to obtain such permission and has not received any denial regarding our listing on the Nasdaq Capital Market
and the entry into the VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws
and regulations relating to our business or industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>PRC laws and regulations governing our current
business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.
</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are uncertainties regarding the interpretation
and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement
and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject
to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation
of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected
if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these
laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.
We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have
limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve,
the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules
involves uncertainties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 1979, the PRC government began to promulgate
a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past
three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has
not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic
activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC
administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual
terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy.
These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or
tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts
to extract payments or benefits from us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Furthermore, the PRC legal system is based in
part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect.
As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition,
any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management
attention.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time, we may have to resort to administrative
and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion
in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and
court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is
based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive
effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties,
including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights,
and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede
our ability to continue our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Recently, the General Office of the Central Committee
of the Communist Party of China and the General Office of the State Council jointly issued the &#8220;Opinions on Severely Cracking Down
on Illegal Securities Activities According to Law,&#8221; or the Opinions, which was made available to the public on July 6, 2021. The
Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision
over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will
be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection
requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirement
in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks Relating to Our Ordinary Shares</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We do not intend to pay dividends for the
foreseeable future.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We currently intend to retain any future earnings
to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.
As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If securities or industry analysts do not
publish research or reports about our business, or if the publish a negative report regarding our Ordinary Shares, the price of our Ordinary
Shares and trading volume could decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The trading market for our Ordinary Shares may
depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control
over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline.
If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in
the financial markets, which could cause the price of our Ordinary Shares and the trading volume to decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>The estimates of
market opportunity, forecasts of market growth included in this annual report may prove to be inaccurate, and any real or perceived inaccuracies
may harm our reputation and negatively affect our business. Even if the market in which we compete achieves the forecasted growth, our
business could fail to grow at similar rates, if at all.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Market opportunity estimates
and growth forecasts included in this annual report are subject to significant uncertainty and are based on assumptions and estimates
that may not prove to be accurate. The variables that go into the calculation of our market opportunities are subject to change over time,
and there is no guarantee that any particular number or percentage of addressable companies covered by our market opportunities estimates
will purchase our products and solutions at all or generate any particular level of revenues for us. Even if the market in which we compete
meets the size estimates and growth forecasted in this annual report, our business could fail to grow for a variety of reasons, including
reasons outside of our control, such as competition in our industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The market price of our Ordinary Shares
may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the
initial public offering price.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The initial public offering price for our Ordinary
Shares will be determined through negotiations between the underwriters and us and may vary from the market price of our Ordinary Shares
following our initial public offering. If you purchase our Ordinary Shares in our initial public offering, you may not be able to resell
those shares at or above the initial public offering price. We cannot assure you that the initial public offering price of our Ordinary
Shares, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions of
our shares that have occurred from time to time prior to our initial public offering. The market price of our Ordinary Shares may fluctuate
significantly in response to numerous factors, many of which are beyond our control, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="width: 3%"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="width: 94%"><span style="font-size: 10pt">actual or anticipated fluctuations in our revenue and other operating results;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">lawsuits threatened or filed against us; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the stock markets have experienced
extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
Share prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.
In the past, shareholders have filed securities class action litigation following periods of market volatility. If we were to become involved
in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business,
and adversely affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i><br/>
Our management has broad discretion to determine how to use the funds raised in the offering and may use them in ways that may not enhance
our results of operations or the price of our Ordinary Shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We anticipate that we will use the net proceeds
from the our initial public offering for working capital and other corporate purposes. Our management will have significant discretion
as to the use of the net proceeds to us from the initial public offering and could spend the proceeds in ways that do not improve our
results of operations or enhance the market price of our Ordinary Shares.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our lack of effective internal controls
over financial reporting may affect our ability to accurately report our financial results or prevent fraud which may affect the market
for and price of our Ordinary Share.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To implement Section 404 of the Sarbanes-Oxley
Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company&#8217;s internal control
over financial reporting. We are subject to the requirement that we maintain internal controls and that management perform periodic evaluation
of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a
result, our business, financial condition, results of operations and prospects, as well as the market for and trading price of our Ordinary
Shares, may be materially and adversely affected if we do not have effective internal controls. We do not presently have the financial
resources or personnel to develop or implement systems that would provide us with the necessary information on a timely basis so as to
be able to implement financial controls. As a result, we may not discover any problems in a timely manner and current and potential shareholders
could lose confidence in our financial reporting, which would harm our business and the trading price of our Ordinary Shares. The absence
of internal controls over financial reporting may inhibit investors from purchasing our shares and may make it more difficult for us to
raise funds in a debt or equity financing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Because we are an &#8220;emerging growth
company,&#8221; we may not be subject to requirements that other public companies are subject to, which could affect investor confidence
in us and our Ordinary Shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As we are an &#8220;emerging growth company,&#8221;
we may not be subject to requirements that other public companies are subject to, which could other requirements applicable to other public
companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company and a smaller reporting company.
As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information
they may deem important.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We will incur increased costs as a result
of being a public company, particularly after we cease to qualify as an &#8220;emerging growth company.&#8221;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We became a public company after completion of
our initial public offering and expect to incur significant legal, accounting and other expenses that we did not incur as a private company.
The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements
on the corporate governance practices of public companies. As an &#8220;emerging growth company&#8221; pursuant to the JOBS Act, we may
take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. We expect
these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming
and costlier. After we are no longer an &#8220;emerging growth company,&#8221; we expect to incur significant additional expenses and
devote substantial management effort toward ensuring compliance increased disclosure requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Since Mr. Shenping Yin, Chairman and his
wife, Ms. Xiaoyang Huang, chief executive office of the Board are able to exercise more than 50% of the total voting power of our issued
and outstanding share capital, Mr. Yin will have the ability to elect directors and approve matters requiring shareholder approval.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Shenping Yin, Chairman of the Board, and his
wife Ms. Xiaoyang Huang are currently the beneficial owner of 8,192,000 ordinary share or 57.74% of our outstanding shares, which are
directly held by Fortune Enterprise Holdings Limited, an entity 100% owned by Mr. Yin and Ms. Huang. As result, Mr. Yin and Ms. Huang
able to exert significant voting influence over fundamental and significant corporate matters and transactions. Depending on the percentage,
they may have the power to elect all directors and approve all matters requiring shareholder approval without the votes of any other shareholder.
They have significant influence over a decision to enter into any corporate transaction and has the ability to prevent any transaction
that requires the approval of shareholders, regardless of whether or not our other shareholders believe that such transaction is in our
best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or
other business combination, which could, in turn, have an adverse effect on the market price of our Ordinary Shares or prevent our shareholders
from realizing a premium over the then-prevailing market price for their Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are a &#8220;controlled company&#8221;
within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements
that provide protection to shareholders of other companies.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a &#8220;controlled company&#8221; as defined
under the NASDAQ Stock Market Rules because two of our principal shareholders, Shenping Yin, our Chairman of the Board, and Xiaoyang Huang
our CEO, who are husband and wife, beneficially own more than 50% of voting power for the election of directors. For so long as we are
a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance
rules, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 3%">&#160;</td>
    <td style="width: 3%; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="width: 94%; text-align: justify"><span style="font-size: 10pt">an exemption from the rule that a majority of our board of directors must be independent directors;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 3%">&#160;</td>
    <td style="width: 3%; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="width: 94%; text-align: justify"><span style="font-size: 10pt">an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 3%">&#160;</td>
    <td style="width: 3%; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="width: 94%; text-align: justify"><span style="font-size: 10pt">an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a result, you will not have the same protection
afforded to shareholders of companies that are subject to these corporate governance requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we cease to qualify as a foreign private
issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers,
and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a foreign private issuer, we are exempt from
the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In
addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as
promptly as United States domestic issuers, and we are not required to disclose in our periodic reports all of the information that United
States domestic issuers are required to disclose. While we currently expect to qualify as a foreign private issuer, we may cease to qualify
as a foreign private issuer in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Anti-takeover provisions in our memorandum
and articles of association may discourage, delay or prevent a change in control.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Some provisions of our memorandum and articles
of association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable,
including, among other things, the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 3%; text-align: justify">&#160;</td>
    <td style="width: 3%; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="width: 94%; text-align: justify"><span style="font-size: 10pt">provisions that authorize our board of directors to issue shares with preferred, deferred or other special rights or restrictions without any further vote or action by our shareholders; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our board of directors may decline to register
transfers of Ordinary Shares in certain circumstances.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our board of directors may, in its sole discretion,
decline to register any transfer of any Ordinary Share which is not fully paid up or on which we have a lien. Our directors may also decline
to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the
shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor
to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly
stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred
does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as Nasdaq Capital
Market may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect
thereof.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If our directors refuse to register a transfer
they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee
notice of such refusal. The registration of transfers may, on 14 days&#8217; notice being given by advertisement in such one or more newspapers
or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time
to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than
30 days in any year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>You may be unable to present proposals before
general meetings or extraordinary general meetings not called by shareholders.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cayman Islands law provides shareholders with
only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general
meeting. However, these rights may be provided in a company&#8217;s articles of association. Our articles of association allow sour shareholders
holding shares representing in aggregate not less than ten per cent in par value of the issued Shares which as at that date carry the
right to vote at general meetings, to requisition an extraordinary general meeting of our shareholders, in which case our directors are
obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting. Although our articles of association
does not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings
not called by such shareholders, any shareholder may submit a proposal to our Board of Directors for consideration of inclusion in a proxy
statement. Advance notice of at least fifteen calendar days is required for the convening of our annual general shareholders&#8217; meeting
and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder
present or by proxy, representing not less than one-third in nominal value of the total issued voting shares in our company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we are classified as a passive foreign
investment company, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A non-U.S. corporation such as ourselves will
be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 3%; text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Passive income generally includes dividends, interest,
rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition
of passive assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we are determined to be a PFIC for any taxable
year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may
be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Based on our operations and the composition of
our assets we do not expect to be treated as a PFIC under the current PFIC rules. We must make a separate determination each year as to
whether we are a PFIC, however, and there can be no assurance with respect to our status as a PFIC for our current taxable year or any
future taxable year. Although the law in this regard is unclear, we are treating HiTek as being owned by us for United States federal
income tax purposes, not only because we control their management decisions, but also because we are entitled to the economic benefits
associated with HiTek, and as a result, we are treating HiTek as our wholly-owned subsidiary for U.S. federal income tax purposes. For
purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of
any entity in which it is considered to own at least 25% of the equity by value. Therefore, the income and assets of HiTek should be included
in the determination of whether or not we are a PFIC in any taxable year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For a more detailed discussion of the application
of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see &#8220;Taxation&#160;&#8212;&#160;United
States Federal Income Taxation&#160;&#8212;&#160;Passive Foreign Investment Company.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our Ordinary Shares may trade under $5.00
per share and thus will be a penny stock. Trading in penny stocks has certain restrictions and these restrictions could negatively affect
the price and liquidity of our shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Ordinary Shares may trade below $5.00 per
share after listing. As a result, our Ordinary Shares would be known as a &#8220;penny stock&#8221;, which is subject to various regulations
involving disclosures to be given to you prior to the purchase of any penny stock. The SEC has adopted regulations which generally define
a &#8220;penny stock&#8221; to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions.
Depending on market fluctuations, our Ordinary Shares could be considered to be a &#8220;penny stock&#8221;. A penny stock is subject
to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established
Members and accredited investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination
for the purchase of these securities. In addition, the broker/dealer must receive the purchaser&#8217;s written consent to the transaction
prior to the purchase. The broker/dealer must also provide certain written disclosures to the purchaser. Consequently, the &#8220;penny
stock&#8221; rules may restrict the ability of broker/dealers to sell our securities, and may negatively affect the ability of holders
of our Ordinary Shares to resell them. These disclosures require you to acknowledge that you understand the risks associated with buying
penny stocks and that you can absorb the loss of your entire investment. Penny stocks generally do not have a very high trading volume.
Consequently, the price of the stock is often volatile and you may not be able to buy or sell the stock when you want to.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 4. INFORMATION ON THE COMPANY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. History and development of the Company</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We were incorporated in the Cayman Islands on
November 3, 2017. HiTek Hong Kong Limited (&#8220;HiTek HK&#8221;), our wholly-owned subsidiary, was incorporated in Hong Kong on November
20, 2017. Tian Dahai (Xiamen) Information Technology Co. Ltd. (&#8220;WFOE&#8221;), HiTek HK&#8217;s wholly owned subsidiary, was organized
pursuant to PRC laws on March 15, 2018. In April 2021, Xiamen Haitian Weilai Technology Co., Ltd. (&#8220;Haitian Weilai&#8221;), a wholly-owned
subsidiary of WFOE was incorporated under the laws of the PRC. The variable interest entity, Xiamen Hengda HiTek Computer Network Co.,
Ltd., which we refer to as HiTek, was established on January 18, 1996 in Xiamen, Fujian Province, PRC pursuant to PRC laws. HiTek&#8217;s
shareholders include certain PRC residents and corporate entities controlled by PRC residents.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Ordinary Shares started to trade on the Nasdaq
Capital Market under the ticker symbol &#8220;HKIT&#8221; on March 31, 2023and on April 4, 2023, the Company completed its initial public
offering of 3,200,000 Ordinary Shares at a public offering price of $5.00 per share. The total net proceeds to the Company from the initial
public offering, after deducting discounts, expense allowance, and expenses, were approximately $13,523,140.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our current registered office in Cayman Islands
is at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our principal
executive offices are located at Unit 304, No. 30 Guanri Road, Siming District, Xiamen City, Fujian Province, People&#8217;s Republic
of China, and our phone number is +86 592-5395967. We maintain a corporate website at <i>http://www.xmhitek.com/</i>. The information
contained in, or accessible from, our website or any other website does not constitute a part of this annual report. The SEC maintains
an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC and state the address of that site (http://www.sec.gov).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Selected Condensed Consolidating Financial Statements of Parent,
Subsidiaries, VIE and its Subsidiaries</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following tables present Selected condensed
consolidating financial data of the Parent (HiTek Global Inc.), HiTek HK (HiTek Hong Kong Limited), WFOE and its Subsidiary (Tian Dahai
(Xiamen) Information Technology Co. Ltd. and Xiamen Haitian Weilai Technology Co., Ltd.), the VIE (Xiamen Hengda HiTek Computer Network
Co., Ltd.) and its Subsidiaries (Xiamen Huasheng HiTek Computer Network Co., Ltd and Huoerguosi Hengda Information Technology Co., Ltd).
Such financial data include condensed consolidating balance sheets data as of December 31, 2022 and 2021 and the related condensed consolidating
statements of operations and cash flows data for the years ended December 31, 2022, 2021 and 2020.&#160;The Parent records its investments
in its subsidiaries under the equity method of accounting. Such investments are presented in the selected condensed consolidating balance
sheets of the Parent as &#8220;investments in non-VIE subsidiaries&#8221; and &#8220;equity in the VIE and its subsidiaries through the
VIE agreements&#8221; and the profit of the subsidiaries is presented as &#8220;Income for Non-VIE subsidiaries&#8221; and &#8220;Income
for VIE and its subsidiaries&#8221; in the selected condensed consolidating statements of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SELECTED CONDENSED CONSOLIDATING STATEMENTS
OF OPERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 28%">Revenues</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">353,836</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,228,595</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(153,823</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,428,608</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Cost of revenues</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SELECTED CONDENSED CONSOLIDATING BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">843,705</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">6,457</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">14,299,036</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">(28,698,688</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">14,346,554</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">(14,346,554</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">14,399,652</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">(43,049,429</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">14,406,109</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">(44,530,490</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">(1,398,175</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">8,605</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SELECTED CONDENSED CONSOLIDATING STATEMENTS
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(981,392</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">116,345</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(865,047</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">745,570</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">7,345</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(752,915</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022 and 2021,
net cash provided by financing activities of HiTek Global Inc., or the &#8220;parent&#8221;, was $nil and $280,300, which was mainly because
that parent received sales collection dominated in USD on behalf of the VIE and its subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>LONG-TERM INVESTMENTS ROLL-FORWARD</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Investments <br/> &#160;in&#160;Non-VIE<br/> subsidiaries&#160;and<br/> VIE&#160;and&#160;its<br/> subsidiaries</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%">As&#160;of&#160;December&#160;31, 2019</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,975,622</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Equity pick-up during the period</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,733,051</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Foreign currency translation adjustment</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">521,914</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>As&#160;of&#160;December&#160;31, 2020</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">11,230,587</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Equity pick-up during the period</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,994,595</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Foreign currency translation adjustment</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">290,407</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>As&#160;of&#160;December 31, 2021</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">13,515,589</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Equity pick-up during the period</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,798,894</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Foreign currency translation adjustment</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,015,447</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt">As&#160;of&#160;December 31, 2022</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">14,299,036</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Our Business</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are an information technology (&#8220;IT&#8221;)
consulting and solutions service provider focusing on delivering services to business in various industry sectors in China. As of the
date of annual report, we have two lines of businesses&#8212; 1) services to small and medium businesses (&#8220;SMEs&#8221;), which consists
of Anti-Counterfeiting Tax Control System (&#8220;ACTCS&#8221;) tax devices, including Golden Tax Disk (&#8220;GTD&#8221;) and printers,
ACTCS services, and IT services, and 2) services to large businesses, which consists of hardware sales and software sales. We expect to
actively develop our system integration services and online service platform in the near future. Our vision is to become a one-stop consulting
destination for holistic IT and other business consulting services in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Value added tax (&#8220;VAT&#8221;) reporting
is mandatory for all business enterprises in China. The ACTCS is one of the two major VAT control systems that a business entity may choose
to comply with the VAT reporting requirements. Developed by the PRC government, ACTCS was intended to effectively eliminate counterfeit
invoices, providing accurate and complete tax information for the regional and national audit system. We provide our customers with the
necessary ACTCS for their value added tax (&#8220;VAT&#8221;) reporting, collection and processing. The VIE entity, HiTek, is authorized
to carry out the sales of GTD. We are authorized by the State Taxation Bureau, Xiamen Branch, as one of the first ACTCS service providers
in the Xiamen metropolitan area. GTD is an ACTCS device necessary for normal operation of ACTCS software. The purchase of GTD is allowed
only in conjunction with the use of the ACTCS software and its supporting services. Currently, there are three ACTCS services providers
for Xiamen business enterprises, and we are one of them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While we are confident that our competitive strengths
will continue improving our business, we are aware of the challenges that our business faces, especially the challenges in our services
to SMEs which are exempted from the ACTCS services. The services provided to the SMEs are restricted in the Xiamen metropolitan areas
since authorization by the State Taxation Bureau, Xiamen Branch to provide ACTCS services is required. Prices of GTD and ACTCS annual
service fees are regulated and subject to the State Tax Administration&#8217;s pricing mandates. We are not able to adjust such pricing
and as such our profit margin is limited. The Chinese tax regulators have been rolling out electronic invoicing starting from 2018. The
electronic invoices enable enterprises to apply for, issue, transfer and check the invoices through the unified online electronic invoice
management system of the Chinese Tax authority. Electronic invoices are very useful in helping business entities reduce operating costs
and streamline service process, since they do not involve printing, storage and postage procedures. From January 21, 2021, new taxpayers
can receive electronic tax control ukey for free from the Tax authority. Increased use of electronic invoices and the free distribution
of GTD will reduce our annual service fee revenue and thus negatively affect our total revenue. Our client base growth may be limited
in spite of our marketing efforts, since it is beyond our control how many new SMEs will open each year in the Xiamen metropolitan area.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Complementing our physical service center, we
started our developing online service platform in 2018 to enable businesses in the Xiamen metropolitan area to securely process VAT reporting
and payment from their desktop virtually anytime and anywhere. Currently, our customers range from small, medium to large enterprises
across industries in the Xiamen metropolitan area. Coupled with our first-mover advantage, this broad applicability has been driving our
client base, resulting in around 54,872 active users, or approximately 27.3% of Xiamen&#8217;s tax collection market as of December 31,
2022, according to the Xiamen Province Taxation Bureau&#8217;s statistics. We plan to offer business management service, such as agent
accounting services and online IT outsourcing services, to the SME clients using our ACTCS services. We also plan to expand our service
to large businesses to other geographic regions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In April 2021, WFOE established a wholly-owned
subsidiary, Haitian Weilai under the laws of the PRC to integrate tax invoicing management services from Hitek to Haitian Weilai.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As part of the services provided to large businesses,
HiTek currently sells Communication Interface System (&#8220;CIS&#8221;), its self-developed software which provides embedded system interface
solutions for large businesses. CIS is a universal embedded interface system used in petrochemical and coal businesses to collect industrial,
electricity, facility pressure and temperature statistics and convert to readable format for analytical purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As part of our services to large businesses, Huasheng
sold hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers, cameras
and monitors. After we launched CIS sales, we also introduced our hardware products to our CIS users. Our major business strategy in the
market is to connect and source through exclusive relationships with manufacturers so that Huasheng can offer competitively priced hardware.
From the beginning of 2022, Huasheng transferred the above business to the VIE. We plan to market large scale hardware integration systems
such as router for commercial use, industrial switch, server, large internet firewall etc. in the future. We established the online support
system in the beginning of 2018. The online system further enhances our customer experience, which is complemented by highly trained professionals
and attractive physical store environment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Services</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, HiTek&#8217;s
two business lines operated three revenue streams. Within the first business line, the services to large businesses, including the hardware
sales, were 39% of the total revenue, and the software sales were for 33% of the total revenue. The second business line, ACTCS devices
and services, was 28% of the total revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2021, HiTek&#8217;s
two business lines operated in three revenue streams. Within the first business line, the services to large businesses, including hardware
sales, accounted for 38% of total revenue and the software sales were 32% of total revenue. The second business line, ACTCS devices and
services, were 31% of the total revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In recent years, the Chinese tax regulators have
been rolling out an electronic invoicing system. Electronic invoices enable enterprises to apply for, issue, transfer and check invoices
through the unified online electronic invoice management system of Chinese Tax authority. Electronic invoices are very useful in helping
business entities reduce operating costs and streamline service process, since they do not involve printing, storage and postage procedures.
From January 21, 2021, new taxpayers can receive electronic tax control ukey for free from the Tax authority. Increased use of electronic
invoices and the free distribution of GTD will reduce our annual service fee revenue and thus negatively affect our total revenue. Our
client base growth may be limited in spite of our diligent marketing efforts, since it is beyond our control how many new SMEs will open
each year in the Xiamen metropolitan area.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>ACTCS Device and Services</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For ACTCS supporting services, we charge fees
on a yearly basis. This service guarantees smooth functions of ACTCS software covers any technical breakdowns related to the ACTCS software.
For tax control system risk investigation service, we charge a one-time service charge for each investigation request.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our ACTCS device consist primarily of selling
GTD. For ACTCS devices sales, we charge one a piece-by-piece basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue generated from our ACTCS device and services
was 30.5% and 28.0%, respectively, of the total revenue derived from our businesses for the years ended December 31, 2021 and 2022.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January 2019, we began to operate new service
areas such as online agent accounting platforms and online IT outsourcing platforms. We intend to actively grow such general business
management services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Software Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For our software sales, we sell our self-developed
Communication Interface System (&#8220;CIS&#8221;). This software provides embedded system interface solutions for large businesses. CIS
is a universal embedded interface system used in petrochemical and coal businesses to collect industrial, electricity, facility pressure
and temperature statistics and convert to readable format for analytical purposes. Currently, almost all of the software sales revenue
comes from sales of CIS. We do not resell any software developed by any third party.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenue generated from our software sales was 31.8% and 33.0%, respectively,
of the total revenue derived from our businesses for the years ended December 31, 2021 and 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 45; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Hardware Sales</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We also generate revenue from our hardware sales,
which includes sales of computer hardware such as laptops, printers, desktop computers and associated accessories, together with certain
internet servers, cameras and monitors. We have established a carefully designed sales network in the Xiamen metropolitan area that combines
online platforms developed in the beginning of 2018 and our retail storefront. We have developed our hardware sale client base over time
via our marketing from our physical store. After we launched CIS sales, we also introduced our hardware products to our CIS users. We
plan to market large scale hardware integration systems such as router for commercial use, industrial switch, server, large internet firewall
etc. to large businesses in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue generated from our hardware sales was
37.7% and 39.0%, respectively, of the total revenue derived from our businesses for the years ended December 31, 2021 and 2022.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our Technology</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We provide effective information technology services
and secured tax solutions to business enterprises across a variety of monetization models. We have a dedicated team of three highly skilled
in-house IT specialists, which includes three full-time IT professionals responsible for research and development. The following is a
list of our self-developed software.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
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    <td style="border-bottom: black 1.5pt solid; width: 15%; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt"><b><i>Completion Date</i></b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 15%; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt"><b><i>Certificate Date</i></b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 42%; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt"><b><i>General Functions</i></b></span></td></tr>
  <tr style="background-color: #CCEEFF">
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    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt"><i>June 15, 2015</i></span></td>
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    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Customers</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We rely upon several of our large customers from
whom we generated substantial revenue each year, and the composition of our largest customers has changed from year to year. For the year
ended December 31, 2022, two customers accounted for 49% of total HiTek&#8217;s revenues, the largest of which represented 36%. For the
year ended December 31, 2021, two customers accounted for 42% of total HiTek&#8217;s revenues, the largest of which represented 28%. While
we believe that one or more of our major customers could account for a significant portion of our sales for at least the year 2021, we
anticipate that our customer base will continue to expand and that in the future we will be less dependent on major customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Suppliers</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Aside from a set number of suppliers from whom
we purchase general hardware for our resale business, we are required by the government to purchase our ACTCS devices from specific suppliers.
For the year ended December 31, 2022, four suppliers accounted for 55% of the total purchases. For the year ended December 31, 2021, two
suppliers accounted for 21% of the total purchases.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We enter into procurement agreements in the ordinary
course of business with our suppliers, pursuant to a form of supply order typically on a &#8220;deal by deal&#8221; basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Marketing and Sales</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Since inception, our user base in both the services
to large businesses and service to SMEs has grown primarily through word of mouth recommendations, digital advertising, and social media
advertising. We accumulated a loyal customer base to our hardware sales via our physical store. In general, we focus on delivering a superior
user experience through better products and services, which we believe can expand our user base and enhance our brand. We do not have
a specific budget for advertising since we have built our brand with very low marketing costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While we have benefited from the effects of word
of mouth recommendation, digital advertising, and social media advertising, we are considering cooperating with professional advertising
companies to initiate campaigns designed to further promote our brand and services. We will finalize a definitive plan for this marketing
initiation after our initial public offering on NASDAQ.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">With respect to the services to SMEs, given the
geographic limitation of our ACTCS services, we plan to focus on marketing and promotion of the business management service, which will
include agent accounting services, online IT outsourcing services, IT internet operation and maintenance service and equipment purchasing
and delivery Door-to-Door service to the SMEs. On the services to large business side, we plan to focus on marketing and promotion of
hardware integration system going forward.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Intellectual Property</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Protection of our intellectual property is a strategic
priority for our business. We rely on a combination of copyright, trademark and trade secret laws, as well as confidentiality agreements,
to establish and protect our proprietary rights. Except for Chinese government developed ACTCS software used in connection with our day-to-day
operations, we generally do not rely on third-party licenses of intellectual property for use in our business<i>.</i></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our research and development activities (&#8220;R&amp;D&#8221;)
are project based and the number of projects we work on varies annually. As of December 31, 2022, we had 3 full-time R&amp;D professionals.
We were successful in developing 12 software products and had obtained 6 Registration of Computer Software Copyright Certificates (the
&#8220;Certificates&#8221;) in 2015, 3 Certificates in 2017 and 3 Certificates in 2018. Our Certificates last indefinitely. In the beginning
of 2018, we established 3 joint IT research collaborative syndicates with other Internet technology companies for innovative Internet
service projects such as the Tax Service Mobile APP, WeChat Cloud Charging System and Remote monitoring system. In addition to the foregoing
protections, we generally control access to and use of our proprietary and other confidential information through the use of internal
and external controls, such as use of confidentiality agreements with our employees and outside consultants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Corporate Information</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our principal executive offices are located at
Unit 304, No. 30 Guanri Road, Siming District, Xiamen City, Fujian Province, PRC, and our phone number is +86 592-5395967. We maintain
a corporate website at <i>http://www.xmhitek.com/</i>. The information contained in, or accessible from, our website or any other website
does not constitute a part of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Organizational Structure</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our corporate structure as of the date of this
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_002.jpg"/>&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Property</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our headquarters are located at Unit 304, No.
30 Guanri Road, Siming District, Xiamen City, Fujian Province, PRC, where we own the office building with a floor area of 495 square meters.
This includes our sales and marketing, communication and business development personnel and our management and operations facilities and
customer services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We currently lease 83 square meters of office
space at Room 101, NO.77 Tianhu Road, Siming District, Xiamen, China. The lease expires on November 19, 2023 and can be renewed subject
to mutual agreements. In addition, the Company also leased three other locations in Xiamen as warehouses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 4A. Unresolved Staff Comments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not required.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 5. Operating and Financial Review and
Prospects</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Operating Results</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following discussion and analysis should be
read in conjunction with our financial statements and related notes thereto.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>This report contains certain statements that
may be deemed &#8220;forward-looking statements&#8221; within the meaning of United States of America securities laws.&#160;&#160;All
statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project,
believe or anticipate and similar expressions or future conditional verbs such as will, should, would, could or may occur in the future
are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of
their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe
to be appropriate.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>These statements include, without limitation,
statements about&#160;our anticipated expenditures, including those related to general and administrative expenses; the potential size
of the market for our services, future&#160;development and/or expansion of our services in our markets, our ability to generate&#160;revenues,
our ability to obtain regulatory clearance and expectations as to our future financial performance. Our actual results will likely differ,
perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including: our need and
ability to raise additional cash. The forward-looking statements included in this report are subject to a number of additional material
risks and uncertainties, including but not limited to the risks described in our filings with the Securities and Exchange Commission.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>The following discussion and analysis of our
financial condition and results of operations should be read together with our financial statements and the related notes to those statements
included in this filing. In addition to historical financial information, this discussion may contain forward-looking statements reflecting
our current plans, estimates, beliefs and expectations that involve risks and uncertainties. As a result of many important factors, our
actual results and the timing of events may differ materially from those anticipated in these forward-looking statements.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are an offshore holding company incorporated
in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by our subsidiaries and
through VIE Agreements, with HiTek and its subsidiaries. This is an offering of the ordinary shares of the offshore holding company in
Cayman Islands. You are not investing in HiTek, the VIE. Neither we nor our subsidiaries own any share in HiTek. The VIE Agreements are
designed so that the operations of the VIE are solely for the benefit of the Company. As such, through the VIE Agreements among WFOE,
HiTek and HiTek&#8217;s shareholders, we are deemed to have a controlling financial interest in, and be the primary beneficiary of, the
VIE for accounting purposes only and must consolidate the VIE because it met the conditions under U.S. GAAP to consolidate the VIE. However,
the VIE agreements have not been tested in a court of law, and the VIE structure cannot completely replicate a foreign investment in China-based
companies, as the investors will not and may never hold equity interests in the Chinese operating entities. Instead, the VIE structure
provides contractual exposure to foreign investment in us.&#160;See &#8220;Business &#8212; Contractual Arrangements between WFOE and
HiTek&#8221; for a summary of these VIE Agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are an IT consulting and solutions service
provider focusing on delivering services to business in various industry sectors in China. As of the date of this annual report, we have
two lines of businesses&#8212; 1) services to small and medium businesses (&#8220;SMEs&#8221;), which consists of Anti-Counterfeiting
Tax Control System (&#8220;ACTCS&#8221;) tax devices, ACTCS services, and 2) services to large businesses, which consists of hardware
sales and software sales. We expect to actively develop our system integration services and online service platform in the near future.
Our vision is to become a one-stop consulting destination for holistic IT and other business consulting services in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VAT reporting is mandatory for all business enterprises
in China. The ACTCS is one of the two major VAT control systems that a business entity may choose to comply with the VAT reporting requirements.
Developed by the government-owned entity China Aerospace Science and Technology Corporation (&#8220;CASTC&#8221;), ACTCS was intended
to effectively eliminate counterfeit invoices, providing accurate and complete tax information for the regional and national audit system.
The VIE entity, HiTek, is authorized to carry out the sales of GTD. We provide our customers with the necessary ACTCS for their VAT reporting,
collection and processing. We are authorized by the State Taxation Bureau, Xiamen Branch, as one of the first ACTCS service providers
in the Xiamen metropolitan area. GTD is an ACTCS hardware necessary for normal operation of ACTCS software. The purchase of GTD is allowed
only in conjunction with the use of the ACTCS software and its supporting services. Currently, there are three ACTCS services providers
for Xiamen business enterprises, and we are one of them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While we are confident that our competitive strengths
will continue improving our business, we are keenly aware of the challenges that our business faces, especially the challenges in our
services to SMEs which are stemmed from the ACTCS services. The services provided to the SMEs are restricted in the Xiamen metropolitan
areas since authorization by the State Taxation Bureau, Xiamen Branch to provide ACTCS services is required which is the cornerstone of
our services to the SMEs. Prices of GTD and ACTCS annual service fees are regulated and subject to the State Tax Administration&#8217;s
pricing mandates. We are not able to adjust such pricing and as such our profit margin is limited. The Chinese tax regulators have been
rolling out the electronic invoicing system starting from 2018. The electronic invoices enable enterprises to apply for, issue, transfer
and check the invoices through the unified online electronic invoice management system of Chinese Tax authority. Electronic invoices are
very useful in helping business entities reduce operating costs and streamline service process, since they do not involve printing, storage
and postage procedures. From January 21, 2021, new taxpayers can receive electronic tax control ukey for free from the Tax authority.
Increased use of electronic invoices and the free distribution of GTD will reduce our annual service fee revenue and thus negatively affect
our total revenue. Our client base growth may be limited in spite of our diligent marketing efforts, since it is beyond our control how
many new SMEs will open each year in the Xiamen metropolitan area.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Complementing our physical service center, we
started developing online service platform in 2018. As of January 2019, the online service platform enables tens of thousands of businesses
in the Xiamen metropolitan area to securely process. Coupled with our first-mover advantage, this broad applicability has been driving
our client base, resulting in around 54,872 active users, or approximately 27.3%&#160;&#160; of Xiamen&#8217;s tax device service market
shares as of December 31, 2022 according to the Xiamen Province Taxation Bureau&#8217;s statistics. We plan to offer business management
service, such as agent accounting services and online IT outsourcing services, to the SME clients using our ACTCS services. We also plan
to expand our service to large businesses to other geographic regions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In April 2021, WFOE established a wholly-owned
subsidiary, Haitian Weilai under the laws of the PRC. &#160;The strategy purpose of establishing the new subsidiary is for the integration
of tax invoicing management services from Hitek to Haitian Weilai.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As part of the services to large businesses, HiTek
currently sells Communication Interface System (&#8220;CIS&#8221;), its self-developed software which provides embedded system interface
solutions for large businesses. CIS is a universal embedded interface system used in petrochemical and coal businesses to collect industrial,
electricity, facility pressure and temperature statistics and convert to readable format for analytical purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As part of our services provided to large businesses,
Huasheng sold hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers,
cameras and monitors. After we launched CIS sales, we also introduced our hardware products to our CIS users. Our major business strategy
in the market is to connect and source through exclusive relationships with manufacturers so that Huasheng can offer competitively priced
hardware. From the beginning of 2022, Huasheng transferred the above business to the VIE. We plan to market large scale hardware integration
systems such as router for commercial use, industrial switch, server, large internet firewall etc. in the future. We have established
the online support system in the beginning of 2018. The online system further enhances our customer experience, which is complemented
by highly trained professionals and attractive physical store environment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, HiTek&#8217;s
two business lines operated three revenue streams. The first business line, services to large businesses, include hardware sales, was
39.0% of the total revenue, and the software sales, was 33.0% of the total revenue, and the second business line, ACTCS devices and services,
was 28.0% of the total revenue. For the year ended December 31, 2021, HiTek&#8217;s two business lines operated in three revenue streams
the first business line, services to large businesses, include hardware sales, accounting for 37.7% of total revenue, and software sales,
accounting for 31.8% of total revenue, and the second business line, ACTCS devices and services accounted for 30.5% of the total revenue.
In recent years, the Chinese tax regulators have been rolling out the electronic invoicing system.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In early December 2022, China announced a nationwide
loosening of its zero-COVID policy, and the country may face a wave in infections after the lifting of these restrictions. 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 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Holding Company Structure</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Overview</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a holding company with no material operations
of our own. We conduct substantially all of our business in China through contractual arrangements with Xiamen Hengda HiTek Computer Network
Co., Ltd., the variable interest entity, and its subsidiaries. See &#8220;Business&#160;&#8212;&#160;Contractual Agreements between WFOE
and HiTek&#8221; for a summary of these VIE arrangements. As of December 31, 2022, the VIE and its subsidiaries accounted for 96% and
98% of our total assets and total liabilities, respectively. As of December 31, 2021, the VIE and its subsidiaries accounted for 93% and
100% of our total assets and total liabilities, respectively. <span style="background-color: white">As of December 31, 2020, the variable
interest entities accounted for 87% and 100% of our total assets and total liabilities, respectively.&#160;</span> As of December 31,
2022, 2021, and 2020, $955,941, $1,557,325&#160;<span style="background-color: white">and $1,335,727</span> of cash was denominated in
RMB, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Conducting our operations through contractual
arrangements with the variable interest entities entails a risk that we may lose the power to direct the activities that most significantly
affect the economic performance of the variable interest entities, which may result in our being unable to consolidate their financial
results with our results and may impair our access to their cash flow from operations and thereby reduce our liquidity. See &#8220;Risk
Factors&#160;&#8212;&#160;Risks Relating to Doing Business in the PRC&#8221; for more information, including the risk factors titled &#8220;Our
contractual arrangements with HiTek and its shareholders may not be effective in providing control over HiTek&#8221; and &#8220;Because
we conduct our business through HiTek, a VIE, if we fail to comply with applicable law, we could be subject to severe penalties and our
business could be adversely affected.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, any transfer of funds from us to
any of our subsidiaries in China or VIEs, either as a shareholder loan or as an increase in registered capital, is subject to certain
statutory limit requirements and registration or approval of the relevant PRC governmental authorities, including the relevant administration
of foreign exchange and/or the relevant examining and approval authority.&#160; Our subsidiaries in China and VIEs are not permitted under
PRC law to directly lend money to one another.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Therefore, it is difficult to change our capital
expenditure plans once the relevant funds are remitted from our company to our subsidiaries in China or VIEs.&#160; These limitations
on the free flow of funds between us and our subsidiaries in China and VIEs could restrict our ability to act in response to changing
market conditions and reallocate funds internally in a timely manner.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Dividend Distributions</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We intend to keep any future earnings to re-invest
in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.
Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided
that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary
course of business. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent
on receipt of funds from our Hong Kong subsidiary, HiTek HK.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Current PRC regulations permit our indirect subsidiaries
in China to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits
each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China
is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be
set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other
ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve
funds are not distributable as cash dividends except in the event of liquidation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The PRC government also imposes controls on the
conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in
completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits,
if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict
their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations
through the current VIE Agreements, we may be unable to pay dividends on our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash dividends, if any, on our Ordinary Shares
will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas
shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In order for us to pay dividends to our shareholders,
we will rely on payments made from HiTek to WFOE, pursuant to VIE Agreements between them, and the distribution of such payments to HiTek
HK as dividends from WFOE. Certain payments from our HiTek to WFOE are subject to PRC taxes, including business taxes and VAT. &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Arrangement between Mainland China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance
Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project.
However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation
that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold
no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current
practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding
tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that
we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding
tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiary to its immediate holding
company, HiTek HK. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong
tax authority. HiTek HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to HiTek HK. See
&#8220;Risk Factors - There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary,
and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Risks in relation to the VIE structure</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The VIE structure through contractual arrangements
has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently
subject to foreign investment restrictions in China. The MOFCOM published a discussion draft of the proposed PRC Foreign Investment Law
(&#8220;FIL&#8221;) in January 2015, or the 2015 Draft FIL, according to which, variable interest entities that are controlled via contractual
arrangements would also be deemed as foreign-invested entities, if they are ultimately &#8220;controlled&#8221; by foreign investors.
In March 2019, the PRC National People&#8217;s Congress promulgated the PRC FIL, and in December 2019, the State Council promulgated the
Implementing Rules of PRC FIL, or the Implementing Rules, to further clarify and elaborate the relevant provisions of the PRC FIL. The
PRC FIL and the Implementing Rules both became effective from January 1, 2020 and replaced the major previous laws and regulations governing
foreign investments in the PRC. Pursuant to the PRC FIL, &#8220;foreign investments&#8221; refer to investment activities conducted by
foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or indirectly in the
PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely
or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights
and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other
investors, and (iv) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council.
The PRC FIL and the Implementing Rules do not introduce the concept of &#8220;control&#8221; in determining whether a company would be
considered as a foreign-invested enterprise, nor do they explicitly provide whether the VIE structure would be deemed as a method of foreign
investment. However, the PRC FIL has a catch-all provision that includes into the definition of &#8220;foreign investments&#8221; made
by foreign investors in China in other methods as specified in laws, administrative regulations, or as stipulated by the State Council,
and as the PRC FIL and the Implementing Rules are newly adopted and relevant government authorities may promulgate more laws, regulations
or rules on the interpretation and implementation of the PRC FIL, the possibility cannot be ruled out that the concept of &#8220;control&#8221;
as stated in the 2015 Draft FIL may be embodied in, or the VIE structure adopted by us may be deemed as a method of foreign investment
by, any of such future laws, regulations and rules. If our consolidated VIE was deemed as a foreign-invested enterprise under any of such
future laws, regulations and rules, and any of the businesses that we operate would be in any &#8220;negative list&#8221; for foreign
investment and therefore be subject to any foreign investment restrictions or prohibitions, further actions required to be taken by us
under such laws, regulations and rules may materially and adversely affect our business, financial condition and results of operations.
Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to
existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner,
or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could
materially and adversely affect our current corporate structure, business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Tabular Disclosure of Contractual Obligations</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Below is a table setting forth all of our contractual
obligations as of December 31, 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center"></td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 40%; text-align: left">Operating lease obligations</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,948</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3,474</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3,474</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">&#160;&#160;&#160;&#160;&#160;-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">506,578</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,171,050</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">285,855</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">285,855</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">2,970,431</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">795,907</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">2,174,524</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Below is a table setting forth all of our contractual
obligations as of December 31, 2021:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td colspan="21" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Payment Due by Period</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">Less&#160;than</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center"></td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center"></td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 53; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->48<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Below is a table setting forth all of our contractual
obligations as of December 31, 2020:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td colspan="21" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Payment Due by Period</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center"></td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center"></td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">1 year</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1.5pt solid; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-</td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">84,059</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">39,319</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Consolidation</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company provides substantially all of its
services to large businesses and SMEs in China via the VIE and its subsidiaries, due to PRC legal restrictions of foreign ownership in
certain sectors. Substantially all of the Company&#8217;s revenues, costs and net income in China are directly or indirectly generated
through the VIE and its subsidiaries. The Company has signed various agreements with the VIE and legal shareholders of the VIE to allow
the transfer of economic benefits from the VIE to the Company and to direct the activities of the VIE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Total assets and liabilities presented on the
Company&#8217;s consolidated balance sheets and revenue, expense, net income presented on consolidated statement of operations and comprehensive
income as well as the cash flow from operating, investing and financing activities presented on the consolidated statement of cash flows
are substantially the financial position, operation and cash flow of the Company&#8217;s VIE and VIE&#8217;s subsidiaries. The Company
has not provided any financial support to the VIE and the VIE&#8217;s subsidiaries for the years ended December 31, 2022, 2021 and 2020.
As of December 31, 2022, the VIE and its subsidiaries accounted for 96% and 98% of our total assets and total liabilities, respectively.
As of December 31, 2021, the VIE and its subsidiaries accounted for 93% and 100% of our total assets and total liabilities, respectively.
<span style="background-color: white">As of December 31, 2020, the VIEs accounted for an aggregate of 87% and 100% of our total assets
and total liabilities, respectively.&#160;</span> As of December 31, 2022 and December 31, 2021, $955,941, $1,557,325 <span style="background-color: white">and
$1,335,727</span> of cash and equivalents were denominated in RMB, respectively. The following table sets forth the assets, liabilities,
results of operations and changes in cash, cash equivalents the VIE and its subsidiaries taken as a whole, which were included in the
Company&#8217;s consolidated balance sheets and statements of comprehensive income and statements of cash flows with intercompany transactions
eliminated:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">As of December&#160;31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Current assets</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">11,276,852</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">11,779,996</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,952,038</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Total non-current assets</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">9,102,933</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">4,173,234</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">3,628,891</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">20,379,785</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">15,953,230</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">12,580,929</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">5,329,843</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">3,793,609</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">3,238,595</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%">Revenues</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,228,595</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Net income</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,684,991</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">2,061,517</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,735,340</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">4,016,852</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(757,861</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">3,025,193</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Net cash&#160;(used in) provided by investing activities</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(7,349,231</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">400,006</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(865,047</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Net cash provided by financing activities</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">2,749,498</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Revenue Recognition </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows ASU 2014-09, Topic 606, &#8220;Revenue
from Contracts with Customers&#8221; and its related amendments (collectively referred to as &#8220;FASB ASC 606&#8221;) for its new 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. Under 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><b><i>Hardware sales</i></b></span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&#8217;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 &#8220;Revenue-Hardware&#8221; on the Company&#8217;s consolidated statements of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><b><i>Software sales</i></b></span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">HiTek also does business in software sales and
focuses on the perpetual licenses sales for one of the self-developed software Communication Interface System(&#8220;CIS&#8221;). 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 a 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes revenue when the software
is accepted by the customer. Revenues from software sales contracts are classified as &#8220;Revenue-Software&#8221; on the Company&#8217;s
consolidated statements of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679; </span></td>
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  </table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Before January 21, 2021, all VAT general taxpayer
businesses in China are required to purchase the Anti-Counterfeiting Tax Control System (&#8220;ACTCS&#8221; 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, new taxpayers can receive electronic tax control ukey for free from the Tax authority. HiTek could provide supporting
services to the new taxpayers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue from 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&#8217;s standalone selling price that are sold separately and charged to customers at contract inception.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenue was comprised of the followings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,970,363</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0px; text-align: justify">&#160;</td>
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  </table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prepayments received from customers before the
services are 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 service
fees as revenue on a straight-line basis in accordance with the service periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0px; text-align: justify">&#160;</td>
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  </table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company generally expenses sales commissions
as incurred because the amortization period would have been one year or less.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Accounts Receivable, Accounts Receivable from
Related Party and Concentration of Risk</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&#8217;s
historical payment history, its current credit-worthiness and current economic trends.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company considers the following factors where
determining whether to permit a longer payment period:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -18pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679; </span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -18pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -18pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: -18pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The normal payment period is approximately six
months to one year after the customers received goods or were served. The Company gave customers different credit period considering the
above factors. For 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 six months
credit period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with ASC 210-10-45, the non-current
accounts receivable and non-current accounts receivable from related parties are the amounts that the Company does not reasonably expect
to be realized during the normal operating cycle of the Company based on the Company&#8217;s best estimates and customers&#8217; historical
payment behaviors. The Company uses a one-year time period as the basis for the separation of current and non-current assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Inventories</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Leases </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022, the Company adopted Accounting
Standards Update (&#8220;ASU&#8221;) 2016-02, Leases (as amended by ASU 2018-01, 2018-10, 2018-11, 2018-20, and 2019-01, collectively
&#8220;ASC 842&#8221;), 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The most significant impact upon adoption relates
to the recognition of Right-of-use (&#8220;ROU&#8221;) assets and lease liabilities on the Company&#8217;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 (&#8220;ROU&#8221;) 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 is reasonably certain that the renewal options will be exercised and periods for which it&#8217;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 (&#8220;IBR&#8221;). 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Recently issued accounting pronouncements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2016, the FASB issued ASU&#160;No.&#160;2016-13,&#160;Financial
Instruments&#8212;Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (&#8220;ASU&#160;2016-13&#8221;).&#160;ASU&#160;2016-13
changes the impairment model for most financial assets and certain other instruments. The standard will replace the &#8220;incurred loss&#8221;
approach with an &#8220;expected loss&#8221; model for instruments measured at amortized cost. For&#160;available-for-sale&#160;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&#160;2016-13&#160;are effective for fiscal years beginning after December&#160;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
consolidated financial statements (&#8220;CFS&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company does not believe other recently issued
but not yet effective accounting standards, if currently adopted, would have a material effect on our CFS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following consolidated results of operations
include the results of operations of the Company, its wholly owned subsidiary and consolidated VIEs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our historical reporting results are not necessarily
indicative of the results to be expected for any future period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Year Ended December 31, 2022 Compared to
Year Ended December 31, 2021</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Revenue</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">6,428,608</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have the following three streams - hardware
retail and wholesale, software sales, and ACTCS sales and services.&#160;The Hardware sales slightly increase was mainly from small retail
sales. The Software sales consist of software sales and software services. The sales of software slightly increased was due to increase
of maintenance service revenue. Tax Devices and service sales were decreased due to the new policies carried from January 2021 that the
new taxpayers in Xiamen could get free tax Ukeys from the Tax authorization. We expect the tax devices and service sales will be affected
in the future. Our total revenues for the year ended December 31, 2022 were $6,428,608, a decrease of $32,555 or 0.5% from $6,461,163
for the year ended December 31, 2021. The overall decrease in revenue was mainly resulted from the decrease of tax device and service
due to the new policy carried from January 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company expects to expand tax control system
risk investigation service for SMEs and also increase orders for software and hardware sales from major customers in 2023.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cost and Margin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(32,555</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">3,537,043</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">55.0</td><td style="padding-bottom: 1.5pt; text-align: left">%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of revenue is comprised of (i) the direct
cost of our hardware products purchased from third parties; (ii) logistics-related costs, which primarily include product packaging and
freight-in charges; (iii) third-party royalties paid related to the GTD (iv) compensation for the employees who handle the products and
perform Tax invoicing management services and other costs that are necessary for us to provide the services to our customers; and (v)
outsourcing costs, which primarily include software outsourcing service cost to the third parties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of revenues increased to $2,891,565 for the
year ended December 31, 2022 from $2,581,218 for 2021. An increase of $310,347 or 12.0%. This increase was mainly due to cost of sales
of software increased in 2022 compared to 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 10pt"><span style="text-decoration:underline">Gross Profit.
</span>Our gross profit decreased to $3,537,043&#160;for the year ended December 31, 2022 from $3,879.945 for 2021. Our gross profit as a
percentage of revenue decreased to 55.0% for the year ended December 31, 2022 from 60.1% for 2021. This was mainly due to the increase
of cost of software,</span> for <span style="font-size: 10pt">the software maintenance service from March 20, 2021 to July 31, 2021 is
provided by Huoerguosi itself, which resulting in a reduction in costs and a higher GP% in 2021. The Company expects to continue to focus
on projects with high gross profit such as services for SMEs, and at the same time, increase the hardware and software sales of large
customers. </span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Operating Expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">22.9</td><td style="padding-bottom: 1.5pt; text-align: left">%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,909,833</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,776,411</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">133,422</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">7.5</td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Selling Expenses</span>. Selling expenses consist
primarily of shipping and handling costs for products sold and advertisement and marketing expenses for promotion of our products. Selling
expenses increased by 471.7% or $360,708 to $437,185 in the&#160;year ended December 31, 2022&#160;from $76,477 in 2021. The increase
was mainly because of the increase of the Company&#8217;s sales commission in connection with obtaining new orders. Selling expenses were
6.8% of total revenue for the year ended December 31, 2022 and 1.2% of total revenue in 2021. The Company expects to maintain the current
ratio of selling expenses to revenue in 2023.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">General and Administrative Expenses</span>. General
and administrative expenses consist primarily of costs in salary and welfare expenses for our general administrative and management staff,
facilities costs, depreciation expenses, professional fees, accounting fees, and other miscellaneous expenses incurred in connection with
general operations. General and administrative expenses decreased in 13.4% or $227,286&#160;to $1,472,648 for the&#160;year ended December
31, 2022 from $1,699,934&#160;in 2021. The decrease was mainly due to the decrease of bad debt recovery of $124,847, and offset with the
decrease of depreciation expense of $333,857. General and administrative expenses were 22.9% of total revenue for the year ended December
31, 2022 and 26.3% of total revenue in 2021.&#160;The Company expects to maintain the current ratio of general and administrative expenses
to revenue in 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net Income</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(343,247</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,415,745</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">24.2</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">24.5</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Operating income</span>. Operating income was
$1,627,210 for the year ended December 31, 2022, compared to $2,103,534 for 2021. The decrease in operating income in 2022 was primary
due to the decrease in gross profit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Other income</span>. Other income includes government
subsidy income, net investment income (loss), and interest income and expenses. Other income was $241,753 and $108,676 for the years ended
December 31, 2022 and 2021, respectively. The increase was primarily due to the increase of interest income related to the loan receivables
in the amount of $570,707 offset by the increase of interest expense for the borrowings of $285,353.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Income tax expense</span>. Income tax expense
was $453,218&#160;for the year ended December 31, 2022, compared to $542,853 for 2021. The decrease in income tax expense was due primarily
to the decrease in gross profit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Effective tax rate</span>. Effective tax rate
was 24.2%&#160;for the&#160;year ended December 31, 2022, compared to 24.5% for 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Net income</span>.&#160;As a result of the factors
described above, net income was $1,415,745 for the year ended December 31, 2022, a decrease of $253,612 from net income $1,669,357 for
2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Year Ended December
31, 2021 Compared to Year Ended December 31, 2020</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Revenue</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%">Hardware</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">2,434,694</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">CIS Software</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,056,106</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,053,467</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,002,639</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">136,722</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(136,722</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,970,363</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 4pt">Total revenues</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">6,461,163</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">We had the following
four revenue streams - hardware retail and wholesale, software sales, outsourced IT services, and ACTCS sales and services. For the year
ended December 31, 2021, we did not recognize the IT revenue because we could not reasonably be assured of collections of payments, and
we will recognize the IT revenue when cash is collected in the future. From January 21, 2021, the new taxpayers can receive electronic
tax control ukey for free from the Tax authorization, and the hardware sales of golden tax disks have decreased significantly, which was
offset by the increase of tax device service due to the increased demand for electronic invoicing technical service. We expect the tax
devices and service sales will be affected in the future. Our total revenues for the year ended December 31, 2021 were $6,461,163, an
increase of $656,436 or 11.3% from $5,804,727 for the year ended December 31, 2020. The overall increase in revenue was mainly resulted
from the increase of software sales as the business recovery from coronavirus outbreak in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->55<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Cost and Margin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">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 perform IT services and other costs that are necessary for us to provide the services to our customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Cost of revenues decreased
to $2,581,218 for the year ended December 31, 2021 from $2,633,455 for the same period in 2020. A decrease of $52,237 or 2.0%. This decrease
was mainly caused by the decrease of IT services sales and costs, and a significant increase in high-margin software revenue.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Gross Profit. Our gross
profit increased to $3,879.945 for the year ended December 31, 2021 from $3,171,272 for the same period in 2020. Our gross profit as
a percentage of revenue increased to 60.1% for the year ended December 31, 2021 from 54.6% for the same period in 2020. This was mainly
due to the increase of sales in software, which has a relatively high gross profit margin compared with other revenue streams. The Company
expects to continue to focus on projects with high gross profit such as services for SMEs, and at the same time, increase the hardware
and software sales of large customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Operating Expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">76,477</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">2,012</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1.18</td><td style="text-align: left">%</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,699,934</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,415,484</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">284,450</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">26.3</td><td style="padding-bottom: 1.5pt; text-align: left">%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,776,411</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,417,496</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">358,915</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt; text-align: right">25.3</td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Selling Expenses</span>.
Selling expenses consist primarily of shipping and handling costs for products sold and advertisement and marketing expenses for promotion
of our products. Selling expenses increased by 3,701.0% or $74,465 to $76,477 in the year ended December 31, 2021 from $2,012 in the same
period of 2020. The increase was mainly because of the increase of the company&#8217;s sales commission in connection with obtaining new
orders. Selling expenses were 1.18% of total revenue for the year ended December 31, 2021 and 0.03% of total revenue in the same period
of 2020. The company expects to maintain the current ratio of Selling expenses to revenue in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">General and Administrative
Expenses</span>. General and administrative expenses consist primarily of costs in salary and welfare expenses for our general administrative
and management staff, facilities costs, depreciation expenses, professional fees, accounting fees, and other miscellaneous expenses incurred
in connection with general operations. General and administrative expenses increased&#160;in 20.1% or $284,450&#160;to $1,699,934 for
the&#160;year ended December 31, 2021from $1,415,484&#160;in the same period of 2020. The increase was mainly due to the increase of social
security expense of $52,651 and professional service fee of $371,269, and offset with the decrease of depreciation expense of $22,856
and $95,552 of bad debt provision. General and administrative expenses were 26.3% of total revenue for the year ended December 31, 2021
and 24.4% of total revenue in the same period of 2020. The company expects to maintain the current ratio of G&amp;A expenses to revenue
in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Net Income</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(19,502</td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt; text-align: right">(1.2</td><td style="padding-bottom: 4pt; text-align: left">)%</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">24.5</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">13.8</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10.8</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Operating income</span>.
Operating income was $2,103,534 for the year ended December 31, 2021, compared to $1,753,776 for the same period of 2020. The increase
in operating income in 2021was primary due to the increase in revenue and gross profit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Other income</span>.
Other income includes government subsidy income, net investment income (loss), and interest income and expenses. Other income was $108,676
and $204,325 for the year ended December 31, 2021 and 2020, respectively. The decrease was primarily due to the Government subsidies in
the amount of $101,965 for the year ended December 31, 2020, compared with the Government subsidies in the amount of $6,883 for the same
period of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Income tax expense</span>.
Income tax expense was $542,853 for the year ended December 31, 2021, compared to $269,242 for the same period of 2020. The increase in
income tax expense was mainly because that the total profit was increased to $2,212,210 for the year ended December 31, 2021 from $1,958,101
in the same period of 2020, and Hitek no longer enjoys preferential tax rates for small and micro businesses in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline"><br/>
Effective tax rate</span>. Effective tax rate was 24.5% for the year ended December 31, 2021, compared to 13.8% for the same period of 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Net income</span>. As
a result of the factors described above, net income was 1,669,357 for the year ended December 31, 2021, a decrease of $19,502 from net
income $1,688,859 for the same period of 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Liquidity and Capital Resources</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Year Ended December 31, 2022 Compared to
Year Ended December 31, 2021</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022 and 2021, we had cash
of $1,203,160 and $2,091,308 respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Working Capital</span>. Working capital as of
December 31, 2022 was $7,898,463 compared to $10,178,635 as of December 31, 2021. The decrease was mainly due to a decrease in short-term
investments of $906,667, advances to suppliers of $629,154 and deferred offering cost of $109,121 which offset by an increase in accounts
receivable of $914,104, loan receivable of $808,716 and inventory of $21,649. Current liabilities amounted to $4,203,695 as of December
31, 2022, compared to $2,788,504 as of December 31, 2021. This increase of liabilities was attributable mainly to an increase in accounts
payable of $177,995, deferred revenue of $192,524,&#160;loan payable of $506,578 and tax payable of $372,175.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Capital Resources and Capital Needs</span>. To
date, we have financed our operations primarily through cash flows from operations and third-party loans. With the uncertainty of the
current market, our management believes it is necessary to enhance collection of outstanding accounts receivable and other receivables,
and to be cautious on operational decisions and project selection. Our management believes that our current operations can satisfy our
daily working capital needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2020, the Company engages an external vendor
to develop software APP. As of December 31, 2022, the Company paid product development costs of $421,679 and the total contract amount
was $434,210. In March 2021, the Company signed a supplementary agreement to postpone the official launch after closing of the Company&#8217;s
initial public offering. The Company had made a payment of $119,405 (VAT included) in January 2022 for the development costs and will
make the final payment of $12,531 in 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 62; Value: 1 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 loan is due by January
20, 2024, July 27, 2022 and June 13, 2023, at 12%. RMB1,500,000 ($217,205) of the principal was paid as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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. Our management
is confident in the collecting account receivables and other receivables. The accounts receivable, net and the accounts receivable of
related party, net balance was $7,480,764 and $399,465 as of December 31, 2022, respectively. Subsequent to April 25, 2023, the Company
collected receivables of $1,145,325.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company gives customers different credit periods
considering the scale of the customer and past credit experience. For large customers such as large-scale oil and coal mine customers,
the Company gives a two-year credit period starting from March 2019 because of these customers&#8217; long repayment cycle. Net balance
of the accounts receivable was $6,802,306 and $6,171,410 as of December 31, 2022 and 2021, respectively. Subsequent to April 25, 2023,
the Company has collected receivables of $978,411.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For IT outsourcing customers, the Company gives
18 months credit period. The accounts receivable, net balance was $nil and $64,478 as of December 31, 2022 and 2021, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For small and medium customers, the Company gives
six months credit period. The accounts receivable, net balance was $1,077,923 and $218,621 as of December 31, 2022 and 2021, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Off-Balance Sheet Arrangements</span>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not entered into any financial guarantees
or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts
that are indexed to our own shares and classified as shareholders&#8217; equity, or that are not reflected in our financial statements.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit,
liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash Flows Analysis&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(a)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Operating Activities</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">(1) </span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Net cash provided by operating activities was $3,824,050&#160;for the year ended December 31, 2022, while, net cash used in operating activities was $214,575 for the year ended December 31, 2021. The increase of $4,038,625 in net cash provided by operating activities for the year ended December 31, 2022 was mainly due to (1) an increase of $5,043,891 in short-term investments, (2) an increase of $744,721 in advances to suppliers, (3) an increase of $218,773 in inventory, (4) an increase of $97,776 in accounts payable, (5) an increase of $249,767 in deferred revenue, and (6) an increase of $160,612 in taxes payable. These were partially offset by a decrease of $1,390,669 in account receivable, $680,330 in prepaid expenses and other current assets.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(b)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Investing Activities</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    for the year ended December 31, 2022, while, net cash provided by investing activities was $400,006 for the year ended December 31, 2021.
    The increase of $7,749,237 in net cash used in investing activities for the year ended December 31, 2022 was mainly due to (1) an increase
    of $5,142,402 in loans lent to third parties, (2) an increase of $1,705,453 in redemption of held-to-maturity investments, (3) an increase
    of $691,751 in purchase of held-to-maturity investments, (4) an increase of $117,596 in recovery of third-party loans and (5) an increase
    of $92,035 in advance payment for software development.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 21, 2022, March 28, 2022, and June 14, 2022, HiTek, Beijing
Baihengda Petroleum Technology Co., Ltd. (&#8220;Beijing Baihengda,&#8221; together with HiTek, the Lenders) and Guangxi Beihengda Mining
Co., Ltd. (&#8220;Guangxi Beihengda,&#8221; or the Borrower) entered into three loan agreements with similar terms, pursuant to which
the Lenders loaned of RMB 40 million ($5.79 million with an exchange rate of 0.1447 as of December 31, 2022) (collectively, the &#8220;Loans&#8221;)
to the Borrower at a monthly interest rate of 1%. Each of HiTek and Baihengda funded RMB 20 million of the Loans ($2.89 million with an
exchange rate of 0.1447 as of December 31, 2022). As of the date of this annual report, the aggregate outstanding principal amount of
the Loans is RMB37 million ($5.36 million with an exchange rate of 0.1447 as of December 31, 2022). The loans will be due by January 20,
2024, and June 13, 2023, respectively. The Borrower can pre-pay the outstanding loan amount after twelve months without penalty.</p></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(c)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Financing Activities</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Net cash provided by financing activities was
$2,749,498 and $nil for the years ended December 31, 2022 and 2021. For the year ended December 31, 2022, we had $2,749,498 cash inflow
from borrowing from third parties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Year Ended December 31, 2021 Compared to
Year Ended December 31, 2020</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2021,
and December 31, 2020, we had cash in the amount of approximately $2,091,308 and $1,861,554, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Working Capital</span>.
Total working capital as of December 31, 2021 amounted to $10,178,635 compared to $8,394,937 as of December 31, 2020. The increase was
mainly due to an increase in short term investments of $2,370,960, accounts receivable of $227,831, advances to suppliers of $ 208,463
and inventory of $289,212, which partially offset by a decrease in accounts receivable &#8211; related parties of $281,447 and prepaid
expenses and other current assets of $714,647. Current liabilities amounted to $2,788,504 as of December 31, 2021 as compared to $2,381,231
as of December 31, 2020. This increase of liabilities was attributable mainly to an increase in tax payable of $355,695 and accounts payable
of $139,326 which partially offset by a decrease in accrued expenses and other current liabilities of $121,150.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Capital Resources
and Capital Needs</span>. To date, we have financed our operations primarily through cash flows from operations. With the uncertainty of
the current market, our management believes it is necessary to enhance collection of outstanding accounts receivable and other receivables,
and to be cautious on operational decisions and project selection. Our management believes that our current operations can satisfy our
daily working capital needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">During 2020, we engaged
an external vendor to develop software application. As of December 31, 2021, we paid product development costs totaled $333,717 and the
total contract amount was $472,000. In March 2021, we signed a supplementary agreement to postpone the official launch after closing of
our initial public offering. We planned to restart the project and make the final payment of $138,283 in December 2022, regardless of
whether the IPO is completed or not.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">We review the accounts
receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances.
Our management is confident in the collecting account receivables and other receivables. The account receivable, net and the account receivable
of related party balance was $5,491,475 and $963,034 as of December 31, 2021, respectively. Subsequent to December 31, 2021 we had collected
receivables in the total amount of $1,077,273 as of the date of the filing. As of December 31, 2022, we expected to collect additional
$1,694,480. We may also raise capital through public offerings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">We gave customers different
credit period considering the scale of the customer and past credit experience. For large customers such as large-scale oil and coal mine
customers, the Company gave a two-year credit period starting from March 2019 because of these customers&#8217; long repayment cycle.
The account receivable, net balance was $6,171,410 and $4,769,470 as of December 31, 2021 and 2020, respectively. From January 2022 to
April 2022, these companies have repaid $827,200. As of December 31, 2022, the Company expects to collect additional $1,680,395.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">For IT outsourcing customers,
we gave a year and half credit period. The accounts receivable, net balance was $64,478 and $592,859 as of December 31, 2021 and 2020,
respectively. From January 2022 to April 2022, these companies have repaid $31,452. As of December 31, 2022, we expected to collect additional
$14,084.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">For small and medium
customers, we gave a half year credit period. The account receivable, net balance was $218,621 and $286,103 as of December 31, 2021 and
2020, respectively. We had collected the remaining balance by April 30, 2022.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Off-Balance Sheet
Arrangements</span>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">We have not entered into
any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered
into any derivative contracts that are indexed to our own shares and classified as shareholders&#8217; equity, or that are not reflected
in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated
entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development
services with us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Cash Flows Analysis</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>&#160;</i></b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(a)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Operating Activities</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white">
  <tr style="vertical-align: top">
    <td style="width: 3%; text-align: justify">&#160;</td>
    <td style="width: 3%; text-align: justify"><span style="font-size: 10pt">(1)</span></td>
    <td style="width: 94%; text-align: justify"><span style="font-size: 10pt">Net cash used in operating activities were $214,575 for the years ended December 31, 2021, while, Net cash provided by operating activities were $1,932,850 for the years ended December 31, 2020. The decrease of $2,147,425 in net cash provided by operating activities for the year ended December 31, 2021 was mainly due to (1) a decrease of $2,034,581 in accounts receivable, (2) a decrease of $2,450,837 in short-term investments, (3) a decrease of $674,275 in inventory. These were partially offset by an increase of $391,934 in account receivable-related party, $664,280 in advances to suppliers and $1,442,932 in prepaid expenses and other current assets,</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(b)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Investing Activities</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white">
  <tr style="vertical-align: top">
    <td style="width: 3%; text-align: justify">&#160;</td>
    <td style="width: 3%; text-align: justify"><span style="font-size: 10pt">(2)</span></td>
    <td style="width: 94%; text-align: justify"><span style="font-size: 10pt">Net cash provided by investing activities was $400,006 for the year ended December 31, 2021, while, Net cash used in investing activities was $865,047 for the year ended December 31, 2020. The increase of $1,265,053 in net cash provided by investing activities for the year ended December 31, 2021 was mainly due to (1) an increase of $259,764 in advance payment for software development, (2) an increase of $317,059 in repayment from third-party loans, (3) an increase of $1,223,403 in purchase of Held-to-maturity investments. These were partially offset by a decrease of $323,503 in redeem of Held-to-maturity investments.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Research and Development, Patents and Licenses,
etc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have a dedicated team of three highly skilled
in-house IT specialists, which includes three full-time IT professionals responsible for controlling the direction of outsourced R&amp;D
projects. Among all the software we have developed, CIS is the only software product we are currently marketing and generated revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Trend information.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other than as disclosed elsewhere in this annual
report, we are not aware of any material recent trends in production, sales and inventory, the state of the order book and costs and selling
prices since our last fiscal year. We are also unaware of any known trends, uncertainties, demands, commitments or events for the year
ended December 31, 2022 that are reasonably likely to have a material adverse effect on our revenues, net income, profitability, liquidity
or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results
or financial conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>E. Critical Accounting Estimates</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our CFS are prepared in accordance with accounting
principles generally accepted in the U.S., which require us to make estimates and assumptions that affect the reported amounts of assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those estimates that may have a significant effect on our financial
condition and results of operations. Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements.
The following discussion of critical accounting policies addresses those policies that are both important to the portrayal of our financial
condition and results of operations and require significant judgment and estimates. We base our estimates and judgment on historical experience
and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates
under different assumptions or conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 6. Directors, Senior Management and Employees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Directors and Senior Management</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our directors and executive officers are as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="vertical-align: top; width: 30%; border-bottom: black 1.5pt solid"><span style="font-size: 10pt"><b>Name</b></span></td>
    <td style="vertical-align: bottom; width: 1%; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; width: 8%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Age</b></span></td>
    <td style="vertical-align: bottom; width: 1%; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; width: 60%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Position(s)</b></span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Shenping Yin</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">53</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Chairman of the Board</span></td></tr>
  <tr style="background-color: white">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Xiaoyang Huang</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">53</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Chief Executive Officer and Director</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Tianyu Xia</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">33</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Chief Financial Officer</span></td></tr>
  <tr style="background-color: white">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Bo Shi</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">48</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Chief Technology Officer</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Wenhua Yang</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">54</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Independent Director*</span></td></tr>
  <tr style="background-color: white">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Jianben Song</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">64</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Independent Director*</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Lawrence Venick</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">50</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">Independent Director*</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><span style="font-size: 10pt">Appointment effective upon the
closing of the Company&#8217;s initial public offering</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Below is a summary of the business experience
of each of our executive officers and directors:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Shenping Yin</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Shenping Yin has been our Chairman since our
inception. Mr. Yin has been the Chief Executive Officer and a director of Recon Technology, Ltd. (NASDAQ: RCON) since 2007. In 2003, Mr.
Yin founded Nanjing Recon, a Chinese company that provides services to automate and enhance the extraction of petroleum in China, and
has been the Chief Executive Officer since that time. Mr. Yin has founded and operated a number of companies engaged in the IT industry
including: Xiamen Hengda Haitian Computer Network Co., Ltd. (1994), Baotou Hengda Haitian Computer Network Co., Ltd. (1997), Beijing Jingke
Haitian Electronic Technology Development Co., Ltd. (1999), and Jingsu Huasheng Information Technology Co., Ltd. (2000). Mr. Yin received
his bachelor&#8217;s degree in 1991 from Nanjing Agricultural University in Information Systems.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Xiaoyang Huang</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ms. Xiaoyang Huang has been our CEO since our
inception. Ms. Huang was appointed as our director upon closing of our initial public offering on April 4, 2023. She has been the Chief
Executive Officer of HiTek, the VIE since 2000. Ms. Huang graduated from Nanjing Agricultural University and majored in Agricultural Information.
She also went through a one-year accounting program in Renmin University of China from 2010 to 2011.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Tianyu Xia</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ms. Tianyu Xia has been our CFO since August 15,
2018. From April 2014 to December 2015, she worked as an Investor Relations Manager at Recon Technology Ltd. From December 2015 to October
2017, she worked as an Investor Relations Manager at Smartisan Technology Co., Ltd. Ms. Xia graduated from Saint Louis University, John
Cook School of Business in 2012 and received her bachelor&#8217;s degree in Accounting. She also minored in Information Technology Management.
Ms. Xia received her Master&#8217;s degree in Investor Relations from Fordham University, Graduate School of Business in 2013. She received
her Master&#8217;s degree in Business Administration from Cheung Kong Graduate School of Business in 2018.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Bo Shi</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Bo Shi has been our CTO since our inception.
From July 1996 to March 1998, he worked as a maintenance engineer at Xiamen Automotive Friction and Sealing Material Co., Ltd. He has
been working for HiTek since March 1998 and has undertaken various responsibilities such as maintenance engineer, technical manager, technical
director, deputy general manager and general manager. He is now the general manager of HiTek. Mr. Shi graduated from Wuhan University
of Technology (formerly known as &#8220;Wuhan Automotive University&#8221;) in July 1996, with a bachelor&#8217;s degree in Computer Science
and Application.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Wenhua Yang</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Wenhua Yang has been our independent director
since April 4, 2023. He was the Vice President of Beijing Huaxia Bank, Guanghua Road Branch from July 2002 to May 2004. From June 2004
to September 2006, he served as the Vice President of Beijing Guangda Bank, Guanghua Road Branch. From April 2006 to date, he served as
the general manager of Beijing Nengju Trading Development Co., Ltd. He has worked for 15 years in the banking and business industries.
Mr. Yang holds a Bachelor&#8217;s Degree in Accounting and a Master&#8217;s Degree in Business Management at Capital University of Economics
and Business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Jianben Song</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Jianben Song has been our independent director
since April 4, 2023. Mr. Song has been the data architect of Charter Communications since February 2013. From November 2010 to January
2013, he worked as a data architect for Bank of America, where he was responsible for designing databases. He has extensive experience
in software engineering. Mr. Song graduated from Tsinghua University with a Bachelor&#8217;s degree in physics. He holds a Master&#8217;s
degree in biophysics from the Institute of Biophysics, Academia China. He holds a Ph.D. in biophysics at the University of Rochester,
New York.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Lawrence Venick</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Lawrence Venick has been our independent director
since April 4, 2023. Mr. Venick has been a Partner at Loeb &amp; Loeb LLP since 2007. He is a corporate and securities lawyer focusing
his practice on United States capital market transactions and corporate governance matters involving U.S. listed companies. Over the course
of his career, Mr. Venick has represented a number of publicly traded companies listed on NASDAQ and The NYSE. Mr. Venick currently splits
his time between Loeb &amp; Loeb LLP&#8217;s Hong Kong and Beijing offices. He serves as the Managing Partner of the Hong Kong office
and is the Chief Legal Representative of the Beijing office. From 2004 to 2012, Mr. Venick worked as a corporate lawyer in Loeb &amp;
Loeb LLP&#8217;s Los Angeles office. Prior to that time, Mr. Venick worked as a corporate lawyer in Wilson Sonsini Goodrich &amp; Rosati
PC&#8217;s Palo Alto office. Mr. Venick holds a B.A. from the University of California at Santa Barbra and a J.D. from Loyola Law School.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Compensation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Executive Compensation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table represents compensation earned
by our executive officers in the fiscal year ended December 31, 2022 and 2021:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Summary Compensation Table</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; text-indent: -9pt; padding-left: 0.125in">Chief Executive Officer</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; text-align: left; text-indent: -9pt; padding-left: 9pt">Bo Shi, </td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: center">2022</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">29,724</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; text-indent: -9pt; padding-left: 9pt">Chief Technology Officer</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="white-space: nowrap; text-align: left; text-indent: -9pt; padding-left: 9pt">Tianyu Xia, </td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 67; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Grants of Plan Based Awards</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Employment Agreements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We entered into employment agreements with our
CEO and CTO on July 1, 2018, and with our CFO on September 2, 2018. Each of our executive officers is employed for a specified time period,
which will be renewed upon both parties&#8217; agreement thirty days before the end of the current employment term. We may terminate the
employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including but not limited
to the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of
a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe neglect
of his or her duties. An executive officer may terminate his or her employment at any time with a one-month prior written notice. Each
executive officer has agreed to hold, both during and after the employment agreement expires, in strict confidence and not to use or disclose
to any person, corporation or other entity without written consent, any confidential information. In addition, each executive officer
has agreed to be bound by non-competition and non-solicitation restrictions during the term of his employment and for one year following
termination of the employment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our employment agreement with Xiaoyang Huang,
our CEO, provides her term of one year with an annual salary of $70,000. Unless terminated pursuant to the terms thereof, the employment
agreement will be renewed automatically for an additional one-year term. As of the date of this annual report, the employment agreement
with Xiaoyang Huang has been renewed and is currently in effect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our employment agreement with Bo Shi, our CTO,
provides his term of one year with an annual salary of $55,000. Unless terminated pursuant to the terms thereof, the employment agreement
will be renewed automatically for an additional one-year term. As of the date of this annual report, the employment agreement with Bo
Shi has been renewed and is currently in effect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our employment agreement with Tianyu Xia, our
CFO, provides her term of three years with an annual salary of $60,000. Unless terminated pursuant to the terms thereof, the employment
agreement will be renewed automatically for an additional one-year term. As of the date of this annual report, the employment agreement
with Tianyu Xia has been renewed and is currently in effect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Outstanding Equity Awards at Fiscal Year-End;
Option Exercises and Stock Vested</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Pension Benefits</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None of the named executives currently participates
in or has account balances in qualified or nonqualified defined benefit plans sponsored by us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Nonqualified Deferred Compensation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None of the named executives currently participates
in or has account balances in nonqualified defined contribution plans or other deferred compensation plans maintained by us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other than as disclosed above, we have not entered
into any agreements or arrangements with our executive officers or directors, and have not made any agreements to provide benefits upon
termination of employment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"></p><div>

</div><!-- Field: Page; Sequence: 68; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->63<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Board Practices</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Committees of the Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have three committees under the board of directors
on April 4, 2023, upon closing of Company&#8217;s initial public offering: an Audit Committee, a Compensation Committee and a Nominating
and Corporate Governance Committee. Even though we are exempted from corporate governance standards because we are a Foreign Private Issuer
(&#8220;FPI&#8221;), we have voluntarily adopted a charter for each of the three committees. Each committee&#8217;s members and functions
are described below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Audit Committee</i>. Our audit committee consists
of Mr. Wenhua Yang, Mr. Jianben Song and Mr. Lawrence Venick. Mr. Wenhua Yang is the chairman of our audit committee. We have determined
that Mr. Yang, Mr. Song and Mr. Venick satisfy the &#8220;independence&#8221; requirements of Section 5605(a)(2) of the Nasdaq Listing
Rules and Rule 10A-3 under the Securities Exchange Act. Our board also has determined that Mr. Yang qualifies as an audit committee financial
expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit
committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit
committee is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px; text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify"><span style="font-size: 10pt">reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">meeting separately and periodically with management and the independent auditors; and</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Compensation Committee.</i> Our compensation
committee consists of Mr. Wenhua Yang, Mr. Jianben Song and Mr. Lawrence Venick. Mr. Song is the chairman of our compensation committee.
We have determined that Mr. Yang, Mr. Song and Mr. Venick satisfy the &#8220;independence&#8221; requirements of Section 5605(a)(2) of
the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act. The compensation committee assists the board in reviewing and
approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief
executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee
is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reviewing and approving to the board with respect to the total compensation package for our most senior executive officers; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">approving and overseeing the total compensation package for our executives other than the most senior executive officers; </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reviewing and recommending to the board with respect to the compensation of our directors; </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reviewing periodically and approving any long-term incentive compensation or equity plans; </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person&#8217;s independence from management; and </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Nominating and Corporate Governance Committee.</i>
Our nominating and corporate governance committee consists of Mr. Wenhua Yang, Mr. Jianben Song and Mr. Lawrence Venick upon the effectiveness
of their appointments. Mr. Venick is the chairperson of our nominating and corporate governance committee. Mr. Yang, Mr. Song and Mr.
Venick satisfy the &#8220;independence&#8221; requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the
Securities Exchange Act. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified
to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee
is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy; </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us; </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">identifying and recommending to our board the directors to serve as members of committees; </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><b>Board Diversity</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The table below provides
certain information regarding the diversity of our board of directors as of the date of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td colspan="5" style="border: black 1pt solid; padding-top: 0.5pt; padding-right: 0.5pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt"><b>Board Diversity Matrix</b></span></td></tr>
  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">Country of Principal Executive Offices:</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.25pt; text-align: center"><span style="font-size: 10pt">China</span></td></tr>
  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">Foreign Private Issuer</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.25pt; text-align: center"><span style="font-size: 10pt">Yes</span></td></tr>
  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">Disclosure Prohibited under Home Country Law</span></td>
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    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">Total Number of Directors</span></td>
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    <td style="width: 53%; border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt; text-align: center">&#160;</td>
    <td style="width: 8%; border-bottom: black 1pt solid; border-right: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.25pt; text-align: center"><span style="font-size: 10pt"><b>Female</b></span></td>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Non-</b></p>
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    <td style="width: 16%; border-bottom: black 1pt solid; border-right: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.25pt; text-align: center"><span style="font-size: 10pt"><b>Did Not<br/>
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    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">Directors</span></td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">LGBTQ+</span></td>
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><b>Family Relationships</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None of our directors or executive officers has
a family relationship as defined in Item 401 of Regulation S-K.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Employees</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We had 60, 66 and 75 employees as of December
31, 2022, 2021 and 2020, respectively. The following table sets forth the numbers of our employees categorized by function as of December
31, 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Function:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; font-style: italic; text-align: justify">Management Department (HiTek)</td><td style="width: 1%; font-style: italic">&#160;</td>
    <td style="width: 1%; font-style: italic; text-align: left">&#160;</td><td style="width: 9%; font-style: italic; text-align: right">8</td><td style="width: 1%; font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: italic; text-align: justify">Financial Department (HiTek)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">4</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-style: italic; text-align: justify">Technical Service Department (HiTek)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">11</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: italic; text-align: justify">Sales Training Department (HiTek)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">7</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-style: italic; text-align: justify">Hotline Service Department (HiTek)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">11</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: italic; text-align: justify">Research and Development Department (HiTek)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">4</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-style: italic; text-align: justify">Operation and Maintenance Department (HiTek)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">1</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: italic; text-align: justify">Financial Department (Huasheng)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">1</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-style: italic; text-align: justify">Technical Service Department (Huasheng)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">1</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: italic; text-align: justify">Management Department (Huoerguosi)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">3</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-style: italic; text-align: justify">Operation and Maintenance Department (Huoerguosi)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">2</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Technical Service Department (weilai)</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">5</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-style: italic; text-align: justify; padding-bottom: 1.5pt">Financial Department (weilai)</td><td style="font-style: italic; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-style: italic; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-style: italic; text-align: right">2</td><td style="padding-bottom: 1.5pt; font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt">Total</td><td style="font-style: italic; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-style: italic; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-style: italic; text-align: right">60</td><td style="padding-bottom: 4pt; font-style: italic; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 70; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->65<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, our employees were located
in Xiamen<i>, </i>Fujian province and Huoerguosi, Xinjiang, China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As required by PRC laws and regulations, we participate
in various employee social security plans that are organized by municipal and provincial governments, including housing, pension, medical
insurance and unemployment insurance programs. We are required under Chinese law to make contributions to employee benefit plans at specified
percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government
from time to time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that we maintain a good working relationship
with our employees, and we have not experienced any labor disputes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>E. Share ownership.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth information regarding
the beneficial of our ordinary shares as of April 25, 2023:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">each person known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">each of our executive officers and directors; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">all our executive officers and directors as a group.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The beneficial ownership of ordinary shares is
determined in accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared
voting or investment power. For purposes of the table below, we deem shares subject to options, warrants or other exercisable or convertible
securities that are exercisable or convertible currently or within 60 days of <span style="background-color: White">April 25, 2023,
to</span> be outstanding and to be beneficially owned by the person holding the options, warrants or other currently exercisable or convertible
securities for the purposes of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose
of computing the percentage ownership of any other person. Unless otherwise indicated below, to our knowledge, all persons named in the
table have sole voting and investment power with respect to their shares, except to the extent authority is shared by spouses under community
property laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center">Ordinary Shares</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Beneficially Owned</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: justify">Directors and Executive Officers:</td><td>&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: justify; text-indent: -9pt; padding-left: 9pt">Shenping Yin</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; text-indent: -9pt; padding-left: 9pt">Xiaoyang Huang</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; text-indent: -9pt; padding-left: 9pt">Tianyu Xia</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="white-space: nowrap; text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; text-indent: -9pt; padding-left: 9pt">Bo Shi</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">431,000</td><td style="white-space: nowrap; text-align: left"><sup>(3)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3.04</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; text-indent: -9pt; padding-left: 9pt">Wenhua Yang</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="white-space: nowrap; text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; text-indent: -9pt; padding-left: 9pt">Jianben Song</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="white-space: nowrap; text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; text-indent: -9pt; padding-left: 9pt">Lawrence Venick</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="white-space: nowrap; text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify; text-indent: -9pt; padding-left: 9pt">All Directors and Executive Officers:</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">8,623,000</td><td style="white-space: nowrap; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">60.78</td><td style="font-weight: bold; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: justify; text-indent: -9pt; padding-left: 9pt">5%&#160;Shareholders:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="white-space: nowrap; text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Fortune Enterprise Holdings Limited	</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,192,000</td><td style="white-space: nowrap; text-align: left"><sup>(1)(2)</sup></td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">These Ordinary Shares are deemed
as beneficially owned by Shenping Yin and Xiaoyang Huang as they are husband and wife.</span></td>
</tr></table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-size: 10pt">These Ordinary Shares are held
by Fortune Enterprise Holdings Limited, a British Virgin Islands company. Since Mr. Yin and Ms. Huang are the shareholders and directors
of Fortune Enterprise Holdings Limited, they are deemed as the beneficial owners of these securities.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(3)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Represents 431,000 Ordinary Shares
held by Star Discover Global Limited, a British Virgin Islands company which Bo Shi owns and controls 60% equity interest and voting
power.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 71; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->66<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>F. Disclosure of A Registrant&#8217;s Action
to Recover Erroneously Awarded Compensation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><div><a id="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 7. Major Shareholders and Related Party
Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Major shareholder</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Please refer to Item 6 &#8220;Directors, Senior
Management and Employees&#8212;E. Share Ownership.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Related party transactions.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Contractual Arrangements with WFOE, HiTek
and Its Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To comply with PRC laws restricting foreign ownership
in the IT business in China, we conduct our IT business through HiTek, a VIE entity that we control through a series of contractual arrangements
between our PRC subsidiary WFOE, HiTek and its shareholders, Xiaoyang Huang, Shenping Yin, Bo Shi, Zhishuang Wang, Liuqing Huang, Jingru
Li, Mian Tang, Ce Tian, Xianfeng Lin, Inner Mongolia Guangxin Investment Co., Ltd. and Baotou Zhongzhe Hengtong Technology Co., Ltd. Such
contractual arrangements provide us (i) the power over HiTek, (ii) the exposure or rights to variable returns from our involvement with
HiTek, and (iii) the ability to affect those returns through use of our power over HiTek to affect the amount of our returns. Therefore,
we control HiTek. For a description of these contractual arrangements, see &#8220;Business &#8212; Our History and Corporate Structure&#8221;.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B. Related Party Transactions </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Advances from Related Parties</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, Company had outstanding
advances owed to Fengqi (Beijing) Zhineng Technology Co., Ltd., 3.04% owned by HiTek&#8217;s Chairman Mr. Shenping Yin, in the amount
$598. The advances are due on demand and non-interest bearing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2021, Company had outstanding
advances owed to Fengqi (Beijing) Zhineng Technology Co., Ltd., 5.7% owned by HiTek&#8217;s Chairman Mr. Shenping Yin, in the amount $4,163.
The advances are due on demand and non-interest bearing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Accounts receivables from related parties</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, accounts receivable from
Beijing Zhongzhe Yuantong Technology Co., Ltd. was $399,465.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2021, accounts receivable from
Beijing Zhongzhe Yuantong Technology Co., Ltd. was $963,034.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sales revenues from related parties</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company generated sales revenues from Beijing
Zhongzhe Yuantong Technology Co., Ltd., which is under the same common control with Baotou Zhongzhe Hengtong Technology Co., Ltd., in
hardware sales of $nil for fiscal year ended December 31,2022 and 2021, and $255,344 for fiscal year ended December 31, 2020; and software
sales of $nil for fiscal year ended December 31, 2022 and 2021, and $353,977 for fiscal year ended December 31, 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cost of revenues from related parties</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company purchased from Fengqi (Beijing) Zhineng
Technology Co., Ltd., 3.04% owned by HiTek&#8217;s Chairman Mr. Shenping Yin, in hardware of $11,830, $52,961 and $nil for fiscal years
ended December 31, 2022, 2021 and 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Employment Agreements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See &#8220;Item 6.B &#8212; Compensation &#8212;&#160;Employment
Agreements&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Interests of experts and counsel.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 8. FINANCIAL INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Consolidated Statements and Other Financial
Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Financial Statements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have appended CFS filed as part of this report.
See Item 18 &#8220;Financial Statements.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Legal Proceedings&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are currently not a party to any material legal
or administrative proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in
the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result
in substantial cost and diversion of our resources, including our management&#8217;s time and attention.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Dividends</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not paid dividends on our ordinary shares
and do not anticipate paying such dividends in the foreseeable future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Significant Changes</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except as disclosed elsewhere in this annual report,
we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual
report.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 9. THE OFFER AND LISTING</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Offer and Listing Details</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Ordinary Shares are listed on the Nasdaq Capital
Market under the symbol &#8220;HKIT&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Plan of Distributions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Markets</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Ordinary Shares are listed on the Nasdaq Capital
Market under the symbol &#8220;HKIT&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Selling Shareholders</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>E. Dilution</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Note applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>F. Expenses of the Issue.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Note applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 10. ADDITIONAL INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Share Capital</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Memorandum and Articles of Association</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following description of our memorandum and
articles of association, as amended and restated from time to time, are summaries and do not purport to be complete.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the date of this annual report, our authorized
share capital consists of $50,000 divided into 500,000,000 shares, par value US$0.0001 per share, comprised of 490,000,000 ordinary Shares,
and 10,000,000 preference shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our amended and restated memorandum and articles
of association provide that our authorized share capital is $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. Our directors may, in their absolute discretion and without the approval
of our shareholders, create and designate out of the unissued preference shares of our company one or more classes or series of preference
shares, comprising such number of preference shares, and having such designations, powers, preferences, privileges and other rights,
including dividend rights, voting rights, conversion rights, terms of redemption and liquidation preferences, as our directors may determine.
As of the date hereof, there are 14,187,679 Ordinary Shares issued and outstanding. The following are summaries of material provisions
of our amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms
of our ordinary shares .</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Ordinary shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Dividends.</i> Subject to any rights and restrictions
of any other class or series of shares, our board of directors may, from time to time, declare dividends on the shares issued and authorize
payment of the dividends out of our lawfully available funds. No dividends shall be declared by the board out of our company except the
following:&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">profits; or</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#8220;share premium account,&#8221; which represents the excess of the price paid to our company on issue of its shares over the par or &#8220;nominal&#8221; value of those shares, which is similar to the U.S. concept of additional paid in capital.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">However, no dividend shall bear interest against
the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Voting Rights. </i>Holders of our ordinary
shares vote as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Subject
to any special rights or restrictions as to voting attached to any shares, every shareholder who is present in person and every person
representing a shareholder by proxy shall have one vote for each share of which he or the person represented by proxy is the holder.&#160;At
any general meeting a resolution put to the vote of the meeting shall be decided by poll.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Any ordinary resolution to be made by the shareholders
requires the affirmative vote of a simple majority of the votes of the ordinary shares cast in a general meeting, while a special resolution
requires the affirmative vote of no less than two-thirds of the votes of the ordinary shares cast.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under Cayman Islands law, some matters, such as
amending the memorandum and articles of association, changing the name or resolving to be registered by way of continuation in a jurisdiction
outside the Cayman Islands, require approval of shareholders by a special resolution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are no limitations on non-residents or foreign
shareholders in the memorandum and articles of association to hold or exercise voting rights on the ordinary shares imposed by foreign
law or by the charter or other constituent document of our company. However, no person will be entitled to vote at any general meeting
or at any separate meeting of the holders of the ordinary shares unless the person is registered as of the record date for such meeting
and unless all calls or other sums presently payable by the person in respect of ordinary shares in the Company have been paid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Winding Up; Liquidation.</i> Upon the winding
up of our company, after the full amount that holders of any issued shares ranking senior to the ordinary shares as to distribution on
liquidation or winding up are entitled to receive has been paid or set aside for payment, the holders of our ordinary shares are entitled
to receive any remaining assets of the Company available for distribution as determined by the liquidator. The assets received by the
holders of our ordinary shares in a liquidation may consist in whole or in part of property, which is not required to be of the same kind
for all shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Calls on Ordinary Shares and Forfeiture of
Ordinary Shares.</i> Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary
shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. Any ordinary shares
that have been called upon and remain unpaid are subject to forfeiture.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Redemption of Ordinary Shares.</i> We may issue
shares that are, or at its option or at the option of the holders are, subject to redemption on such terms and in such manner as it may,
before the issue of the shares, determine. Under the Companies Law, shares of a Cayman Islands company may be redeemed or repurchased
out of profits of the company, out of the proceeds of a fresh issue of shares made for that purpose or out of capital, provided the memorandum
and articles of association authorize this and it has the ability to pay its debts as they come due in the ordinary course of business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>No Preemptive Rights.</i> Holders of ordinary
shares will have no preemptive or preferential right to purchase any securities of our company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Variation of Rights Attaching to Shares.</i>
If at any time the share capital is divided into different classes of shares, the rights attaching to any class (unless otherwise provided
by the terms of issue of the shares of that class) may, subject to the memorandum and articles of association, be varied or abrogated
with the consent in writing of the holders of three-fourth of the issued shares of that class or with the sanction of a special resolution
passed at a general meeting of the holders of the shares of that class.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Anti-Takeover Provisions. </i>Some provisions
of our current memorandum and articles of association may discourage, delay or prevent a change of control of our company or management
that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference shares in one
or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further
vote or action by our shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Exempted Company. </i>We are an exempted company
with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies.
Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered
as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted
company:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">does not have to file an annual return of its shareholders with the Registrar of Companies;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">is not required to open its register of members for inspection;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">does not have to hold an annual general meeting;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">may issue shares with no par value;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">may register as a limited duration company; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">may register as a segregated portfolio company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#8220;Limited liability&#8221; means that the
liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Register of Members</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under Cayman Islands law, we must keep a register
of members and there shall be entered therein:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">(a)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the names and addresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be considered as paid, on the shares of each member;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">(b)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the date on which the name of any person was entered on the register as a member; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">(c)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the date on which any person ceased to be a member.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under Cayman Islands law, the register of members
of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a presumption of fact on
the matters referred to above unless rebutted) and a member registered in the register of members shall be deemed as a matter of Cayman
Islands law to have legal title to the shares as set against its name in the register of members. Upon the closing of this public offering,
the register of members shall be immediately updated to reflect the issue of shares by us. Once our register of members has been updated,
the shareholders recorded in the register of members shall be deemed to have legal title to the shares set against their name.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">However, there are certain limited circumstances
where an application may be made to a Cayman Islands court for a determination on whether the register of members reflects the correct
legal position. Further, the Cayman Islands court has the power to order that the register of members maintained by a company should be
rectified where it considers that the register of members does not reflect the correct legal position. If an application for an order
for rectification of the register of members were made in respect of our ordinary shares, then the validity of such shares may be subject
to re-examination by a Cayman Islands court.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Preference shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our amended and restated memorandum and articles
of association authorizes the issuance of 10,000,000 preference shares with such designation, rights and preferences as may be determined
from time to time by our board of directors. Accordingly, our board of directors is empowered, without shareholder approval, to issue
preference shares with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other
rights of the holders of ordinary shares. We may issue some or all of the preference shares to effect a business combination. In addition,
the preference shares could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do
not currently intend to issue any preference shares, we cannot assure you that we will not do so in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Certain Differences in Corporate Law</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cayman Islands companies are governed by the Companies
Law. The Companies Law is modeled on English Law but does not follow recent English Law statutory enactments, and differs from laws applicable
to United States corporations and their shareholders. Set forth below is a summary of the material differences between the provisions
of the Companies Law applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Mergers and Similar Arrangements.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In certain circumstances, the Companies Law allows
for mergers or consolidations between two Cayman Islands companies, or between a Cayman Islands company and a company incorporated in
another jurisdiction (provided that is facilitated by the laws of that other jurisdiction).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Where the merger or consolidation is between two
Cayman Islands companies, the directors of each company must approve a written plan of merger or consolidation containing certain prescribed
information. That plan or merger or consolidation must then be authorized by either (a) a special resolution (usually a majority of 66.6%
in value) of the shareholders of each company; or (b) such other authorization, if any, as may be specified in such constituent company&#8217;s
articles of association. No shareholder resolution is required for a merger between a parent company (i.e., a company that owns at least
90% of the issued shares of each class in a subsidiary company) and its subsidiary company. The consent of each holder of a fixed or floating
security interest of a constituent company must be obtained, unless the court waives such requirement. If the Cayman Islands Registrar
of Companies is satisfied that the requirements of the Companies Law (which includes certain other formalities) have been complied with,
the Registrar of Companies will register the plan of merger or consolidation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Where the merger or consolidation involves a foreign
company, the procedure is similar, save that with respect to the foreign company, the director of the Cayman Islands company is required
to make a declaration to the effect that, having made due enquiry, he is of the opinion that the requirements set out below have been
met: (i) that the merger or consolidation is permitted or not prohibited by the constitutional documents of the foreign company and by
the laws of the jurisdiction in which the foreign company is incorporated, and that those laws and any requirements of those constitutional
documents have been or will be complied with; (ii) that no petition or other similar proceeding has been filed and remains outstanding
or order made or resolution adopted to wind up or liquidate the foreign company in any jurisdictions; (iii) that no receiver, trustee,
administrator or other similar person has been appointed in any jurisdiction and is acting in respect of the foreign company, its affairs
or its property or any part thereof; (iv) that no scheme, order, compromise or other similar arrangement has been entered into or made
in any jurisdiction whereby the rights of creditors of the foreign company are and continue to be suspended or restricted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Where the surviving company is the Cayman Islands
company, the director of the Cayman Islands company is further required to make a declaration to the effect that, having made due enquiry,
he is of the opinion that the requirements set out below have been met: (i) that the foreign company is able to pay its debts as they
fall due and that the merger or consolidated is bona fide and not intended to defraud unsecured creditors of the foreign company; (ii)
that in respect of the transfer of any security interest granted by the foreign company to the surviving or consolidated company (a) consent
or approval to the transfer has been obtained, released or waived; (b) the transfer is permitted by and has been approved in accordance
with the constitutional documents of the foreign company; and (c) the laws of the jurisdiction of the foreign company with respect to
the transfer have been or will be complied with; (iii) that the foreign company will, upon the merger or consolidation becoming effective,
cease to be incorporated, registered or exist under the laws of the relevant foreign jurisdiction; and (iv) that there is no other reason
why it would be against the public interest to permit the merger or consolidation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Where the above procedures are adopted, the Companies
Law provides for a right of dissenting shareholders to be paid a payment of the fair value of his shares upon their dissenting to the
merger or consolidation if they follow a prescribed procedure. In essence, that procedure is as follows (a) the shareholder must give
his written objection to the merger or consolidation to the constituent company before the vote on the merger or consolidation, including
a statement that the shareholder proposes to demand payment for his shares if the merger or consolidation is authorized by the vote; (b)
within 20 days following the date on which the merger or consolidation is approved by the shareholders, the constituent company must give
written notice to each shareholder who made a written objection; (c) a shareholder must within 20 days following receipt of such notice
from the constituent company, give the constituent company a written notice of his intention to dissent including, among other details,
a demand for payment of the fair value of his shares; (d) within seven days following the date of the expiration of the period set out
in paragraph (b) above or seven days following the date on which the plan of merger or consolidation is filed, whichever is later, the
constituent company, the surviving company or the consolidated company must make a written offer to each dissenting shareholder to purchase
his shares at a price that the company determines is the fair value and if the company and the shareholder agree the price within 30 days
following the date on which the offer was made, the company must pay the shareholder such amount; (e) if the company and the shareholder
fail to agree a price within such 30 day period, within 20 days following the date on which such 30 day period expires, the company (and
any dissenting shareholder) must file a petition with the Cayman Islands Grand Court to determine the fair value and such petition must
be accompanied by a list of the names and addresses of the dissenting shareholders with whom agreements as to the fair value of their
shares have not been reached by the company. At the hearing of that petition, the court has the power to determine the fair value of the
shares together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value. Any dissenting
shareholder whose name appears on the list filed by the company may participate fully in all proceedings until the determination of fair
value is reached. These rights of a dissenting shareholder are not be available in certain circumstances, for example, to dissenters holding
shares of any class in respect of which an open market exists on a recognized stock exchange or recognized interdealer quotation system
at the relevant date or where the consideration for such shares to be contributed are shares of any company listed on a national securities
exchange or shares of the surviving or consolidated company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Moreover, Cayman Islands law also has separate
statutory provisions that facilitate the reconstruction or amalgamation of companies in certain circumstances, schemes of arrangement
will generally be more suited for complex mergers or other transactions involving widely held companies, commonly referred to in the Cayman
Islands as a &#8220;scheme of arrangement&#8221; which may be tantamount to a merger. In the event that a merger was sought pursuant to
a scheme of arrangement (the procedure of which are more rigorous and take longer to complete than the procedures typically required to
consummate a merger in the United States), the arrangement in question must be approved by a majority in number of each class of shareholders
and creditors with whom the arrangement is to be made and who must in addition represent three-fourths in value of each such class of
shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meeting summoned
for that purpose. The convening of the meetings and subsequently the terms of the arrangement must be sanctioned by the Grand Court of
the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction should not
be approved, the court can be expected to approve the arrangement if it satisfies itself that:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">we are not proposing to act
illegally or beyond the scope of our corporate authority and the statutory provisions as to majority vote have been complied with;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the shareholders have been
fairly represented at the meeting in question;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the arrangement is such as
a businessman would reasonably approve; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the arrangement is not one
that would more properly be sanctioned under some other provision of the Companies Law or that would amount to a &#8220;fraud on the
minority.&#8221;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If a scheme of arrangement or takeover offer (as
described below) is approved, any dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily
be available to dissenting shareholders of United States corporations, providing rights to receive payment in cash for the judicially
determined value of the shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Squeeze-out Provisions</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When a takeover offer is made and accepted by
holders of 90% of the shares to whom the offer relates within four months, the offeror may, within a two-month period, require the holders
of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands
but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of the shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Further, transactions similar to a merger, reconstruction
and/or an amalgamation may in some circumstances be achieved through other means to these statutory provisions, such as a share capital
exchange, asset acquisition or control, through contractual arrangements, of an operating business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Shareholders&#8217; Suits</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Cayman Islands counsel is not aware of any
reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts,
and the Cayman Islands courts have confirmed the availability for such actions. In most cases, we will be the proper plaintiff in any
claim based on a breach of duty owed to us, and a claim against (for example) our officers or directors usually may not be brought by
a shareholder. However, based both on Cayman Islands authorities and on English authorities, which would in all likelihood be of persuasive
authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">a company is acting, or proposing
to act, illegally or beyond the scope of its authority;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the act complained of, although
not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been
obtained; or</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">those who control the company
are perpetrating a &#8220;fraud on the minority.&#8221;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A shareholder may have a direct right of action
against us where the individual rights of that shareholder have been infringed or are about to be infringed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Enforcement of civil liabilities</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Cayman Islands has a different body of securities
laws as compared to the United States and may provide less protection to investors. Additionally, Cayman Islands companies may not have
standing to sue before the Federal courts of the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have been advised by our Cayman Islands legal
counsel that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States
predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original
actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal
securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those
circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts
of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial
on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay
the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands,
such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent
with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of
a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple
damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings
are being brought elsewhere.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Special Considerations for Exempted Companies</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are an exempted company with limited liability
under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies. Any company that
is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted
company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges
listed below:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">annual reporting requirements are minimal and consist mainly of a statement that the company has conducted its operations mainly outside of the Cayman Islands and has complied with the provisions of the Companies Law;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 78; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an exempted company&#8217;s register of members is not open to inspection;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an exempted company does not have to hold an annual general meeting;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an exempted company may issue negotiable or bearer shares or shares with no par value;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an exempted company may register as a limited duration company; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an exempted company may register as a segregated portfolio company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VStock Transfer, LLC is the transfer agent and
registrar for our Ordinary Shares as its principal office at 18 Lafayette Place, Woodmere, New York 11598.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Material Contracts</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not entered into any material contracts
other than in the ordinary course of business and other than those described in &#8220;Item 4. Information on the Company,&#8221; &#8220;Item
7. Major Shareholders and Related Party Transactions&#8212;B. Related Party Transactions,&#8221; or elsewhere in this annual report on
Form 20-F.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Exchange Controls</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cayman Islands</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are currently no exchange control regulations
in the Cayman Islands applicable to us or our shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The PRC</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">China regulates foreign currency exchanges primarily
through the following rules and regulations:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Foreign Currency Administration Rules of 1996, as amended; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Administrative Rules of the Settlement, Sale and Payment of Foreign Exchange of 1996.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Renminbi is not a freely convertible currency
at present. Under the current PRC regulations, conversion of Renminbi is permitted in China for routine current-account foreign exchange
transactions, including trade and service related foreign exchange transactions, payment of dividends and service of foreign debts. Conversion
of Renminbi for most capital-account items, such as direct investments, investments in PRC securities markets and repatriation of investments,
however, is still subject to the approval of SAFE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the above-mentioned administrative
rules, foreign-invested enterprises may buy, sell and/or remit foreign currencies for current account transactions at banks in China with
authority to conduct foreign exchange business by complying with certain procedural requirements, such as presentment of valid commercial
documents. For capital-account transactions involving foreign direct investment, foreign debts and outbound investment in securities and
derivatives, approval from SAFE is a pre-condition. Capital investments by foreign-invested enterprises outside China are subject to limitations
and requirements in China, such as prior approvals from the PRC Ministry of Commerce or SAFE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>E. Taxation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following summary of the material Cayman Islands,
PRC and U.S. tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect
as of the date hereof, all of which are subject to change, possibly with retroactive effect. This summary is not intended to be, nor should
it be construed as, legal or tax advice and is not exhaustive of all possible tax considerations. This summary also does not deal with
all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local, non-U.S.,
non-PRC, and non-Cayman Islands tax laws. Investors should consult their own tax advisors with respect to the tax consequences of the
acquisition, ownership and disposition of our ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">People&#8217;s Republic of China Enterprise
Taxation</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following brief description of Chinese enterprise
laws is designed to highlight the enterprise-level taxation on our earnings, which will affect the amount of dividends, if any, we are
ultimately able to pay to our shareholders. See &#8220;Dividend Policy.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a holding company incorporated in the Cayman
Islands and we gain substantial income by way of dividends paid to us from our subsidiaries in China. The EIT Law and its implementation
rules provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that
are non-resident enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor&#8217;s
jurisdiction of incorporation has a tax treaty with China that provides for a preferential tax rate or a tax exemption.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the EIT Law, an enterprise established outside
of China with a &#8220;de facto management body&#8221; within China is considered a &#8220;resident enterprise,&#8221; which means that
it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the
EIT Law define &#8220;de facto management body&#8221; as a managing body that actually, comprehensively manage and control the production
and operation, staff, accounting, property and other aspects of an enterprise, the only official guidance for this definition currently
available is set forth in SAT Notice 82, which provides guidance on the determination of the tax residence status of a Chinese-controlled
offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that
has a PRC enterprise or enterprise group as its primary controlling shareholder. Although Hitek Global Inc. does not have a PRC enterprise
or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise
within the meaning of SAT Notice 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth
in SAT Notice 82 to evaluate the tax residence status of Hitek Global Inc. and its subsidiaries organized outside the PRC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">According to SAT Notice 82, a Chinese-controlled
offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a &#8220;de facto management body&#8221; in
China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met: (i) the
places where senior management and senior management departments that are responsible for daily production, operation and management of
the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions (such as money borrowing,
lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal and salary and wages) are decided
or need to be decided by organizations or persons located within the territory of China; (iii) main property, accounting books, corporate
seal, the board of directors and files of the minutes of shareholders&#8217; meetings of the enterprise are located or preserved within
the territory of China; and (iv) one half (or more) of the directors or senior management staff having the right to vote habitually reside
within the territory of China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that we do not meet some of the conditions
outlined in the immediately preceding paragraph. For example, as a holding company, the key assets and records of Hitek Global Inc., including
the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located
and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to
ours that has been deemed a PRC &#8220;resident enterprise&#8221; by the PRC tax authorities. Accordingly, we believe that Hitek Global
Inc. and its offshore subsidiaries should not be treated as a &#8220;resident enterprise&#8221; for PRC tax purposes if the criteria for
&#8220;de facto management body&#8221; as set forth in SAT Notice 82 were deemed applicable to us. However, as the tax residency status
of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of
the term &#8220;de facto management body&#8221; as applicable to our offshore entities, we will continue to monitor our tax status.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The implementation rules of the EIT Law provide
that, (i) if the enterprise that distributes dividends is domiciled in the PRC or (ii) if gains are realized from transferring equity
interests of enterprises domiciled in the PRC, then such dividends or gains are treated as China-sourced income. It is not clear how &#8220;domicile&#8221;
may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore,
if we are considered as a PRC tax resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders which are
non-resident enterprises as well as gains realized by such shareholders from the transfer of our shares may be regarded as China-sourced
income and as a result become subject to PRC withholding tax at a rate of up to 10%. We are unable to provide a &#8220;will&#8221; opinion
because Jingtian&amp; Gongcheng, our PRC counsel, believes that it is possible but highly unlikely that the Company and its offshore subsidiaries
would be treated as a &#8220;resident enterprise&#8221; for PRC tax purposes because they do not meet some of the conditions outlined
in SAT Notice 82. In addition, we are not aware of any offshore holding companies with a corporate structure similar to ours that has
been deemed a PRC &#8220;resident enterprise&#8221; by the PRC tax authorities as of the date of the annual report. Therefore, it is possible
but highly unlikely that the income received by our overseas shareholders will be regarded as China-sourced income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Cayman Islands Tax Considerations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following is a discussion on certain Cayman
Islands income tax consequences of an investment in the securities of the Company. The discussion is a general summary of present law,
which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor&#8217;s particular
circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Under Existing Cayman Islands Laws: </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Payments of dividends and capital in respect of
our securities will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend
or capital to any holder of the securities nor will gains derived from the disposal of the securities be subject to Cayman Islands income
or corporation tax. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax
or gift tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No stamp duty is payable in respect of the issue
of the warrants. An instrument of transfer in respect of a warrant is stampable if executed in or brought into the Cayman Islands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No stamp duty is payable in respect of the issue
of our Ordinary Shares or on an instrument of transfer in respect of such shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has been incorporated under the laws
of the Cayman Islands as an exempted company with limited liability and, as such, has applied for and expects to obtain after the effectiveness
of the registration statement on Form F-1 (File No. 333-228498) an undertaking from the Financial Secretary of the Cayman Islands in the
following form:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>The Tax Concessions Law (2018 Revision)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Undertaking as to Tax Concessions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the provision of Section 6
of The Tax Concessions Law (2018 Revision), the Financial Secretary undertakes with Hitek Global Inc. (&#8220;the Company&#8221;):</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">1.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">That no law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">In addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable: </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">a.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">On or in respect of the shares, debentures or other obligations of the Company; or </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">by way of the withholding in whole or part, of any relevant payment as defined in Section 6(3) of the Tax Concessions Law (2018 Revision). </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These concessions shall be for a period of twenty
years from the date hereof.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">United States Federal Income Taxation</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following does not address the tax consequences
to any particular investor or to persons in special tax situations such as:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify"><span style="font-size: 10pt">banks;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">financial institutions; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">insurance companies; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">regulated investment companies; </span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">real estate investment trusts; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">broker-dealers; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">traders that elect to mark-to-market; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">U.S. expatriates; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">tax-exempt entities; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">persons liable for alternative minimum tax; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">persons that actually or constructively own 10% or more of our voting shares; </span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">persons who acquired our Ordinary Shares pursuant to the exercise of any employee share option or otherwise as consideration; or</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">persons holding our Ordinary Shares through partnerships or other pass-through entities.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prospective purchasers are urged to consult their
own tax advisors about the application of the U.S. Federal tax rules to their particular circumstances as well as the state, local, foreign
and other tax consequences to them of the purchase, ownership and disposition of our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of Dividends and Other Distributions
on our Ordinary Shares </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subject to the passive foreign investment company
rules discussed below, the gross amount of distributions made by us to you with respect to the Ordinary Shares (including the amount of
any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but
only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal
income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction
allowed to corporations in respect of dividends received from other U.S. corporations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">With respect to non-corporate U.S. Holders, including
individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that
(1) the Ordinary Shares are readily tradable on an established securities market in the U.S., or we are eligible for the benefits of an
approved qualifying income tax treaty with the U.S. that includes an exchange of information program, (2) we are not a passive foreign
investment company (as discussed below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3)
certain holding period requirements are met. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose
of clause (1) above to be readily tradable on an established securities market in the U.S. because they are listed on the Nasdaq Capital
Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our
Ordinary Shares, including the effects of any change in law after the date of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dividends will constitute foreign source income
for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of
the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the
dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed
by us with respect to our Ordinary Shares will constitute &#8220;passive category income&#8221; but could, in the case of certain U.S.
Holders, constitute &#8220;general category income.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, we have
not declared any dividends on our Ordinary Shares. To the extent the distribution exceeds our current and accumulated earnings and profits
(as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary
Shares, and to the extent the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate
our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be
treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under
the rules described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of Dispositions of Ordinary Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subject to the passive foreign investment company
rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to
the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Ordinary Shares.
The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held
the Ordinary Shares for more than one year, you will be eligible for (a) reduced tax rates of 0% (for individuals in the 10% or 15% tax
brackets), (b) higher tax rates of 20% (for individuals in the 39.6% tax bracket) or (c) 15% for all other individuals. The deductibility
of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source
income or loss for foreign tax credit limitation purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Passive Foreign Investment Company (PFIC)
Consequences</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Based on our current and anticipated operations
and the composition of our assets, we do not expect to be treated as a passive foreign investment company, or PFIC, for U.S. federal income
tax purposes for our current taxable year. PFIC status is a factual determination for each taxable year which cannot be made until the
close of the taxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">at least 75% of its gross income is passive income; or</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the &#8220;asset test&#8221;). </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will be treated as owning our proportionate
share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly,
at least 25% (by value) of the stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We must make a separate determination each year
as to whether we are a PFIC. As a result, our PFIC status may change from no to yes. In particular, because the value of our assets for
purposes of the asset test will generally be determined based on the market price of our Ordinary Shares, our PFIC status will depend
in large part on the market price of our Ordinary Shares. Accordingly, fluctuations in the market price of the Ordinary Shares may cause
us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition
of our income and assets will be affected by how, and how quickly, we spend the cash we raise in our initial public offering. If we are
a PFIC for any year during which you hold Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years during which
you hold Ordinary Shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a
&#8220;deemed sale&#8221; election with respect to the Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we are a PFIC for any taxable year during which
you hold Ordinary Shares, you will be subject to special tax rules with respect to any &#8220;excess distribution&#8221; that you receive
and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary Shares, unless you make a &#8220;mark-to-market&#8221;
election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions
you received during the shorter of the three preceding taxable years or your holding period for the Ordinary Shares will be treated as
an excess distribution. Under these special tax rules:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The tax liability for amounts allocated to years
prior to the year of disposition or &#8220;excess distribution&#8221; cannot be offset by any net operating losses for such years, and
gains (but not losses) realized on the sale of the Ordinary Shares cannot be treated as capital, even if you hold the Ordinary Shares
as capital assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A U.S. Holder of &#8220;marketable stock&#8221;
(as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you
make a mark-to-market election for the Ordinary Shares, you will include in income each year an amount equal to the excess, if any, of
the fair market value of the Ordinary Shares as of the close of your taxable year over your adjusted basis in such Ordinary Shares. You
are allowed a deduction for the excess, if any, of the adjusted basis of the Ordinary Shares over their fair market value as of the close
of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the Ordinary Shares included
in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual
sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible
portion of any mark-to-market loss on the Ordinary Shares, as well as to any loss realized on the actual sale or disposition of the Ordinary
Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary
Shares. Your basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market
election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that
the lower applicable capital gains rate for qualified dividend income discussed above under &#8220;&#8212; Taxation of Dividends and Other
Distributions on our Ordinary Shares&#8221; generally would not apply.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The mark-to-market election is available only
for &#8220;marketable stock&#8221;, which is stock that is traded in other than de minimis quantities on at least 15 days during each
calendar quarter (&#8220;regularly traded&#8221;) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations),
including the Nasdaq Capital Market. For the year ended December 31, 2022, our Ordinary Share have not been listed on the Nasdaq Capital
Market. Our Ordinary Shares started trading on the Nasdaq Capital Market on March 31, 2023. If the Ordinary Shares are regularly traded
on the Nasdaq Capital Market and if you are a holder of Ordinary Shares, the mark-to-market election would be available to you were we
to be or become a PFIC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Alternatively, a U.S. Holder of stock in a PFIC
may make a &#8220;qualified electing fund&#8221; election with respect to such PFIC to elect out of the tax treatment discussed above.
A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable
year such holder&#8217;s pro rata share of the corporation&#8217;s earnings and profits for the taxable year. However, the qualified electing
fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as
required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable
you to make a qualified electing fund election. If you hold Ordinary Shares in any year in which we are a PFIC, you will be required to
file U.S. Internal Revenue Service Form 8621 regarding distributions received on the Ordinary Shares and any gain realized on the disposition
of the Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">You are urged to consult your tax advisors regarding
the application of the PFIC rules to your investment in our Ordinary Shares and the elections discussed above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Information Reporting and Backup Withholding</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dividend payments with respect to our Ordinary
Shares and proceeds from the sale, exchange or redemption of our Ordinary Shares may be subject to information reporting to the U.S. Internal
Revenue Service and possible U.S. backup withholding at a current rate of 24%. Backup withholding will not apply, however, to a U.S. Holder
who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form
W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must
provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the
application of the U.S. information reporting and backup withholding rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Backup withholding is not an additional tax. Amounts
withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service
and furnishing any required information. We do not intend to withhold taxes for individual shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the Hiring Incentives to Restore Employment
Act of 2010, certain U.S. Holders are required to report information relating to Ordinary Shares, subject to certain exceptions (including
an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue
Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold Ordinary Shares.
U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding
rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>F. Dividends and Paying Agents</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>G. Statement by Experts</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>H. Documents on Display</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and will file reports, registration statements and other information with the SEC.
The Company&#8217;s reports, registration statements and other information can be inspected on the SEC&#8217;s website at www.sec.gov.
You may also visit us on the World Wide Web at http http://www.xmhitek.com/. However, information contained on our website does not constitute
a part of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>I. Subsidiary Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Interest Rate Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We deposit surplus funds with Chinese banks earning
daily interest. We do not invest in any instruments for trading purposes. Most of our outstanding debt instruments carry loan prime rates
plus basis points of interest. Our operations generally are not directly sensitive to fluctuations in interest rates and we currently
do not have any long-term debt outstanding. Management monitors the banks&#8217; prime rates in conjunction with our cash requirements
to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions
in an effort to reduce our exposure to interest rate risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Foreign Exchange Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While our reporting currency is the U.S. dollar,
substantially all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. Substantially all of our assets
are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected
by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of
our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated
at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and equity is translated
at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining
other comprehensive income, a component of equity. The depreciation of the RMB against the U.S. dollar in 2022 increased our comprehensive
loss to $279,251 based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of December 31, 2022.
As of December 31, 2022. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The value of RMB against the U.S. dollar and other
currencies is affected by, among other things, changes in China&#8217;s political and economic conditions. Since July 2005, RMB has not
been pegged to the U.S. dollar. Although the People&#8217;s Bank of China regularly intervenes in the foreign exchange market to prevent
significant short-term fluctuations in the exchange rate, RMB may appreciate or depreciate significantly in value against the U.S. dollar
in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in RMB
exchange rate and lessen intervention in the foreign exchange market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Inflation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inflationary factors such as increases in the
cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a
material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse
effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net
revenues if the selling prices of our products do not increase with these increased costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>A. Debt Securities.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Warrants and Rights</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Other Securities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. American Depositary Shares.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART II</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;13. DEFAULTS, DIVIDEND ARREARAGES
AND DELINQUENCIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;14. MATERIAL MODIFICATIONS TO THE
RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See &#8220;Item 10. Additional Information&#8221;
for a description of the rights of securities holders, which remain unchanged.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Use of Proceeds</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following &#8220;Use of Proceeds&#8221; information
relates to the post-effective amendment to the registration statement on Form&#160;F-1, as amended (File Number 333-228498) for our initial
public offering, which was declared effective by the SEC on March 30, 2023. In April 2023, we completed our initial public offering in
which we issued and sold an aggregate of 3,200,000 Ordinary Shares, at a price of $5.00 per share for $16 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We incurred approximately $2,476,860 in expenses
in connection with our initial public offering, which included approximately $1,360,000	in underwriting discounts, approximately $250,000
in expenses paid to or for underwriters, and approximately $866,860 in other expenses. None of the transaction expenses included payments
to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates.
None of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers
or their associates, persons owning 10% or more of our equity securities or our affiliates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The net proceeds raised from the initial public
offering were $13,523,140 after deducting underwriting discounts and the offering expenses payable by us. As of today, we have not used
any of the proceeds yet. We plan to use the net proceeds we receive from our initial public offering for the following purposes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom; background-color: white">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Use of net proceeds</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="width: 74%"><span style="font-size: 10pt">Research and development </span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 25%; text-align: center"><span style="font-size: 10pt">approximately US$2,700,000</span></td></tr>
  <tr style="vertical-align: bottom; background-color: white">
    <td><span style="font-size: 10pt">Recruit additional employees </span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">approximately US$3,380,000</span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td><span style="font-size: 10pt">Enhance our information technology systems </span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">approximately US$4,730,000</span></td></tr>
  <tr style="vertical-align: bottom; background-color: white">
    <td><span style="font-size: 10pt">General working capital </span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">approximately US$2,710,000</span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td><span style="font-size: 10pt">Total </span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt">US$13,520,000 </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;15. CONTROLS AND PROCEDURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Evaluation of Disclosure Controls and Procedures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our management, with the participation of our
chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b)
under the Exchange Act. Based on the foregoing evaluation, our principal executive officer and principal financial officer concluded that,
as of December 31, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level&#160;due to the material
weaknesses described below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Management&#8217;s Report on Internal Control
over Financial Reporting</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our management is responsible for establishing
and maintaining adequate internal control over financial reporting (&#8220;ICFR&#8221;), as defined in Rules 13a-15 (f)&#160;under the
Exchange Act. Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness
of our ICFR based on criteria established in the framework in Internal Control&#8212;Integrated Framework (2013)&#160;issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the 2013 Framework, our principal executive officer
and principal financial officer have concluded that our ICFR was not effective as of December 31, 2022 due to the following material weaknesses:&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">We had insufficient financial reporting and accounting with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A material weakness is a deficiency, or a combination
of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the Company&#8217;s annual or interim financial statements will not be prevented
or detected on a timely basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We plan to address the weaknesses identified above
by implementing the following measures:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">recruiting qualified professionals
with appropriate levels of knowledge and experience to assist in resolving accounting issues in non-routine or complex transactions;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-size: 10pt">investing in technology infrastructure
to support our financial reporting function; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(3)</span></td><td style="text-align: justify"><span style="font-size: 10pt">improving the communication
between management, board of directors and chief financial officer.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Attestation Report of the Registered Public
Accounting Firm</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because the Company is a non-accelerated filer,
this annual report does not include an attestation report of our registered public accounting firm regarding ICFR.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Changes in Internal Control Over Financial
Reporting</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were no changes in our internal control
over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or
are reasonably likely to materially affect, our ICFR</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_020a"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16. [RESERVED]</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;16A. AUDIT COMMITTEE FINANCIAL EXPERT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Wenhua Yang &#160;qualifies as an &#8220;audit
committee financial expert&#8221; as defined in Item&#160;16A of Form&#160;20-F.&#160; Mr. Yang also is an independent director as defined
by the rules of the NASDAQ Stock Market as well as qualifies as an audit committee financial expert as defined by the rules of the NASDAQ
Stock Market, Inc. and Rule 10A-3 under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16B. CODE OF ETHICS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 9, 2019, we have adopted a code of ethics
applicable to our directors, officers, and employees in accordance with applicable federal securities law and NASDAQ rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-transform: uppercase"><b>ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth the aggregate fees
by categories specified below in connection with certain professional services rendered by UHY LLP, our former independent registered
public accounting firm, for the year ended December 31, 2021, and Wei, Wei &amp; Co., LLP for the year ended December 31, 2022. We did
not pay any other fees to our independent registered public accounting firm during the periods indicated below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 10pt">Audit fees<sup>(1)</sup>&#160;</span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">180,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">181,380</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 10pt">Audit related fees<sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt"><span style="font-size: 10pt">Tax fees<sup>(3)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 10pt">All other fees<sup>(4)</sup></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">TOTAL</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">180,000</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">181,380</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;Audit fees&#8221; means
the aggregate fees billed or to be billed for each of the fiscal years for professional services rendered by our principal accountant
for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years.</span></td>
</tr></table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;Audit related fees&#8221;
means the aggregate fees billed or to be billed for each of the fiscal years for assurance and related services by our principal accountant
that are reasonably related to the performance of the audit or review of our financial statements and are not reported under paragraph
(1).</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(3)</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;Tax Fees&#8221; represents
the aggregate fees billed or to be billed in each of the fiscal years listed for the professional tax services rendered by our principal
auditors.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(4)</span></td><td style="text-align: justify"><span style="font-size: 10pt">&#8220;All Other Fees&#8221; represents
the aggregate fees billed or to be billed in each of the fiscal years listed for services rendered by our principal auditors other than
services reported under &#8220;Audit fees,&#8221; &#8220;Audit-related fees&#8221; and &#8220;Tax fees.&#8221;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The policy of our audit committee and our board
of directors is to pre-approve all audit and non-audit services provided by our principal auditors, including audit services, audit-related
services, and other services as described above, other than those for de minimis services which are approved by the audit committee or
our board of directors prior to the completion of the services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;16D. EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_025"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;16E. PURCHASES OF EQUITY SECURITIES
BY THE ISSUER AND AFFILIATED PURCHASERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;16F. CHANGE IN REGISTRANT&#8217;S
CERTIFYING ACCOUNTANTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 2, 2022, UHY LLP (&#8220;<b>UHY</b>&#8221;)
notified the Company of its intention to resign as the Company&#8217;s auditor on January 1, 2023. The auditor&#8217;s report of UHY on
the Company&#8217;s consolidated financial statements as of and for the years ended December 31, 2021 and 2020 did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. Furthermore,
during the fiscal years ended December 31, 2021 and 2020, and the subsequent interim period through January 1, 2023, there has been: (1)
no disagreement (as described under Item 16F(a)(1)(iv) of Form 20-F and the related instructions thereto) with UHY on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to UHY&#8217;s
satisfaction, would have caused UHY to make reference to the subject matter of the disagreement in connection with its reports on the
Company&#8217;s consolidated financial statements for such years, and (2) no &#8220;reportable events&#8221; (as defined under Item 16F(a)(1)(v)
of the instructions to Form 20-F), except the material weaknesses in the Company&#8217;s internal control over financial reporting previously
reported in Item 15 &#8220;Controls and Procedures&#8221; in the Company&#8217;s Annual Reports on Form 20-F for the years ended December
31, 2021 and 2020, respectively. The material weaknesses previously reports were: (i) the Company had insufficient financial reporting
and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP
accounting issues; and (ii) the Company did not have sufficient systems and procedures in place to ensure effective supervision and monitoring
of our annual financial statements preparation process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 15, 2023, the Company engaged of Wei,
Wei &amp; Co., LLP (&#8220;<b>WWC</b>&#8221;) to serve as the independent registered public accounting firm of the Company. During the
two most recent fiscal years and through the subsequent interim period preceding WWC&#8217;s engagement, the Company has not consulted
with WWC regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type
of audit opinion that might be rendered on the Company&#8217;s financial statements, and neither a written report was provided to the
Company nor oral advice was provided that WWC concluded was an important factor considered by the Company in reaching a decision as to
the accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a disagreement (as defined in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as described in
Item 304(a)(1)(v) of Regulation S-K).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company provided UHY with a copy of the above
disclosure and requested that UHY furnish the Company with a letter addressed to the Commission stating whether or not it agrees with
the above statement. A copy of UHY&#8217;s letter is filed as Exhibit 16.1 to the Form 6-K filed on February 21, 2023, and is incorporated
by reference herein.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;16G. CORPORATE GOVERNANCE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other than as described in this section, our corporate
governance practices do not differ from those followed by domestic companies listed on the NASDAQ Capital Market. NASDAQ Listing Rule
5635 generally provides that shareholder approval is required of U.S. domestic companies listed on the NASDAQ Capital Market prior to
issuance (or potential issuance) of securities (i) equaling 20% or more of the company&#8217;s Ordinary Shares or voting power for less
than the greater of market or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant
to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially
amended. Notwithstanding this general requirement, NASDAQ Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home
country practice rather than these shareholder approval requirements. The Cayman Islands do not require shareholder approval prior to
any of the foregoing types of issuances. The Company, therefore, is not required to obtain such shareholder approval prior to entering
into a transaction with the potential to issue securities as described above. The Board of Directors of the Company has elected to follow
the Company&#8217;s home country rules as to such issuances and will not be required to seek shareholder approval prior to entering into
such a transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Nasdaq Listing Rule&#160;5605(b)(1)&#160;requires
listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we
are permitted to, and we may follow home country practice in lieu of the above requirements. The corporate governance practice in our
home country, the British Virgin Islands, does not require a majority of our board to consist of independent directors. Currently, a majority
of our board members are independent. However, if we change our board composition such that independent directors do not constitute a
majority of our board of directors, our shareholders may be afforded less protection than they would otherwise enjoy under Nasdaq&#8217;s
corporate governance requirements applicable to U.S. domestic issuers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM&#160;16H. MINE SAFETY DISCLOSURE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART III</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_031"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 17. FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have elected to provide financial statements
pursuant to Item 18.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_032"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 18. FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results of Operations and Financial Condition</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Following are the audited financial results for
the years ended December 31, 2022, 2021 and 2020 of Hitek Global Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>INDEX TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>HITEK GLOBAL INC. AND SUBSIDIARIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: left; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><img alt="" src="fin_002.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></span></p><div>

</div><p style="margin: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td rowspan="14" style="text-align: left; width: 15%; font-size: 10pt"><img alt="" src="fin_003.jpg"/>&#160;</td>
    <td style="width: 85%; text-align: justify; font-size: 10pt">To the Board of Directors and Shareholders of</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hitek Global Inc.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Opinion on the Financial Statements</b></span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">We have audited the accompanying consolidated balance sheet of Hitek
Global Inc. and Subsidiaries (the &#8220;Company&#8221;) as of December 31, 2022, and the related consolidated statements of operations
and comprehensive income, changes in shareholders&#8217; equity, and cash flows for the year then ended December 31, 2022, and the related
notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the
year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Basis for Opinion</b></span></td></tr>
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    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">These financial statements are the responsibility of the Company&#8217;s
management. Our responsibility is to express an opinion on the Company&#8217;s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB. </td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company&#8217;s internal control
over financial reporting. Accordingly, we express no such opinion. </td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We <span style="font-weight: normal">believe that our audits provide a reasonable basis for our opinion.</span></td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="width: 15%">&#160;</td>
    <td style="padding-bottom: 1.5pt; width: 35%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/ Wei, Wei &amp; Co., LLP</span></td>
    <td style="width: 50%">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Flushing, New York</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 26, 2023</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td colspan="2"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We have served as the Company&#8217;s auditor since 2023.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="fin_001.jpg" style="height: 80px; width: 680px"/>&#160;</p><div>

</div><div><a id="f_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">To the Board of Directors and Shareholders
of Hitek Global Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>Opinion on the Financial
Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">We have audited the accompanying
consolidated balance sheet of Hitek Global Inc. (the &#8220;Company&#8221;) as of December 31, 2021 and the related consolidated
statements of operations and comprehensive income, changes in shareholders&#8217; equity, and cash flows for each of the years in the
two-year period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2021, and the results of their operations and their cash flows for each of the years in the two-year period ended
December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>Basis for Opinion</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">These consolidated financial
statements are the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on the Company&#8217;s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we
are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#8217;s internal control over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits
provide a reasonable basis for our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="border-bottom: Black 1.5pt solid; width: 40%"><span style="font-size: 10pt">/s/ <ix:nonNumeric contextRef="c0" name="dei:AuditorName">UHY LLP</ix:nonNumeric></span></td> <td style="width: 60%">&#160;</td></tr> <tr style="vertical-align: top"> <td colspan="2">&#160;</td></tr> <tr style="vertical-align: top"> <td colspan="2"><span style="font-size: 10pt">We have served as the Company&#8217;s auditor since 2017.</span></td></tr> <tr style="vertical-align: top"> <td colspan="2">&#160;</td></tr> <tr style="vertical-align: top"> <td><ix:nonNumeric contextRef="c0" name="dei:AuditorLocation"><span style="font-size: 10pt">New York, New York</span></ix:nonNumeric></td> <td>&#160;</td></tr> <tr style="vertical-align: top"> <td>&#160;</td> <td>&#160;</td></tr> <tr> <td style="vertical-align: top"><span style="font-size: 10pt">May 13, 2022</span></td> <td>&#160;</td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>HITEK GLOBAL INC. AND SUBSIDIARIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Assets</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Current assets</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-0">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-6">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Commitments and Contingencies</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-7">&#160;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-8">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Statutory reserve</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><ix:footnote id="ix_0_footnote" xml:lang="en-US"><span style="font-size: 10pt">Retrospectively restated for effect
of Reverse Split.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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</div><div><a id="f_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>HITEK GLOBAL INC. AND SUBSIDIARIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

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  <tr style="vertical-align: bottom">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><ix:footnote id="ix_1_footnote" xml:lang="en-US"><span style="font-size: 10pt">Retrospectively restated for effect
of Reverse Split.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 95; Value: 1 --><div>
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    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>HITEK GLOBAL INC. AND SUBSIDIARIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#8217;
EQUITY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Years Ended December 31, 2022, 2021 and 2020</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><ix:footnote id="ix_2_footnote" xml:lang="en-US"><span style="font-size: 10pt">Retrospectively restated for effect
of Reverse Split.</span></ix:footnote></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>HITEK GLOBAL INC. AND SUBSIDIARIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td>&#160;</td><td>&#160;</td>
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Accounts receivable</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Advances to suppliers</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Deferred offering cost</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Due from related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueFromRelatedParties" scale="0" sign="-" unitRef="usd">708</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="0" unitRef="usd">225,198</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="0" unitRef="usd">172,025</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Deferred revenue</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="0" unitRef="usd">12,089</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="0" sign="-" unitRef="usd">58,463</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Taxes payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedIncomeTaxesPayable" scale="0" unitRef="usd">488,419</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedIncomeTaxesPayable" scale="0" unitRef="usd">327,807</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedIncomeTaxesPayable" scale="0" unitRef="usd">159,464</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Due to related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueToRelatedParties" scale="0" sign="-" unitRef="usd">3,320</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueToRelatedParties" scale="0" unitRef="usd">1,062</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueToRelatedParties" scale="0" unitRef="usd">2,843</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 9pt">Accrued expenses and other current liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherCurrentAssetsAndLiabilitiesNet" scale="0" sign="-" unitRef="usd">163,884</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherCurrentAssetsAndLiabilitiesNet" scale="0" unitRef="usd">127,375</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherCurrentAssetsAndLiabilitiesNet" scale="0" unitRef="usd">7,144</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; padding-left: 9pt">Net cash provided by (used in) operating activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Investing Activities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Advance payment for software development</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToDevelopSoftware" scale="0" unitRef="usd">117,617</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToDevelopSoftware" scale="0" unitRef="usd">25,582</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToDevelopSoftware" scale="0" unitRef="usd">285,346</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Loans to third parties</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="hkit:LoanToThirdParty" scale="0" unitRef="usd">356,595</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="hkit:LoanToThirdParty" scale="0" unitRef="usd">144,925</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Supplemental disclosures of cash flow information:</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>HITEK GLOBAL INC. AND SUBSIDIARIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="text-transform: uppercase"><b>Notes
to CONSOLIDATED Financial Statements</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">December 31, 2022 and 2021</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_NatureOfOperations-c0_cont_1" escape="true" name="us-gaap:NatureOfOperations"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 1 &#8211; NATURE OF OPERATIONS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_2" id="_NatureOfOperations-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">HiTek Global Inc. (the &#8220;Company&#8221;)
was incorporated under the laws of the Cayman Islands on November 3, 2017 in anticipation of an initial public offering.&#160;The Company
through its variable interest entity (&#8220;VIE&#8221;) and VIE&#8217;s subsidiaries provide hardware sales, software sales, Information
Technology (&#8220;IT&#8221;) maintenance services and tax devices and services in the People&#8217;s Republic of China (the &#8220;PRC&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_3" id="_NatureOfOperations-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company issued <ix:nonFraction contextRef="c43" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c44" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares">10,987,679</ix:nonFraction></ix:nonFraction> ordinary shares
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formed its wholly-owned subsidiary, HiTek Hong Kong Limited (&#8220;HiTek HK&#8221;) in Hong Kong. On March 15, 2018, HiTek HK formed
its wholly-owned subsidiary, Tian Dahai (Xiamen) Information Technology Co. Ltd. (&#8220;WFOE&#8221;) in PRC.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_4" id="_NatureOfOperations-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c0" name="hkit:OwnershipDescription">Xiamen Hengda HiTek Computer Network Co., Ltd.
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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
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</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_5" id="_NatureOfOperations-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In September 1999, Xiamen Huasheng HiTek Computer
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</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_6" id="_NatureOfOperations-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In September 2017, Huoerguosi Hengda Information
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</div><div>

</div><ix:continuation continuedAt="_NatureOfOperations-c0_cont_7" id="_NatureOfOperations-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In April 2021, Xiamen Haitian Weilai Technology
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_003.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><ix:continuation id="_NatureOfOperations-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 (&#8220;CFS&#8221;) 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.&#160;</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_3" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:continuation id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accounting and financial reporting policies
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_4" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" continuedAt="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_1" escape="true" name="us-gaap:PriorPeriodReclassificationAdjustmentDescription"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Reclassification</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_5" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_4"><ix:continuation continuedAt="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_2" id="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain prior year amounts have been reclassified
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_6" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_5"><ix:continuation continuedAt="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_3" id="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_7" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:ScheduleOfPrepaidExpensesAndOtherCurrentAssetstableTextBlock"><ix:continuation id="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_3"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_8" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_7"><ix:nonNumeric contextRef="c0" continuedAt="_ConsolidationPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ConsolidationPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Principles of Consolidation</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_9" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_8"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_2" id="_ConsolidationPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial statements
include financial information related to the Company and its wholly-owned subsidiaries and those variable interest entities (&#8220;VIEs&#8221;)
where the Company is the primary beneficiary.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_10" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_9"><ix:continuation id="_ConsolidationPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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. &#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_11" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_10"><ix:nonNumeric contextRef="c0" continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_1" escape="true" name="hkit:VieAgreementsWithHitekPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>VIE Agreements with HiTek</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_12" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_11"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_2" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&#8217;s shareholders
entered into a series of contractual arrangements (&#8220;VIE Agreements&#8221;) on March 31, 2018, which have not been tested in a court
of law. The VIE Agreements by and among WFOE, HiTek, and HiTek&#8217;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&#8217;s subsidiaries&#8217; assets, liabilities, results of operations, and cash flows in the
accompanying consolidated financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 99; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_13" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_12"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_3" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each of the VIE Agreements is described in detail
below:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_14" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_13"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_4" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Exclusive Technical Consulting and Service
Agreement</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_15" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_14"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_5" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_16" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_15"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_6" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Equity Interest Pledge Agreement</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_17" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_16"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_7" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">WFOE, HiTek and HiTek shareholders entered into
an Equity Interest Pledge Agreement, pursuant to which HiTek shareholders pledged all of their equity interests&#160;in HiTek to WFOE
in order to guarantee the performance of HiTek&#8217;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 &#160;&#160;of HiTek. The Equity Interest Pledge Agreement ends when
all contractual obligations under the Exclusive Technical Consulting and Service Agreement have been fully performed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_18" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_17"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_8" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Exclusive Equity Interests Purchase Agreement</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_19" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_18"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_9" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&#8217;s election.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_20" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_19"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_10" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Power of Attorney</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_21" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_20"><ix:continuation continuedAt="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_11" id="hkit_VieAgreementsWithHitekPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&#8217; rights with respect to their&#160;equity interest in the VIE Companies, including HiTek, Huasheng and
Huoerguosi.&#160;The power of attorney will remain in force for so long as the shareholder remains a shareholder of HiTek.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

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and 2020, there were no transactions in HiTek Global Inc. and HiTek HK besides minimal capital transactions and professional fee payments.
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_24" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_23"><ix:continuation continuedAt="_UseOfEstimates-c0_cont_2" id="_UseOfEstimates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

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the Company&#8217;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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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(&#8220;FV&#8221;) 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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_28" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_27"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The three levels of inputs are defined as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.4pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_29" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_28"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18pt; text-align: justify">Level 1 inputs to the valuation methodology
are quoted prices (unadjusted) for identical assets or liabilities in active markets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.4pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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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.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.4pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_31" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_30"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 18pt; text-align: justify">Level 3 inputs to the valuation methodology
are unobservable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_32" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_31"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_7" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 825-10 &#8220;Financial Instruments&#8221;,
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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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balance sheets for cash, accounts receivable, accounts receivable &#8211; 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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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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&#160;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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer&#8217;s
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_55" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_54"><ix:continuation continuedAt="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_5" id="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_56" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_55"><ix:continuation continuedAt="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_6" id="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_57" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_56"><ix:continuation continuedAt="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_7" id="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_58" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_57"><ix:continuation continuedAt="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_8" id="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_59" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_58"><ix:continuation continuedAt="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_9" id="hkit_AccountsReceivableAccountsReceivableRelatedPartyAndConcentrationOfRiskPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The normal payment period is approximately six
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the above factors. For the large customers such as large-scale oil and coal mine customers, the Company gives a two-year credit period.
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</div><div>

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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&#8217;s best estimates and customers&#8217;
historical payment behaviors. The Company uses approximately one-year time period as the basis to the separation of current and non-current
assets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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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:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_63" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_62"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:ScheduleOfAdvancesToSuppliersTableTextBlock"><ix:continuation continuedAt="hkit_AdvancesToSuppliersNetPolicyTextBlock-c0_cont_3" id="hkit_AdvancesToSuppliersNetPolicyTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

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had expired.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_65" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_64"><ix:nonNumeric contextRef="c0" continuedAt="_CapitalizationOfDeferredPolicyAcquisitionCostsPolicy-c0_cont_1" escape="true" name="us-gaap:CapitalizationOfDeferredPolicyAcquisitionCostsPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Deferred Offering Costs</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_66" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_65"><ix:continuation id="_CapitalizationOfDeferredPolicyAcquisitionCostsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company complies with ASC 340-10-S99-1 and
SEC Staff Accounting Bulletin (&#8220;SAB&#8221;) Topic 5A &#8212; &#8220;Expenses of Offering&#8221;. 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&#8217; 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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_67" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_66"><ix:nonNumeric contextRef="c0" continuedAt="_InventoryPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:InventoryPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Inventories</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_68" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_67"><ix:continuation id="_InventoryPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_69" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_68"><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Property, Equipment and Software</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_70" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_69"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_71" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_70"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Estimated useful lives are as follows, taking into account the assets&#8217;
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_72" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_71"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:ScheduleOfEstimatedUsefulLivesTableTextBlock"><ix:continuation id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom; background-color: white">
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    <td style="border-bottom: black 1.5pt solid; width: 10%; text-align: center"><span style="font-size: 10pt"><b>Estimated<br/>
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</div><div>

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</div><div>

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the RCTX-X module, collect the work diagram, the electricity diagram, the pressure temperature and other measures, and can extract the
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</div><div>

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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
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</div><div>

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</div><div>

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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.
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</div><div>

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services, tax control system risk investigation service, and tax invoicing management service, such as training service on issuing electronic
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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
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_91" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_90"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_17" id="_RevenueRecognitionPolicyTextBlock-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_92" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_91"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_18" id="_RevenueRecognitionPolicyTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_93" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_92"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_19" id="_RevenueRecognitionPolicyTextBlock-c0_cont_18"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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exemptions</i></b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_94" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_93"><ix:continuation id="_RevenueRecognitionPolicyTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company generally expenses sales commissions
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</div><div>

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</div><div>

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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
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</div><div>

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</div><div>

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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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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</div><div>

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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&#160;were recorded in general and administrative expenses because
fixed assets are mainly for sales and administrative purpose.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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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&#8217;s products reach technological feasibility
shortly before the products are released and sold to the public. Therefore, research and development (&#8220;R&amp;D&#8221;) costs are
generally expensed as incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_107" id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_106"><ix:continuation continuedAt="_ResearchAndDevelopmentExpensePolicy-c0_cont_3" id="_ResearchAndDevelopmentExpensePolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company expenses R&amp;D expenses as incurred
and are included as part of general and administrative expenses. R&amp;D expenses for the years ended December 31, 2022, 2021 and 2020
were $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ResearchAndDevelopmentExpense" scale="0" unitRef="usd">42,052</ix:nonFraction>, $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ResearchAndDevelopmentExpense" scale="0" unitRef="usd">43,661</ix:nonFraction> and <ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ResearchAndDevelopmentExpense" scale="0" unitRef="usd">35,904</ix:nonFraction>, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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of the PRC. The Company accounts for income taxes using the asset/liability method prescribed by ASC 740, &#8220;Accounting for Income
Taxes.&#8221; 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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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&#8220;Accounting for Uncertainty in Income Taxes,&#8221; which provides clarification related to the process associated with accounting
for uncertain tax positions recognized in the Company&#8217;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&#8217;s liability for income taxes. Any such adjustment could be material to the Company&#8217;s results of operations
for any given quarterly or annual period based, in part, upon the results of operations for the given period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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revenue generated from providing products was changed from 16% to 13%.</ix:nonNumeric> 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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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operations in the PRC is the Chinese Yuan or Renminbi (&#8220;RMB&#8221;). 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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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</div><div>

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</div><div>

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</div><div>

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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
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</div><div>

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</div><div>

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</div><div>

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resources and assessing performance. Since the Company&#8217;s assets are substantially all located in the PRC and substantially all of
the Company&#8217;s revenues and expenses are derived in the PRC, the Company has determined that it has only one operating segment and
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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&#8220;ASC 842&#8221;), 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
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</div><div>

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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&#160;right-of-use&#160;(&#8220;ROU&#8221;) 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&#8217;s reasonably certain that the renewal options will be exercised and periods for
which it&#8217;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 (&#8220;IBR&#8221;). 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
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</div><div>

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</div><div>

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</div><div>

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changes the impairment model for most financial assets and certain other instruments. The standard will replace the &#8220;incurred loss&#8221;
approach with an &#8220;expected loss&#8221; model for instruments measured at amortized cost. For&#160;available-for-sale&#160;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&#160;2016-13&#160;are effective for fiscal years beginning after December&#160;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
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_4" id="_InvestmentTextBlock-c0_cont_3"><ix:continuation id="_InvestmentTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_5" id="_InvestmentTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net investment (loss) income for the years ended December 31, 2022,
2021 and 2020 consists of the following.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_InvestmentTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfRealizedGainLossTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-71">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="hkit:MutualFund" scale="0" unitRef="usd">17,189</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-73">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

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receivable, Net</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_2" id="_AccountsAndNontradeReceivableTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2022 and 2021, accounts receivable,
net consisted of the following.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_3" id="_AccountsAndNontradeReceivableTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_4" id="_AccountsAndNontradeReceivableTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table describes the movements in
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</div><div>

</div><ix:continuation continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_5" id="_AccountsAndNontradeReceivableTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:ScheduleOfAllowanceForDoubtfulAccounts"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%">Balance at January 1, 2021</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c22" decimals="0" format="ixt:num-dot-decimal" name="hkit:AtBeginningOfYear" scale="0" unitRef="usd">298,224</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Decrease in allowance for doubtful accounts</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="hkit:DecreaseInAllowanceForDoubtfulAccounts" scale="0" sign="-" unitRef="usd">1,087</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Balance at December 31, 2022</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:AtBeginningOfYear" scale="0" unitRef="usd">164,122</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_AccountsAndNontradeReceivableTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AllowanceForDoubtfulAccountsReceivableRecoveries" scale="0" unitRef="usd">1,087</ix:nonFraction> and $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AllowanceForDoubtfulAccountsReceivableRecoveries" scale="0" unitRef="usd">124</ix:nonFraction>,881and $<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AllowanceForDoubtfulAccountsReceivableRecoveries" scale="0" unitRef="usd">27,696</ix:nonFraction>,
respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_InventoryDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:InventoryDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 5 &#8211; INVENTORIES, NET</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_InventoryDisclosureTextBlock-c0_cont_2" id="_InventoryDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2022 and 2021, inventories consisted of the following.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InventoryDisclosureTextBlock-c0_cont_3" id="_InventoryDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfInventoryNoncurrentTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%">Inventory</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryRawMaterials" scale="0" unitRef="usd">442,681</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryRawMaterials" scale="0" unitRef="usd">419,726</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:ReserveForObsoleteInventories" scale="0" unitRef="usd">12,011</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="hkit:ReserveForObsoleteInventories" scale="0" unitRef="usd">10,705</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryNet" scale="0" unitRef="usd">430,670</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation id="_InventoryDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="hkit_PrepaidExpensesAndCurrentAssetsTextBlock-c0_cont_1" escape="true" name="hkit:PrepaidExpensesAndCurrentAssetsTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 6 &#8211; PREPAID EXPENSES AND OTHER CURRENT ASSETS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="hkit_PrepaidExpensesAndCurrentAssetsTextBlock-c0_cont_2" id="hkit_PrepaidExpensesAndCurrentAssetsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2022 and 2021, prepaid expenses and current assets
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</div><div>

</div><ix:continuation id="hkit_PrepaidExpensesAndCurrentAssetsTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:DeferredCostsCapitalizedPrepaidAndOtherAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsNotesAndLoansReceivableNetCurrent" scale="0" unitRef="usd">42,263</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:LoansNotesTradeAndOtherReceivablesDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><b>NOTE 7 &#8211; LOAN RECEIVABLE</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_2" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;At December 31, 2022 and 2021, loan receivable consisted of the
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</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_3" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:LoanReceivableTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_5" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 21, 2022, March 28, 2022 and June 14,
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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&#8217;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 <ix:nonFraction contextRef="c94" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProductionCosts" scale="6" unitRef="usd">1.306</ix:nonFraction> million cubic meters per year.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Interest income for the years ended December 31,
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="hkit_AdvanceToAThirdPartyDisclosureTextBlock-c0_cont_1" escape="true" name="hkit:AdvanceToAThirdPartyDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 8 &#8211; NON-CURRENT ADVANCE TO A THIRD PARTY</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="hkit_AdvanceToAThirdPartyDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.
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30 working days after the signing of this contract, 50% within 30 working days upon launching of the official version, and 20% within
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 9 &#8211; <span style="text-transform: uppercase">PROPERTY,
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</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2022 and 2021, property, equipment and software consisted
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</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022, 2021 and
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="hkit_TaxesPayableTextBlock-c0_cont_1" escape="true" name="hkit:TaxesPayableTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 10 &#8211; <span style="text-transform: uppercase">Taxes payable</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="hkit_TaxesPayableTextBlock-c0_cont_2" id="hkit_TaxesPayableTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2022 and 2021 taxes payable consisted of the following.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="hkit_TaxesPayableTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:ScheduleOfTaxesPayableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: normal 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 11 &#8211; RELATED PARTY TRANSACTIONS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following are related party balances as of December 31, 2022 and
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfRelatedPartyTransactionsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Accounts receivable</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left; padding-bottom: 1.5pt"><span style="font-size: 10pt">Beijing Zhongzhe Yuantong Technology Co., Ltd.<sup>(1)</sup></span></td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Non-current accounts receivable-related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt"><span style="font-size: 10pt">Beijing Zhongzhe Yuantong Technology Co., Ltd.<sup>(1)</sup></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-75">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3"><ix:continuation continuedAt="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_2" id="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following are related party transactions for the years ended December
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5"><ix:continuation continuedAt="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_3" id="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Revenue</td><td>&#160;</td>
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left; padding-bottom: 1.5pt"><span style="font-size: 10pt">Beijing Zhongzhe Yuantong Technology Co., Ltd.<sup>(1)</sup></span></td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_7" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6"><ix:continuation continuedAt="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_4" id="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><ix:footnote id="ix_3_footnote" xml:lang="en-US"><span style="font-size: 10pt">Beijing Zhongzhe Yuantong Technology
Co., Ltd. (&#8220;Beijing Zhongzhe&#8221;) 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 $<span style="-sec-ix-hidden: hidden-fact-83">nil</span> for fiscal year ended December 31,2022
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_7"><ix:continuation id="_ScheduleOfRelatedPartyTransactionsTableTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: justify"><ix:footnote id="ix_4_footnote" xml:lang="en-US"><span style="font-size: 10pt">Mr. Yin is the director and a
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</tr></table></ix:continuation></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160; &#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeOperatingLeasesTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 12 &#8211; Leases</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_2" id="_LesseeOperatingLeasesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of supplemental information related to operating leases as
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</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_3" id="_LesseeOperatingLeasesTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:OperatingLeasesOfLesseeDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDue" scale="0" unitRef="usd">6,948</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Interest payable</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160; &#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="hkit_BorrowingsTextBlock-c0_cont_1" escape="true" name="hkit:BorrowingsTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><b>NOTE 14 &#8211; BORROWINGS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="hkit_BorrowingsTextBlock-c0_cont_2" id="hkit_BorrowingsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At December 31, 2022 and 2021, borrowings consisted of the following.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="hkit_BorrowingsTextBlock-c0_cont_3" id="hkit_BorrowingsTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:ScheduleOfBorrowingsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="hkit_BorrowingsTextBlock-c0_cont_4" id="hkit_BorrowingsTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 21, March 28 and June 14, 2022, the
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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 <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="hkit:LoanRate" scale="-2" unitRef="pure">12</ix:nonFraction>%, respectively. RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherBorrowings" scale="0" unitRef="cny">1,500,000</ix:nonFraction> ($<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherBorrowings" scale="0" unitRef="usd">217,205</ix:nonFraction>) of the principal was repaid as of December
31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="hkit_BorrowingsTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The interest expense for the years ended December
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="hkit_StatutoryReserveTextBlock-c0_cont_1" escape="true" name="hkit:StatutoryReserveTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 15 &#8211;&#160;STATUTORY RESERVE</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="hkit_StatutoryReserveTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c0" name="hkit:StatutoryReserveDescription">Pursuant to the laws applicable to the PRC, PRC
entities must make appropriations from after-tax profit to the non-distributable &#8220;statutory surplus reserve fund&#8221;. Subject
to certain cumulative limits, the &#8220;statutory surplus reserve fund&#8221; 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
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and $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="hkit:StatutoryReserve" scale="0" unitRef="usd">767,207</ix:nonFraction>, respectively.&#160;</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 16 &#8211;&#160;ORDINARY SHARES</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is authorized to issue <ix:nonFraction contextRef="c130" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ExcessStockSharesAuthorized" scale="0" unitRef="shares">500,000,000</ix:nonFraction>
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</div><div>

</div><ix:continuation id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 15, 2021, the Company approved and adopted
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 17 &#8211; INCOME TAXES</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_2" id="_IncomeTaxDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The entities within the Company file separate
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_3" id="_IncomeTaxDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cayman Islands</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_4" id="_IncomeTaxDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is a tax-exempt entity incorporated
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_5" id="_IncomeTaxDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Hong Kong</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_6" id="_IncomeTaxDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_7" id="_IncomeTaxDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>PRC</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_8" id="_IncomeTaxDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s PRC operating subsidiary and
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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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_10" id="_IncomeTaxDisclosureTextBlock-c0_cont_9"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_11" id="_IncomeTaxDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Income tax expense was comprised of the followings for the years ended
December 31.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_12" id="_IncomeTaxDisclosureTextBlock-c0_cont_11"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c133" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CurrentIncomeTaxExpenseBenefit" scale="0" unitRef="usd">276,190</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_13" id="_IncomeTaxDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="hkit:CumulativeTaxEffectPercentage" scale="-2" unitRef="pure">25</ix:nonFraction>% of significant items comprising the net deferred tax amount
is at December 31, 2022 and 2021 as follows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_14" id="_IncomeTaxDisclosureTextBlock-c0_cont_13"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwards" scale="0" unitRef="usd">5,313</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsDeferredIncome" scale="0" unitRef="usd">205,605</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsDeferredIncome" scale="0" unitRef="usd">147,876</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:DeferredTaxAssetsUnbilledCost" scale="0" unitRef="usd">355,461</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:UnbilledInterestExpenses" scale="0" unitRef="usd">34,592</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsGoodwillAndIntangibleAssets" scale="0" unitRef="usd">267,039</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsGoodwillAndIntangibleAssets" scale="0" unitRef="usd">290,149</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:DeferredTaxAssetsAllowanceForDoubtfulAccounts" scale="0" unitRef="usd">8,308</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="hkit:DeferredTaxAssetsAllowanceForDoubtfulAccounts" scale="0" unitRef="usd">15,270</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsInventory" scale="0" unitRef="usd">7,043</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsInventory" scale="0" unitRef="usd">1,759</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accrued Bonus</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:DeferredTaxAssetsAccruedBonus" scale="0" unitRef="usd">62,441</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="hkit:DeferredTaxAssetsAccruedBonus" scale="0" unitRef="usd">40,377</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Deferred tax liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:DeferredTaxLiabilitiesUnbilledRevenue" scale="0" sign="-" unitRef="usd">2,149,169</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Unbilled interest income</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkit:UnbilledInterestIncome" scale="0" sign="-" unitRef="usd">69,149</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-94">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_15" id="_IncomeTaxDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Following is a reconciliation of income tax expense at the effective
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_16" id="_IncomeTaxDisclosureTextBlock-c0_cont_15"><ix:nonNumeric contextRef="c0" escape="true" name="hkit:ScheduleOfAReconciliationOfIncomeTaxExpenseTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">For others</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Tax holiday effect</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_17" id="_IncomeTaxDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Uncertain Tax Positions</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company did not have any significant unrecognized
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the years ended December 31, 2022 and 2021.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerShareTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerShareTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 18 &#8211; EARNINGS PER SHARE</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_2" id="_EarningsPerShareTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the computation of basic and diluted
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</div><div>

</div><ix:continuation id="_EarningsPerShareTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold">Denominator:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_4" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfRevenueByMajorCustomersByReportingSegmentsTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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</div><div>

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</div><div>

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</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

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</div><div>

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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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Underwriter Agreement</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 18pt">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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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
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_10" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_9"><ix:continuation id="_LesseeOperatingLeaseDescription-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 117; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12pt; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_12" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Risks in relation to the VIE structure</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_13" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">It is possible that the Company&#8217;s operation
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prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. While the Company&#8217;s management
considers the possibility of such a finding by PRC regulatory authorities under current law and regulations to be remote, on January&#160;19,
2015, the Ministry of Commerce of the PRC, or (the&#160;&#8220;MOFCOM&#8221;) released on its Website for public comment a proposed PRC
law (the&#160;&#8220;Draft FIE Law&#8221;) that appears to include VIE within the scope of entities that could be considered to be foreign
invested enterprises (or&#160;&#8220;FIEs&#8221;) 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 &#8220;actual control&#8221; 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 &#8220;actual control.&#8221; If the Draft FIE Law is passed
by the People&#8217;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&#8217;s VIE arrangements, and as a result the Company&#8217;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&#8217;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&#8217;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&#8217;s business operations, and have a severe adverse impact on the Company&#8217;s cash flows, financial position
and operating performance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_14" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, it is possible that the contracts
among WFOE, HiTek and HiTek&#8217;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&#8217; results of operations, assets and liabilities would not be included in the Company&#8217;s consolidated
financial statements. If such were the case, the Company&#8217;s cash flows, financial position, and operating performance would be materially
adversely affected. The Company&#8217;s contractual arrangements WFOE, HiTek and HiTek&#8217;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&#8217;s operations and contractual relationships would find the contracts to be unenforceable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_15" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;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&#8217;s operations and businesses
may be adversely impacted if the Company loses the ability to use and enjoy assets held by its&#160;VIE.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_16" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; background-color: white">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.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_18" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_17"><ix:nonNumeric contextRef="c0" escape="true" name="srt:ScheduleOfCondensedFinancialStatementsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

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  <tr style="vertical-align: bottom; background-color: White">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_SubsequentEventsTextBlock-c0_cont_1" escape="true" name="us-gaap:SubsequentEventsTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 21 &#8211; SUBSEQUENT EVENTS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_3" id="_SubsequentEventsTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In April 2023, the Company completed initial public offering in which
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</div><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_4" id="_SubsequentEventsTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth the pro forma condensed
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_5" id="_SubsequentEventsTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfCondensedBalanceSheetTableTextBlock-c0_cont_1" escape="true" name="srt:ScheduleOfCondensedBalanceSheetTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Operating lease liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: 10pt; padding-left: 9.2pt">Loan payable, non-current</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: 10pt; padding-left: 9.2pt">Operating lease liabilities, non-current</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c274" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd">3,399</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c275" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd">3,399</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Total Liabilities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Commitments and Contingencies</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-158">&#160;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-159">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Shareholders&#8217; Equity</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Additional paid-in capital ()</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><div><a id="a_033"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 19. EXHIBITS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>EXHIBIT INDEX</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 6%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Exhibit&#160;No.</b></span></td>
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    <td>&#160;</td>
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</span></td>
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    <td>&#160;</td>
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</span></td>
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    <td style="text-align: center">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SIGNATURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The registrant hereby certifies that it meets
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
☐
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31
,
2022
OR
☐
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to
_________.
OR
☐
SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report:
Commission file number:
001-39339
HITEK GLOBAL INC.
(Exact name of Registrant as Specified in its Charter)
N/A
(Translation of Registrant's Name into
English)
Cayman Islands
(Jurisdiction of Incorporation or Organization)
Unit 304
,
No. 30 Guanri Road
,
Siming District
,
Xiamen City, Fujian Province
, People's
Republic of
China
+86 592-5395967
(Address of Principal Executive Offices)
Xiaoyang Huang
, Chief Executive Officer
+86 592
-
5395967
Unit 304
,
No. 30 Guanri Road
,
Siming District
,
Xiamen City, Fujian Province
, People's
Republic of
China
(Name, Telephone, E-mail and/or Facsimile Number
and Address of Company Contact Person)
Securities registered or to be registered pursuant
to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange On Which Registered
Ordinary shares, par value US$0.0001 per share
HKIT
NASDAQ
Capital Market
Securities registered or to be registered pursuant
to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:
None
(Title of Class)
The number of outstanding shares of each of the
issuer's classes of capital or common stock as of December 31, 2022 was:
10,987,679
ordinary shares, par value $0.0001 per share.
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐
No
☒
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
Yes
☐
No
☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
☒
No
☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Emerging growth company
☒
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
☐
If the securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
☒
U.S. GAAP
☐
International Financial Reporting Standards as issued by the
International Accounting Standards Board
☐
Other
If "Other" has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17
☐
Item
18
☐
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
No
☒
TABLE OF CONTENTS
Page
Number
INTRODUCTORY NOTES
ii
FORWARD-LOOKING STATEMENTS
iii
PART I
1
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3.
KEY INFORMATION
1
ITEM 4.
INFORMATION ON THE COMPANY
35
ITEM 4A.
UNRESOLVED STAFF COMMENTS
44
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
44
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
61
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
67
ITEM 8.
FINANCIAL INFORMATION
68
ITEM 9.
THE OFFER AND LISTING
68
ITEM 10.
ADDITIONAL INFORMATION
68
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
81
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
81
PART II
82
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
82
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
82
ITEM 15.
CONTROLS AND PROCEDURES
82
ITEM 16.
[RESERVED]
83
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
83
ITEM 16B.
CODE OF ETHICS
83
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
83
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
84
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
84
ITEM 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANTS
84
ITEM 16G.
CORPORATE GOVERNANCE
84
ITEM 16H.
MINE SAFETY DISCLOSURE
84
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
84
PART III
85
ITEM 17.
FINANCIAL STATEMENTS
85
ITEM 18.
FINANCIAL STATEMENTS
85
ITEM 19.
EXHIBITS
86
i
INTRODUCTORY NOTES
Except as otherwise indicated by the context and
for the purposes of this report only, references in this report to:
●
"affiliated entities"
are to our subsidiaries and variable interest entities ("VIE");
●
"China" or the
"PRC" are to the People's Republic of China, excluding Taiwan and the special administrative regions of Hong Kong and
Macau for the purposes of this annual report only;
●
"Haitian Weilai"
are to Xiamen Haitian Weilai Technology Co., Ltd., a limited liability company organized under the laws of the PRC that is fully owned
by Tian Dahai;
●
"HiTek HK" are
to the Company's wholly owned subsidiary, HiTek Hong Kong Ltd., a Hong Kong corporation;
●
"HiTek", or "VIE
entity", are to Xiamen Hengda HiTek Computer Network Co., Ltd., a limited liability company organized under the laws of the PRC,
that we control via a series of contractual arrangements between WFOE and HiTek;
●
"Huasheng" are
to Xiamen Huasheng HiTek Computer Network Co., Ltd., a limited liability company organized under the laws of the PRC that function as
HiTek's operating subsidiary;
●
"Huoerguosi" are
to Huoerguosi Hengda Information Technology Co., Ltd., a limited liability company organized under the laws of the PRC that function
as HiTek's operating subsidiary;
●
"Ordinary Shares"
are to the Ordinary Shares of Hitek Global Inc., par value $0.0001 per share.
●
"we", "us"
or the "Company" are to Hitek Global Inc.;
●
"WFOE" are to Tian
Dahai (Xiamen) Information Technology Co. Ltd. ("Tian Dahai"), a limited liability company organized under the laws of the
People's Republic of China (the "PRC"), which is wholly-owned by us through HiTek HK; and
Our business is conducted via HiTek, a VIE entity
in the PRC, using RMB, the currency of China. Our consolidated financial statements are presented in United States dollars. In this annual
report, we refer to assets, obligations, commitments and liabilities in our consolidated financial statements in United States dollars.
These dollar references are based on the exchange rate of RMB to United States dollars, determined as of a specific date or for a specific
period. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of United States dollars
which may result in an increase or decrease in the amount of our obligations (expressed in dollars) and the value of our assets.
ii
FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F contains
forward-looking statements that reflect our current expectations and views of future events. These statements are made under the "safe
harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements
by terminology such as "may," "will," "expect," "anticipate," "aim," "estimate,"
"intend," "plan," "believe," "is/are likely to," "potential," "continue"
or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about
future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial
needs. These forward-looking statements include, but are not limited to:
●
the adverse effects of the COVID-19 pandemic on our business or the market price of our ordinary shares;
●
our goals and strategies;
●
our future business development, financial condition and results of operations;
●
our expectations regarding the market for our concrete products;
●
our expectations regarding demand for and market acceptance of our nutraceutical and dietary supplements products;
●
our plans to establish partnerships and develop new businesses;
●
our plans to invest in our business;
●
our relationships with our partners;
●
our future business development, results of operations and financial condition;
●
market conditions affecting our equity capital;
●
change in macroeconomic conditions;
●
competition in our industry; and
●
relevant government policies and regulations relating to our industry.
We would like to caution you not to place undue
reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in "Item
3. Key Information—D. Key Information—Risk Factors." Those risks are not exhaustive. We operate in an evolving environment.
New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of
all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those
contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except
as required under applicable law. You should read this annual report and the documents that we reference in this annual report completely
and with the understanding that our actual future results may be materially different from what we expect.
iii
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Our Corporate Structure
We are an offshore holding company incorporated
in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by (i) Haitian Weilai,
our indirect subsidiary, (ii) the VIE, Hitek and the VIE's subsidiaries, Huasheng and Huoerguosi. Neither we nor our subsidiaries
own any equity interests in the VIE. WFOE, the VIE and the shareholders of the VIE entered into a series of contractual arrangements,
also known as the "VIE Agreements", pursuant to which we are able to consolidate the financial results of the VIE in our consolidated
financial statements because we are deemed as the primary beneficial of the VIE under generally accepted accounting principles in the
U.S. ("U.S. GAAP"), and this structure involves unique risks to investors.
The following diagram illustrates our corporate
structure as of the date of this annual report:
1
The VIE Agreements
The VIE Agreements by and among Tian Dahai (Xiamen)
Information Technology Co. Ltd. (the "WFOE"), HiTek, and HiTek's shareholders include (i) certain power of attorney
agreements and equity interest pledge agreement, pursuant to which shareholders of HiTek pledged all of their equity interests in HiTek
to WFOE guarantee the performance of HiTek's obligations under the exclusive technical consulting and service agreement; (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. Through the VIE Agreements among WFOE, HiTek
and HiTek's shareholders, we are deemed to have a controlling financial interest in, and be the primary beneficiary of, the VIE
for accounting purposes only and must consolidate the VIE because it met the conditions under U.S. GAAP to consolidate the VIE.
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 extended for another ten years at WFOE's election.
Power of Attorney
Pursuant to the Power of Attorney, each HiTek
Shareholder authorizes WFOE to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders, including
but not limited to: (a) the attendance of the shareholder's meeting and the execution of relative shareholder resolution(s) of HiTek;
(b) exercising all the shareholder's rights, including voting, that shareholders are entitled to under the laws of China and the
articles of association, including but not limited to the sale or transfer or pledge or disposition of shares in part or in whole; and
(c) designating and appointing on behalf of shareholders the legal representative, the executive director, supervisor, the chief executive
officer and other senior management members of HiTek.
Although it is not explicitly stipulated in the
Powers of Attorney, the term of the Powers of Attorney shall be the same as the term of that of the Exclusive Equity Interests Purchase
Agreement.
The Powers of Attorney are coupled with an interest
and shall be irrevocable and continuously valid from the date of their execution, so long as the relevant HiTek Shareholder is a shareholder
of Company.
2
Risks Associated with Our Corporate Structure
and the VIE Agreements
However, the VIE structure cannot completely replicate
a foreign investment in China-based companies, as the shareholders will not and may never hold equity interests in the Chinese operating
entities. Instead, the VIE structure provides contractual exposure to foreign investment in us. Because we do not hold equity interests
in the VIE, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including
but not limited to limitation on foreign ownership of internet technology companies, regulatory review of oversea listing of PRC companies
through a special purpose vehicle, and the validity and enforcement of the VIE Agreements as they have not been tested in a court of law.
The VIE Agreements may not be effective in providing control over HiTek. See "Risk Factors — Risks Relating to Our
Corporate Structure" starting on page 14 of this annual report, "Risk Factors — Risks Relating to Doing Business
in the PRC" starting on page 19 of this annual report for more information.
We are subject to the risks of uncertainty about
any future actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material
change in our operations and the value of Ordinary Shares may depreciate significantly or become worthless. We are also subject to certain
legal and operational risks associated with the VIE's operations in China. PRC laws and regulations governing our current business
operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in the VIE's operations,
significant depreciation of the value of our Ordinary Shares, or a complete hindrance of our ability to continue to offer our securities
to investors. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in
China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based
companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews,
and expanding the efforts in anti-monopoly enforcement.
Pursuant to the PRC Cybersecurity Law, which was
promulgated by the Standing Committee of the National People's Congress on November 7, 2016 and took effect on June 1, 2017, personal
information and important data collected and generated by a critical information infrastructure operator in the course of its operations
in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that
affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China ("CAC").
Due to the lack of further interpretations, the exact scope of "critical information infrastructure operator" remains unclear.
On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures (the
"CAC Revised Measures") to replace the original Cybersecurity Review Measures. The CAC Revised Measures took effect on February
15, 2022. Pursuant to the CAC Revised Measures, if critical information infrastructure operators purchase network products and services,
or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to
cybersecurity review. On November 14, 2021, CAC published the Administration Measures for Cyber Data Security (Draft for Public Comments),
or the "Cyber Data Security Measure (Draft)", which requires cyberspace operators with personal information of more than 1
million users who want to list abroad to file a cybersecurity review with the Office of Cybersecurity Review. The cybersecurity review
will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal
information being influenced, controlled or maliciously used by foreign governments and risk of network data security after going public
overseas. As confirmed by our PRC counsel, Jingtian & Gongcheng, we are not subject to cybersecurity review with the CAC in accordance
with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over one million users
and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have
not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure
operator. However, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative
regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will
be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business
operation, the ability to accept foreign investments and list on an U.S. exchange.
3
On February 17, 2023, the CSRC promulgated the
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting
guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities
overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures
within three working days following its submission of initial public offerings or listing application. If a PRC company fails to complete
required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may
be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers,
the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and
fines. In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State
Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives
Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection
and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions
on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came
into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its
application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require
that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity,
publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas
regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval
from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic
company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals
and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that,
if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable
national regulations. As of the date of this annual report, as advised by Jingtian & Gongcheng, our PRC counsel, as our
post-effective amendment to the registration statement on Form F-1 relating to our initial public offering was declared effective on March
30, 2023 and we have completed our initial public offering and listing prior to September 30, 2023, we are not required to complete the
filing procedures pursuant to the Trial Measures for our initial public offering. If in the future we are going to conduct any offering
or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures. In addition,
we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect our listing on the Nasdaq
Capital Market. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory
requirements related to overseas securities offerings and other capital markets activities. Any failure or perceived failure of us to
fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to offer securities
to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and
adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline
or be worthless.
Furthermore, as an auditor of companies that are
registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, our auditor, Wei, Wei & Co.
LLP, is headquartered in the United States and is required under the laws of the United States to undergo regular inspections by the U.S.
Public Company Accounting Oversight Board ("PCAOB") to assess their compliance with the laws of the United States and professional
standards. Although we operate through HiTek in mainland China, a jurisdiction where the PCAOB is currently unable to conduct inspections
without the approval of the Chinese government authorities, our auditor is currently inspected fully by the PCAOB. Inspections of other
auditors conducted by the PCAOB outside mainland China have at times identified deficiencies in those auditors' audit procedures
and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.
Even though our auditor is based in United
States and under full inspection by the PCAOB and is not currently subject to the determinations announced by the PCAOB on December
16, 2021, if  any PRC law relating to the access of the PCAOB to auditor files were to apply to a company such as HiTek or its
auditor, the PCAOB may be unable to fully inspect our auditor, which may result in our securities being delisted or prohibited from
being traded "over-the-counter" pursuant to the Holding Foreign Companies Accountable Act (the "HFCA Act")
and materially and adversely affect the value and/or liquidity of your investment. On August 26, 2022, the China Securities
Regulatory Commission, the Ministry of Finance of the PRC (the "MOF"), and the PCAOB signed a Statement of Protocol (the
"Protocol"), governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the
first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in
mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the U.S. Securities and Exchange
Commission (the "SEC"), the PCAOB shall have independent discretion to select any issuer audits for inspection or
investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined
that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in
mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities
obstruct or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need to issue a
new determination.  See "Risk Factors—Risks Related to Doing Business in the PRC" starting on page 19 of this
annual report for a detailed description of risks related to the PRC. On December 29, 2022, a legislation entitled
"Consolidated Appropriations Act, 2023" (the "Consolidated Appropriations Act"), was signed into law by
President Biden, which amended the HFCA Act by reducing the number of consecutive non-inspection years required for triggering the
prohibitions under the HFCA Act from three years to two. There are risks and uncertainties which we cannot foresee for the time
being, and rules and regulations in the PRC can change quickly with little or no advance notice. The PRC government may intervene or
influence HiTek's future operations in the PRC at any time, or may exert more control over offerings conducted overseas and/or
foreign investment in companies like us. The PRC government may intervene or influence HiTek's future operations in the PRC at
any time, or may exert more control over offerings conducted overseas and/or foreign investment in companies like us. In the event
it is later determined that the PCAOB is unable to inspect or investigate completely our auditor, then such lack of inspection could
cause trading in our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities
exchange to delist our securities.
4
Our management monitors the cash position of each
entity within our organization regularly and prepare budgets on a monthly basis to ensure each entity has the necessary funds to fulfill
its obligation for the foreseeable future and to ensure adequate liquidity. As a holding company, we may rely on dividends and other distributions
on equity paid by our subsidiary in Hong Kong, Hitek HK, and the consolidated VIE in mainland China, HiTek, for our cash and financing
requirements. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available
for distribution. In order for us to pay dividends to our shareholders, we will rely on payments made from HiTek to WFOE, pursuant to
VIE Agreements between them, and the distribution of such payments to HiTek HK as dividends from WFOE. Certain payments from our HiTek
to WFOE are subject to PRC taxes, including business taxes and VAT. We intend to keep any future earnings to re-invest in and finance
the expansion of our business, and we do not anticipate that any cash dividends will be paid or any assets will be transferred in the
foreseeable future. As of the date of this annual report, there has been no distribution of dividends or assets among the holding company,
the subsidiary or the consolidated VIE.  In the future, cash proceeds raised from overseas financing activities may be transferred
by us to the consolidated VIE via capital contribution or shareholder loans, as the case may be. Other than the above, we did not adopt
or maintain any cash management policies and procedures as of the date of this annual report.
Dividend Distributions or Assets Transfer among
the Holding Company, its Subsidiaries and the VIE
We intend to keep any future earnings to re-invest
in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid or any assets will be transferred
in the foreseeable future. As of the date of this annual report, there has been no distribution of dividends or assets among the holding
company, the subsidiary or the consolidated VIE.  Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares
out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company
being unable to pay its debts due in the ordinary course of business. If we determine to pay dividends on any of our Ordinary Shares in
the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, HiTek HK.
Current PRC regulations permit our indirect PRC
subsidiaries to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits
each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China
is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be
set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other
ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve
funds are not distributable as cash dividends except in the event of liquidation.
The PRC government also imposes controls on the
conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in
completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits,
if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict
their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations
through the current VIE Agreements, we may be unable to pay dividends on our Ordinary Shares.
5
Cash dividends, if any, on our Ordinary Shares
will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas
shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.
In order for us to pay dividends to our shareholders,
we will rely on payments made from HiTek to WFOE, pursuant to VIE Agreements between them, and the distribution of such payments to HiTek
HK as dividends from WFOE. Certain payments from our HiTek to WFOE are subject to PRC taxes, including business taxes and VAT.
Pursuant to the Arrangement between Mainland China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance
Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project.
However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation
that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold
no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current
practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding
tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that
we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding
tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiary to its immediate holding
company, HiTek HK. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong
tax authority. HiTek HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to HiTek HK. See
"Risk Factors - There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary,
and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits."
Permission or Approval Required from the PRC Authorities for The
VIE's Operation
To operate the general business activities currently
conducted in China, the consolidated VIE is required to obtain a business license from the State Administration for Market Regulation
("SAMR"). HiTek has obtained a valid business license from the SAMR, and no application for any such license has been denied.
We are aware, however, recently, the PRC government
initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including
cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable
interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly
enforcement.
On July 6, 2021, the General Office of the Central
Committee of the Communist Party of China and the General Office of the State Council jointly issued the "Opinions on Severely Cracking
Down on Illegal Securities Activities According to Law," or the Opinions. The Opinions emphasized the need to strengthen the administration
over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective
measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept
overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related
implementing rules to be enacted may subject us to compliance requirement in the future. Given the current regulatory environment in the
PRC, we are still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse
to us, which may take place quickly with little advance notice.
6
On December 28, 2021, the CAC published the CAC
Revised Measures, which further restates and expands the applicable scope of the cybersecurity review. The CAC Revised Measures took effect
on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding personal information of over one million
users seeks for "foreign" listing, it must apply for the cybersecurity review. In addition, operators of critical information
infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities.
Although the CAC Revised Measures provides no further explanation on the extent of "network platform operator" and "foreign"
listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that
(i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that
we will reach such threshold in the near future; (ii) as of the date of this this annual report, we have not received any notice or determination
from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
That being said, the CAC Revised Measures empowers
the cybersecurity review office to initiate cybersecurity review when they believe any particular data processing activities "affect
or may affect national security". In addition, on November 14, 2021, the CAC promulgated the Regulations on the Administration of
Cyber Data Security (Draft for Comments) (the "Draft CAC Regulations"), and according to the Draft CAC Regulations, any data
processors shall, in accordance with relevant state provisions, apply for a cybersecurity review when carrying out, among other things,
"other data processing activities that affect or may affect national security". However, neither the CAC Revised Measures
nor the Draft CAC Regulations provides for any further explanation or interpretation over what constitutes activities that "affect
or may affect national security". Therefore, if any competent government authorities deem that HiTek's data processing activities
may affect national security, we may be subject cybersecurity review, and in that scenario, failure to pass such cybersecurity review
and/or to comply with the data privacy and data security requirements raised during such cybersecurity review could subject HiTek to penalties,
damage its reputation and brand, and harm its business and results of operations. See risk factor titled "in light of recent events
indicating greater oversight by the CAC over data security, particularly for companies seeking to list on a foreign exchange, we are subject
to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws
and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition, results of operations,
and the offering" starting on page 26 of this annual report for more information.
In summary, we, our subsidiaries, or the VIE are
not required to obtain permission or approval from the PRC authorities including CSRC or CAC for the VIE's operation, nor have we,
our subsidiaries, or VIE received any denial for the VIE's operation. We are subject to the risks of uncertainty of any future actions
of the PRC government in this regard including the risk that we inadvertently conclude that the permission or approvals discussed here
are not required, that applicable laws, regulations or interpretations change such that we or HiTek is required to obtain approvals in
the future, or that the PRC government could disallow our holding company structure, which would likely result in a material change in
our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign
investments, and continue to offer securities to our investors. These adverse actions could cause the value of our Ordinary Shares to
significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including
the CSRC, if we fail to comply with such rules and regulations, which would likely adversely affect the ability of our securities to be
listed on the U.S. exchange, which would likely cause the value of our securities to significantly decline or become worthless.
A. [RESERVED]
B. Capitalization and indebtedness.
Not applicable.
C. Reasons for the offer and use of proceeds.
Not applicable.
7
D. Risk factors.
An investment in our ordinary shares involves
a high degree of risk. You should carefully consider the risks and uncertainties described below together with all other information contained
in this annual report, including the matters discussed under the headings "Forward-Looking Statements" and "Operating
and Financial Review and Prospects" before you decide to invest in our ordinary shares. We are a holding company with substantial
operations in China and are subject to a legal and regulatory environment that in many respects differs from the United States. If any
of the following risks, or any other risks and uncertainties that are not presently foreseeable to us, actually occur, our business, financial
condition, results of operations, liquidity and our future growth prospects could be materially and adversely affected.
Risks Related to Our Business Operations
We face risks related to health epidemics
such as the COVID-19, and other outbreaks, which could significantly disrupt our operations and adversely affect our business, financial
condition and results of operations.
Our business could be materially and adversely
affected by health epidemics such as the COVID-19 and other outbreaks affecting the PRC. Health epidemics may give rise to severe interruptions
to public transportation and usual business operations, which could severely disrupt our operations. Our business operations depend on
overall economy and demand for IT consulting and solutions service in Xiamen area, which could be disrupted by health epidemics. For example,
our office had to shut down from February 3, 2020 to February 23, 2020. Public transportation services in Xiamen city were curtailed over
COVID-19 concerns. For our Tax Devices and Services sector, we have to collect the service fee on-site from those customers who have not
used our online payment platform, which may lead to a delay in collection. The number of our new customers decreased in February 2020.
The COVID-19 outbreak may have the same impact on our IT services sector. As of the date this annual report, there is no clear sign of
slow-down in our hardware and software sales. In early December 2022, China announced a nationwide loosening of its zero-COVID policy,
and the country may face a wave in infections after the lifting of these restrictions. The impact of COVID-19 pandemic still depends on
the future developments of the pandemic, including new information concerning the global severity of and actions taken to contain the
pandemic, or the appearance of new or more severe strains of the virus, which are highly uncertain and unpredictable. Therefore, while
we do not expect the COVID-19 pandemic to negatively impacting our business, results of operations, and financial position, the related
financial impact cannot be reasonably estimated at this time.
Our future revenues and growth prospects
depend on the ACTCS pricing model mandated by the PRC government. If the PRC government continues to reduce the annual fee per user we
are allowed to charge, our operations and revenues may be negatively impacted.
We sell ACTCS tax devices and provide ACTCS supporting
services to our clients. The prices of GTD and annual service fees are regulated and subject to the State Tax Administration's pricing
mandates. In the past 20 years, the annual service fee has undergone three major adjustments -- from RMB 450 per year per user to RMB
370 per year per user, and then further reduced to RMB 330 per year per user. Most recently, the ACTCS annual service fee was again reduced
to RMB 280 per year per user, according to the "Notice of the National Development and Reform Commission on Relevant Issues Concerning
the Reduction of ACTCS Products and Maintenance Service Fee" (Development and Reform Commission Case [2017] No. 1243). According
to relevant notice, the small-scale taxpayers for which sales amount did not exceed RMB 100,000 for each month are exempt from ACTCS or
GTD technical service fee since 2019. Besides, the Company provides tax invoicing management services and charges service fee on an annual
basis. The tax invoicing management service period is usually one year for RMB299. Tax invoicing management services is to host customers'
tax devices, provide training service on using Nuonuo, complete tax declaration automatically and back up data online. Since we do not
control the pricing of the ACTCS services, we cannot guarantee our profit margin will be stable or we will make a profit on such services
at all. We cannot guarantee that the annual service fee will not be further reduced, and therefore our revenues to be derived from ACTCS
supporting services may be subject to significant fluctuation.
8
Our future revenues and growth prospects
depend on the growth of new business entities in the Xiamen metropolitan areas, which is not within our control and the growth rate may
decrease. As such, our operations and revenues may be negatively impacted.
The willingness of people to establish business
entities in the Xiamen metropolitan areas is beyond our control. There are multiple reasons people may find appealing to establish a particular
business in the Xiamen metropolitan areas, such as people's personal belief and volatility in the Chinese capital markets. To the
extent that people are unwilling to establish new businesses in the Xiamen metropolitan area either due to political or economic climate,
we will not be able to acquire new customers to our ACTCS services. Thus, our ability to generate revenue or operate profitably may be
negatively impacted.
Increased use of electronic invoice will
reduce the number of customers using our ACTCS services.
From 2018, the Chinese tax regulators have been
rolling out the electronic invoicing system. Currently, electronic invoices are mostly used by businesses in the Fast Moving Consumer
Goods ("FMCG") industry such as fast food restaurants and coffee shops. The electronic invoices enable FMCG enterprises to
apply for, issue, transfer and check the invoices through the unified online electronic invoice management system of Chinese tax authorities.
Electronic invoices are very useful in helping business entities reduce operating costs and streamline service process, since they do
not involve printing, storage and postage procedures. Businesses who use electronic invoices still need to purchase tax reporting devices
such as GTD. But they will not need maintenance services. Currently, approximately 1.5% of our SME clients are FMCG business entities.
According to relevant notice, small-scale taxpayers with sales amount not in excess of RMB 100,000 for each month are exempt from ACTCS
or GTD technical service fee since 2019. From January 2021, new taxpayers in Xiamen could receive free tax Ukeys from the Tax authorities.
The increased use of electronic invoices, the exemption of ACTCS technical service fee for small-scale taxpayers and free tax Ukeys for
new tax payers will reduce our annual service fee revenue and thus negatively affect our total revenue.
Future inflation in China may inhibit
our ability to conduct business in China.
During the past ten years, the Chinese economy
has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has
been as high as 3.3% and as low as 1.1%. These factors have led to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the
future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic
activity in China, and thereby harm the market for our products and our company.
The war in Ukraine could
materially and adversely affect our business and results of operations.
The recent outbreak of war in Ukraine has
already affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this
conflict could result in protracted and/or severe damage to the global economy. Russia's recent military interventions in Ukraine
have led to, and may lead to, additional sanctions being levied by the United States, European Union and other countries against Russia.
Russia's military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could
affect our customers' businesses and our business, even though we do not have any direct exposure to Russia or the adjoining geographic
regions. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could
be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described
herein. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly
developing and beyond their control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region
could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business,
financial condition, results of operations and prospects.
9
Increasing competition within our industry
could have an impact on our business prospects.
While the VAT reporting service industry in China
is a heavily regulated industry where new players must obtain approval by the relevant PRC government agencies before entering this industry,
it is still highly possible that new competitors will enter into the market and have significantly greater financial and other resources
than we have and may offer services that is more attractive and more advanced that we can provide for large business enterprises and SMEs.
Thus, we anticipate increasing competition, which may have a negative impact on both our revenues and our profit margins.
Our IT services and hardware and software
sales rely on evolving information technologies to maintain our competitiveness, and any failure to adapt to technological developments
or industry trends could harm our business.
We depend upon the use of sophisticated information
technologies and systems, including technologies and systems utilized for communications, procurement and administrative systems. As our
operations grow in both size and scope, we continuously need to improve and upgrade our systems and infrastructure to offer an increasing
number of clients enhanced products, services, features and functionality, while maintaining the reliability and integrity of our systems
and infrastructure. Our future success in IT services and hardware and software sales also depends on our ability to adapt to rapidly
changing technologies, particularly the increasing use of internet-based products and services, to change our services and infrastructure
so they address evolving industry standards and to improve the performance, features and reliability of our services in response to competitive
service and product offerings in the Chinese software markets and the evolving demands of the IT service markets. If there are technological
impediments to introducing new technological products or maintaining current technologies or other products and services, or if these
products and services do not meet the requirements of our clients' evolving needs, our business, financial condition or results
of operations may be adversely affected.
In addition, the emergence of competitors which
may be able to optimize products, services or strategies that use advanced computing such as cloud computing, as well as other technological
changes and developing technologies, such as machine learning and artificial intelligence, have, and will mandate us to make new and costly
investments. Transitioning to new technologies may be disruptive to resources and the services we provide, and may increase our reliance
on third party service providers. We may not be successful, or may be less successful than our current or new competitors, in developing
technology that operates effectively across multiple devices and platforms and that is appealing to our customers, either of which would
negatively affect our business and financial performance.
It is possible that, if we are not able to maintain
existing systems, obtain new technologies and systems, or replace or introduce new technologies and systems as quickly as our competitors
or in a cost-effective manner, our business and operations could be materially adversely affected. Also, we may not achieve the benefits
anticipated or required from any new technology or system, or be able to devote financial resources to new technologies and systems in
the future.
We are dependent upon software, equipment
and services provided by third parties.
We are dependent upon software, equipment and
services provided and/or managed by third parties in the operation of our business. In the event that the performance of such software,
equipment or services provided and/or managed by third parties deteriorates or our arrangements with any of these third parties related
to the provision and/or management of software, equipment or services are terminated, we may not be able to find alternative services,
equipment or software on a timely basis or on commercially reasonable terms, or at all, or be able to do so without significant cost or
disruptions to our business, and our relationships with our customers may be adversely impacted.
10
A significant portion of our revenue is
concentrated on a few large customers, and we do not have long-term service agreements with our key customers and rely upon our longstanding
relationship with them. If we lose one or more of our customers, our results of operations may be adversely and materially impacted.
For the year ended December 31, 2022, two customers
accounted for 49% of total HiTek's revenues, the largest of which represented 36%. For the year ended December 31, 2021, two customers
accounted for 42% of total HiTek's revenues, the largest of which represented 28%. Since we do not have long-term customer supply
agreements with such large customers and rely primarily upon our goodwill and reputation to sustain the business relationship, our results
of operations may be adversely and materially impacted if one or more of these customers stop purchasing from us.
Extended payment terms may cause deferred
payments or bad debts, which could negatively affect our business operations.
The Company gave a two-year credit period to large
customers such as large-scale oil and coal mining groups. Their collection period is usually longer than other medium or small-sized companies.
An extended credit period will have a potential risk of causing deferred payments or bad debts, which could negatively affect our business
operations.
We source our retail hardware primarily
from a limited number of suppliers. If we lose one or more of the suppliers, our operation may be disrupted, and our results of operations
may be adversely and materially impacted.
For the year ended December 31, 2022, four suppliers
accounted for 16%, 15%, 13% and 11% of the total purchases, respectively. For the year ended December 31, 2021, two suppliers accounted
for 11% and 10% of the total purchases, respectively. If we lose suppliers and are unable to swiftly engage new suppliers, our operations
may be disrupted or suspended, and we may not be able to deliver hardware products to our customers on time. We may also have to pay a
higher price to source from a different supplier on short notice. While we are actively searching for and negotiating with new suppliers,
there is no guarantee that we will be able to locate appropriate new suppliers or supplier merger targets in our desired timeline. As
such, our results of operations may be adversely and materially impacted.
We face the risk
that a third party borrower may not repay the loans we made to it. An event of default could have a material adverse effect on our cash
flow, results of operations and financial condition.
On January 21, 2022, March 28, 2022, and June
14, 2022, Hitek and HiTek, Beijing Baihengda Petroleum Technology Co., Ltd. ("Beijing Baihengda," together with HiTek, the
"Lenders") and Guangxi Beihengda Mining Co., Ltd. ("Guangxi Beihengda," or the "Borrower") entered
into three loan agreements with similar terms, pursuant to which the Lenders loaned an aggregate amount of RMB 40 million (approximately
US$5.98 million with an exchange rate of 0.1494 as of June 30, 2022) (collectively, the "Loans") to the Borrower at a monthly
interest rate of 1%. Each of HiTek and Baihengda funded RMB 20 million of the Loans (approximately US$2.99 million with an exchange rate
of 0.1494 as of June 30, 2022).  As of the date of this annual report, the aggregate outstanding principal amount of the Loans is
RMB37 million (approximately US $5.36 million with an exchange rate of 0.1447 as of December 31, 2022). All of the Loans have a two-year
term. The Borrower can pre-pay the outstanding loan amount after 12 months without penalty. Pursuant to a mining right pledge agreement
dated August 5, 2022 between HiTek, as representative of the Lenders, and the Borrower, the Loans are secured by the Borrower's
coal mining permit, 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.
In the event the Borrower is unable to make full
and timely payments of interest and principal on the Loans when due, our cash flow, results of operations and financial conditions may
be adversely affected. In addition, there is risk that the mining property may decrease in value during the term of the Loans. In the
event the underlying collateral value is less than the loan amount at the time of default, we will suffer a loss.
11
We may need additional capital to fund our
future operations and, if it is not available when needed, we may need to reduce our planned expansion and marketing efforts, which may
reduce our revenue.
We believe that our existing working capital and
cash available from operations will enable us to meet our working capital requirements for at least the next 12 months. However, if cash
from future operations is insufficient, or if cash is used for acquisitions or other currently unanticipated uses, we may need additional
capital. As a result, we could be required to raise additional capital. To the extent that we raise additional capital through the sale
of equity or convertible debt securities, the issuance of such securities could result in dilution of the shares held by existing shareholders.
If additional funds are raised through the issuance of debt or equity securities, such securities may provide the holders certain rights,
preferences, and privileges senior to those of shareholders holding Ordinary Shares, and the terms of any such debt securities could impose
restrictions on our operations. We cannot assure you that additional capital, if required, will be available on acceptable terms, or at
all. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned product
development and marketing efforts, which could harm our business, financial condition and operating results.
If we are unable to manage our anticipated
growth effectively, our business could be adversely affected.
To develop our business, we need to hire and retain
key managers and executives in all areas of our operations. Our future operating results depend to a large extent on our ability to develop
and manage expansion and growth successfully. For us to manage such growth, we must put in place legal and accounting systems, and implement
human resource management and other tools. We have taken preliminary steps to put this structure in place. However, there is no assurance
that we will be able to expand our business or successfully manage any growth that may result. Failure to expand our operations or manage
our growth effectively could materially and adversely affect our ability to market our services in multiple venues.
Because we rely upon a third party to perform
the payment processing for our clients, the failure or inability of the third party to provide these services could impair our ability
to operate.
Because we do not possess an internal payment
method, all payments by participants or customers are processed by third parties such as Alipay and WeChat Pay. The payment processing
business is highly regulated, and it is subject to a number of risks that could materially and adversely affect their abilities to provide
payment processing and escrow services to us, including:
●
increased regulatory focus and the requirement that it comply with numerous complex and evolving laws, rules and regulations;
●
increases in the costs to the third party, including fees charged by banks to process funds through the third parties, which could result in increased costs to us and to our participants;
●
dissatisfaction with the third parties' services;
●
a decline in the use of the third parties' services generally which could result in increases in costs to users such as us and our participants;
●
the ability of the third parties to maintain adequate security procedures to prevent the hacking or other unauthorized access to account and other information provided by us and the participants who use the system;
●
system failures or failure to effectively scale the system to handle large and growing transaction volumes;
●
the failure or inability of the third parties to manage funds accurately or the loss of funds by the third parties, whether due to employee fraud, security breaches, technical errors or otherwise; and
●
the failure or inability of these third parties to adequately manage business and regulatory risks.
12
We rely on the convenience and ease of use that
third party's payment methods provide to our users. If the quality, utility, convenience or attractiveness of these payment services
declines for any reason, the attractiveness of our services could be materially impaired. If we need to migrate to other third-party payment
services for any reason, the transition could require considerable time and management resources, and the third-party payment services
may not be as effective, efficient or well-received by our clients. Further, our clients may be reluctant to use a different payment system.
Our success depends substantially on the
continued retention of certain key personnel and our ability to hire and retain qualified personnel in the future to support our growth
and execute our business strategy.
If one or more of our senior executives or other
key personnel are unable or unwilling to continue in their present positions, our business may be disrupted and our financial condition
and results of operations may be materially and adversely affected. While we depend on the abilities and participation of our current
management team generally, we rely particularly upon Mr. Shenping Yin, Chairman of the Board and Ms. Xiaoyang Huang, our Chief Executive
Officer who is responsible for the development and implementation of our business plan. The loss of the services of Mr. Yin for any reason
could significantly adversely impact our business and results of operations. Competition for senior management and senior technology personnel
in the PRC is intense and the pool of qualified candidates is very limited. We cannot assure you that the services of our senior executives
and other key personnel will continue to be available to us, or that we will be able to find a suitable replacement for them if they were
to leave.
We may not be able to adequately protect
our intellectual property rights, and our competitors may be able to offer similar products and services, which would harm our competitive
position.
Our success depends in part upon our intellectual
property rights. We rely primarily on copyright, trade secret laws, confidentiality procedures, license agreements and contractual provisions
to establish and protect our proprietary rights over our products, procedures and services. Other persons could copy or otherwise obtain
and use our technology without authorization, or develop similar IP independently. We may also pursue the registration of our domain names,
trademarks, and service marks in other jurisdictions, including the United States. However, the intellectual property laws in China are
not considered as strong as comparable laws in the United States or the European Union. We cannot assure you that we will be able to protect
our proprietary rights. Further, our competitors may be able to independently develop similar or more advanced technology, duplicate our
products and services or design around any intellectual property rights we hold. Further, our intellectual property rights may be subject
to termination or expirations. The loss of intellectual property protections or the inability to timely regain intellectual property protections
could harm our business and ability to compete.
We have engaged in transactions with related
parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of
operations.
We entered into a number of transactions with
related parties, including our significant shareholder and director. For example, we entered into several transactions with Beijing Zhongzhe
Yuantong Technology Co., Ltd. which is under common control with one minority shareholder of HiTek or business entities affiliated with
or owned by Chairman, Shenping Yin, where we have sales revenues or have advances from these entities. See "Related Party Transactions".
We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties
hold ownership interests.
13
Transactions with related parties present potential
for conflicts of interest, as the interests of related party may not align with the interests of our shareholders. Although we believe
these transactions were in our best interests, we cannot assure you that these transactions were entered into on terms as favorable to
us as those that could have been obtained in an arms-length transaction. We may also engage in transactions with related parties in the
future. Conflicts of interests arise when we transact business with related parties. These transactions, individually or in the aggregate,
may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.
Risks Relating to Our Corporate Structure
We do not have direct ownership of our operating
entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its subsidiaries through VIE
Agreements, which may not be effective in providing control over HiTek.
We do not have direct ownership of our operating
entities in China, but have control rights and the rights to the assets, property, and revenue of HiTek and its subsidiaries through VIE
Agreements. All of our current revenue and net income is derived from HiTek, the VIE in China. Foreign ownership of internet technology
businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations. For example,
foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except
e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain
a good track record in accordance with the Special Administrative Measures for Entrance of Foreign Investment (Negative List) (2020 Version)
promulgated on June 23, 2020 and effective on July 23, 2020, respectively, and other applicable laws and regulations.
To comply with PRC laws and regulations, we do
not intend to have an equity ownership interest in HiTek but rely on VIE Agreements with HiTek to control and operate its business. However,
as discussed above, these VIE Agreements may not be effective under PRC laws in providing us with the necessary control over HiTek and
its operations. Any deficiency in these VIE Agreements may result in our loss of control over the management and operations of HiTek,
which will result in a significant loss in the value of an investment in our company. Because of the practical restrictions on direct
foreign equity ownership imposed by the Fujian provincial government authorities, we must rely on contractual rights through the VIE structure
to effect control over and management of HiTek, which exposes us to the risk of potential breach of contract by the shareholders of HiTek.
In addition, as our Chairman of the Board Mr. Yin and his wife Ms. Xiaoyang Huang, our Chief Executive Officer, holds 29.82% and 44.74%
of HiTek's outstanding equity, it may be difficult for us to change our corporate structure if such shareholders refuse to cooperate
with us.
Because we are an offshore holding company
and our business was conducted through VIE Agreements with HiTek, the VIE in China, if we fail to comply with applicable PRC law, we could
be subject to severe penalties and our business could be adversely affected.
We are an offshore holding company incorporated
in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by our subsidiaries and
through VIE Agreements with HiTek, the VIE in China, the equity of which is owned by Xiaoyang Huang, Shenping Yin, Bo Shi, Zhishuang Wang,
Liuqing Huang, Jingru Li, Mian Tang, Ce Tian, Xianfeng Lin, Inner Mongolia Guangxin Investment Co., Ltd. and Baotou Zhongzhe Hengtong
Technology Co., Ltd. through VIE Agreements, as a result of which, under United States generally accepted accounting principles, the assets
and liabilities of HiTek are treated as our assets and liabilities and the results of operations of HiTek are treated in all respects
as if they were the results of our operations. There are uncertainties regarding the interpretation and application of PRC laws, rules
and regulations, including but not limited to the laws, rules and regulations governing the validity and enforcement of the VIE Agreements
between WFOE and HiTek.
The Provisions Regarding Mergers and Acquisitions
of Domestic Projects by Foreign Investors (the "M&A Rules") requires an overseas special purpose vehicle that are controlled
by PRC companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions
of PRC domestic companies using shares of such special purpose vehicle or held by its shareholders as considerations to obtain the approval
of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle's securities
on an overseas stock exchange. However, the application of the M&A Rules remains unclear. If CSRC approval is required for future
public offerings in the U.S., it is uncertain whether it would be possible for us to obtain such approval. Any failure to obtain or delay
in obtaining CSRC approval for future public offerings in the U.S. would subject us to sanctions imposed by the CSRC and other PRC regulatory
agencies.
14
Furthermore, regulatory requirements on cybersecurity,
data security and data privacy in China are evolving and are subject to varying interpretations or significant changes, resulting in uncertainties
about the scope of HiTek's responsibilities in that regard. On June 10, 2021, the Standing Committee of the National People's
Congress promulgated the PRC Data Security Law, which took effect September 1, 2021. The Data Security Law provides for a security review
procedure for the data activities that may affect national security. Furthermore, Measures for Cybersecurity Review, which became effective
on June 1, 2020, set forth the cybersecurity review mechanism for critical information infrastructure operators, and provided that critical
information infrastructure operators who intend to purchase internet products and services that affect or may affect national security
shall be subject to a cybersecurity review. On December 28, 2021, the CAC published the CAC Revised Measures which further restates and
expands the applicable scope of the cybersecurity review. The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC
Revised Measures, if a network platform operator holding personal information of over one million users seeks for "foreign"
listing, it must apply for the cybersecurity review, and operators of critical information infrastructure purchasing network products
and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the CAC Revised Measures
provides no further explanation on the extent of "network platform operator" and "foreign" listing, we do not
believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that (i) we are not in
possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such
threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable
PRC governmental authorities identifying it as a critical information infrastructure operator. That being said, considering that the CAC
Revised Measures empowers the cybersecurity review office to initiate cybersecurity review when they believe any particular data processing
activities "affect or may affect national security", and it is uncertain whether the competent government authorities will
deem that HiTek's data processing activities may affect national security and thus initiating the cybersecurity review against HiTek's
businesses. Failure of cybersecurity, data privacy and data security compliance could subject HiTek to penalties, damage its reputation
and brand, and harm its business and results of operations.
If WFOE, HiTek or their ownership structure or
the VIE Agreements are determined to be in violation of any existing or future PRC laws, rules or regulations, or WFOE or HiTek fails
to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad
discretion in dealing with such violations, including:
●
revoking the business and operating licenses of WFOE or HiTek;
●
discontinuing or restricting the operations of WFOE or HiTek;
●
imposing conditions or requirements with which we, WFOE, or HiTek may not be able to comply;
●
requiring us, WFOE, or HiTek to restructure the relevant ownership structure or operations which may significantly impair the rights of the holders of our Ordinary Shares in the equity of HiTek;
●
restricting or prohibiting our use of the proceeds from our initial public offering to finance our business and operations in China; and
●
imposing fines.
We cannot assure you that the PRC courts or regulatory
authorities may not determine that our corporate structure and VIE Agreements violate PRC laws, rules or regulations. If the PRC courts
or regulatory authorities determine that our contractual arrangements are in violation of applicable PRC laws, rules or regulations, the
VIE Agreements will become invalid or unenforceable, and HiTek will not be treated as a VIE entity and we will not be entitled to treat
HiTek's assets, liabilities and results of operations as our assets, liabilities and results of operations, which could effectively
eliminate the assets, revenue and net income of HiTek from our balance sheet, which would most likely require us to cease conducting our
business and would result in the delisting of our Ordinary Shares from Nasdaq Capital Market and a significant impairment in the market
value of our Ordinary Shares.
We may have difficulty in enforcing any
rights we may have under the VIE Agreements in PRC.
As all of the VIE Agreements with HiTek are governed
by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with
PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed
as in the United States. As a result, uncertainties in the PRC legal system could further limit our ability to enforce these VIE Agreements.
Furthermore, these VIE Agreements may not be enforceable in China if PRC government authorities or courts take a view that such VIE Agreements
contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce
these VIE Agreements, we may not be able to exert effective control over HiTek, and our ability to conduct our business may be materially
and adversely affected.
15
The approval of the China Securities Regulatory
Commission and other compliance procedures may be required in connection with the offering of our securities in the U.S., and, if required,
we cannot predict whether we will be able to obtain such approval. As a result, both you and us face uncertainty about future actions
by the PRC government that could significantly affect the operating company's financial performance and the enforceability of the
VIE Agreements.
The Provisions Regarding Mergers and Acquisitions
of Domestic Projects by Foreign Investors (the "M&A Rules") require an overseas special purpose vehicle that are controlled
by PRC companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions
of PRC domestic companies using shares of such special purpose vehicle or held by its shareholders as considerations to obtain the approval
of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle's securities
on an overseas stock exchange. However, the application of the M&A Rules remains unclear. If CSRC approval is required for any of
our future offerings in the U.S., it is uncertain whether it would be possible for us to obtain the approval. Any failure to obtain or
delay in obtaining CSRC approval for our future offerings in the U.S. would subject us to sanctions imposed by the CSRC and other PRC
regulatory agencies.
The General Office of the Central Committee of
the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on
Illegal Securities Activities, which was available to the public on July 6, 2021. These opinions emphasized the need to strengthen the
administration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions proposed
to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing
China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. The aforementioned policies and any
related implementation rules to be enacted may subject us to additional compliance requirement in the future. As of the date of this annual
report, we have not received or denied any permission from the PRC authorities regarding our listing on the Nasdaq Capital Market. As
these opinions were recently issued, official guidance and interpretation of the opinions remain unclear in several respects at this time.
Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of these opinions or any future
implementation rules on a timely basis, or at all. We face uncertainty about future actions by the PRC government that could significantly
affect the operating company's financial performance and the enforceability of the VIE Agreements.
On February 17, 2023, the CSRC promulgated the
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting
guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities
overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures
within three working days following its submission of initial public offerings or listing application. If a domestic company fails to
complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic
company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual
controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as
warnings and fines. See "Regulations—M&A Rules and Overseas Listings."
On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued
by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions.
The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of
the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent
with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either
directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including
securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or
working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy
administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas
listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers
and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest,
shall strictly fulfill relevant procedures stipulated by applicable national regulations.
16
Any failure or perceived failure by the Company,
the Company's subsidiaries in China or the VIE to comply with the above confidentiality and archives administration requirements
under the revised Provisions and other PRC laws and regulations may result in that the relevant entities would be held legally liable
by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure you that
we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities. Notwithstanding
the foregoing, as of the date of this annual report, we are not aware of any Chinese laws or regulations in effect requiring that we obtain
permission from any Chinese authority to issue securities to foreign investors, and we have not received any inquiry, notice, warning,
sanction or any regulatory objection to our initial public offering from the CSRC.
As advised by Jingtian & Gongcheng, our PRC
counsel, as our post-effective amendment to the registration statement on Form F-1 relating to our initial public offering was declared
effective on March 30, 2023 and we have completed our initial public offering and listing prior to September 30, 2023, we are not required
to complete the filing procedures pursuant to the Trial Measures for our initial public offering. If in the future we are going to conduct
any offering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures.
.. Based on the above and our understanding of the Chinese laws and regulations currently in effect as of the date of this annual report,
we are not aware of any PRC laws or regulations in effect requiring that we obtain permission or approval from any PRC authorities for
our subsidiaries or the VIE's operations and to issue securities to foreign investors, and we have not received any inquiry, notice,
warning, sanction, or any regulatory objection to our offerings from the CSRC, the CAC, or any other PRC authorities that have jurisdiction
over our operations.. However, there remains uncertainty as to the enactment, interpretation and implementation of regulatory requirements
related to overseas securities offerings and other capital markets activities. Any failure to obtain or delay in obtaining such approval,
complete required filing or procedures, or a rescission of any such approval or filing obtained by us, would subject us to sanctions by
the CSRC or other PRC regulatory authorities. These regulatory agencies may impose fines and penalties on our operations in mainland China,
limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds
from our initial public offering into mainland China or take other actions that could have a material adverse effect on our business,
financial condition, results of operations and prospects, as well as the trading price of the Ordinary Shares. In addition, if the CSRC,
or other regulatory agencies later promulgate new rules requiring that we obtain their approvals for our initial public offering, we may
be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties
and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of the Ordinary
Shares.
PRC laws and regulations governing our current
business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitable.
There are uncertainties regarding the interpretation
and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement
and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject
to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation
of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected
if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these
laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.
We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.
17
On July 6, 2021, the General Office of the Communist
Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities
in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant
governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over
China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.
Since this document is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making
bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated,
if any, and the potential impact such modified or new laws and regulations will have on companies like us.
Regulations relating to offshore investment
activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business.
In July 2014, State Administration of Foreign
Exchange, or SAFE, promulgated the Circular on Issues Concerning Foreign Exchange Administration Over the Overseas Investment and Financing
and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or Circular 37, which replaced Relevant Issues Concerning
Foreign Exchange Control on Domestic Residents' Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles,
or Circular 75. Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment
or indirect control of an offshore entity, referred to in Circular 37 as a "special purpose vehicle" for the purpose of holding
domestic or offshore assets or interests. Circular 37 further requires amendment to a PRC resident's registration in the event of
any significant changes with respect to the special purpose vehicle, such as an increase or decrease in the capital contributed by PRC
individuals, share transfer or exchange, merger, division or other material event. Under these regulations, PRC residents' failure
to comply with specified registration procedures may result in restrictions being imposed on the foreign exchange activities of the relevant
PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows
from the offshore entity to the PRC entity, including restrictions on its ability to contribute additional capital to Company's
subsidiaries in China or the VIE. Further, failure to comply with the SAFE registration requirements could result in penalties under PRC
law for evasion of foreign exchange regulations.
Mr. Shenping Yin and Ms. Xiaoyang Huang, together
with ten other PRC residents, who are our beneficial owners, filed applications for Circular 37 registration, and our PRC counsel believes
there is no substantial legal impediment to the registration of the aforementioned beneficial owners' Circular 37 registration.
As the promulgation of Circular 37 is relatively recent, it is unclear how these regulations will be interpreted and implemented. We cannot
assure you that our ultimate shareholders who are PRC residents will in the future provide sufficient supporting documents required by
the SAFE or complete the required registration with the SAFE in a timely manner, or at all. Any failure by any of our shareholders who
is a PRC resident, or is controlled by a PRC resident, to comply with relevant requirements under these regulations could subject us to
fines or sanctions imposed by the PRC government, including restrictions on our overseas or cross-border investment activities, restrictions
on WFOE's ability to pay dividends or make distributions to us and on our ability to increase our investment in the WFOE.
Although we believe that our agreements relating
to our structure are in compliance with current PRC regulations, we cannot assure you that the PRC government would agree that these VIE
Agreements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies
that may be adopted in the future.
Uncertainties exist with respect to the
interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure,
corporate governance and business operations.
On March 15, 2019, the National People's
Congress approved the Foreign Investment Law ("FIL"), which came into effect on January 1, 2020 and replaced the trio of existing
laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative
Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.
The FIL embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international
practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, since
it is relatively new, uncertainties exist in relation to its interpretation and implementation. For instance, under the FIL, "foreign
investment'' refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other
entities in China. Though it does not explicitly classify VIE Agreements as a form of foreign investment, there is no assurance that operations
conducted by foreign investors or foreign-invested enterprises via contractual arrangement would not be interpreted as a type of indirect
foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes
investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the
State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council
to provide for VIE Agreements as a form of foreign investment. In any of these cases, it will be uncertain whether the VIE Agreements
will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore,
if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies
with respect to existing VIE Agreements, we may face substantial uncertainties as to whether we can complete such actions in a timely
manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges
could materially and adversely affect our current corporate structure, corporate governance and business operations
18
Risks Relating to Doing Business in the PRC
Although the audit report included in this
annual report is prepared by U.S. auditors which are currently inspected by the PCAOB, there is no guarantee that future audit reports
will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection.
Furthermore, trading in our securities may be prohibited under the HFCA Act, as Amended, if the SEC subsequently determines our audit
work is performed by auditors that the PCAOB is unable to inspect or investigate completely for two consecutive years, and as a result,
U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities.
As an auditor of companies that are registered
with the SEC and publicly traded in the US ("U.S.") and a firm registered with the PCAOB, our auditor is required under the
laws of the U.S. to undergo regular inspections by the PCAOB to assess their compliance with the laws of the U.S. and professional standards.
Our auditor, the independent registered public
accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly
in the U.S. and a firm registered with the PCAOB, is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections
to assess its compliance with the applicable professional standards. Our auditor is currently subject to PCAOB inspections and PCAOB is
able to inspect our auditor. However, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent
criteria to us after considering the effectiveness of our auditor's audit procedures and quality control procedures, adequacy of
personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements
On May 20, 2020, the U.S. Senate passed the HFCA
Act, which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to
inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor's local jurisdiction.
The U.S. House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020.
On March 24, 2021, the SEC adopted interim final
rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. We would be required to comply
with these rules if the SEC identifies us as having a "non-inspection" year (as defined in the interim final rules) under
a process to be subsequently established by the SEC. The SEC was assessing how to implement other requirements of the HFCA Act, including
the listing and trading prohibition requirements described above.
On September 22, 2021, the PCAOB adopted a final
rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act,
whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction
because of a position taken by one or more authorities in that jurisdiction.
19
On December 2, 2021, the SEC issued amendments
to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC
identifies as having filed an annual report with an audit report issued by a registered public accounting firm located in a foreign jurisdiction
and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.
On December 16, 2021, SEC announced that the PCAOB
designated China and Hong Kong as the jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections as mandated
under the HFCA Act.
On August 26, 2022, the CSRC, the MOF, and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based
in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public
accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the
SEC the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability
to transfer information to the SEC.
On December 15, 2022, the PCAOB Board determined
the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China
and Hong Kong and voted to vacate its previous determinations to the contrary.
On December 29, 2022, the Consolidated Appropriations
Act was signed into law by President Biden, which amended the HFCA Act by requiring the SEC to prohibit an issuer's securities from
trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus
reducing the time period for triggering the prohibition on trading.
However, should PRC authorities obstruct or otherwise
fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need to issue a new determination. Delisting
of our Ordinary Shares would force holders of our Ordinary Shares to sell their Ordinary Shares. The market price of our Ordinary Shares
could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions upon, as well as negative
investor sentiment towards, companies with significant operations in China that are listed in the U.S., regardless of whether these executive
or legislative actions are implemented and regardless of our actual operating performance.
The recent joint statement by the SEC, proposed
rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional
and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our offering, business
operations, share price and reputation.
U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators
and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting
irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies
or a lack of adherence thereto and, in many cases, allegations of fraud.
20
On December 7, 2018, the SEC and the PCAOB issued
a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed
companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III,
along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or
have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including the difficulty
associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty
of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of fraud, in emerging markets
generally.
On May 20, 2020, the U.S. Senate passed the HFCA
Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified
reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company's
auditors for three consecutive years, the issuer's securities are prohibited to trade on a national exchange. On December 2, 2020,
the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act.
On May 21, 2021, Nasdaq filed three proposals
with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a "Restrictive Market", (ii)
prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and only permit them to list on Nasdaq Global Select
or Nasdaq Global Market in connection with a direct listing and (iii) apply additional and more stringent criteria to an applicant or
listed company based on the qualifications of the company's auditors.
As discussed in the previous risk factor, our
Ordinary Shares are subject to the risk of being delisted under the HFCA Act and the Consolidated Appropriations Act, in the event that
PCAOB determines it is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign
jurisdiction for two consecutive years. The PCAOB Board determined, on December 15, 2022, that it was able to secure complete access to
inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous
determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access in the
future, the PCAOB Board will consider the need to issue a new determination.
As a result of this scrutiny, criticism and negative
publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, became virtually
worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and
external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity
will have on us, our offering, business and our share price. If we become the subject of any unfavorable allegations, whether such allegations
are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company.
This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven
to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of
our share.
Nasdaq may apply additional and more stringent
criteria for our continued listing because we plan to have a small public offering and our insiders will hold a large portion of our listed
securities.
Nasdaq Listing Rule 5101 provides Nasdaq with
broad discretionary authority over the initial and continued listing of securities in Nasdaq and Nasdaq may use such discretion to deny
initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend
or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing
of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria
for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion to deny initial or continued listing or to apply
additional and more stringent criteria in the instances, including but not limited to: (i) where the company engaged an auditor that has
not been subject to an inspection by PCAOB, an auditor that PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources,
geographic reach, or experience to adequately perform the company's audit; (ii) where the company planned a small public offering,
which would result in insiders holding a large portion of the company's listed securities. Nasdaq was concerned that the offering
size was insufficient to establish the company's initial valuation, and there would not be sufficient liquidity to support a public
market for the company; and (iii) where the company did not demonstrate sufficient nexus to the U.S. capital market, including having
no U.S. shareholders, operations, or members of the board of directors or management. Our public float is relatively small and the insiders
of our Company hold a large portion of the company's listed securities. Therefore, we may be subject to the additional and more
stringent criteria of Nasdaq for our continued listing.
It may be difficult for overseas shareholders
and/or regulators to conduct investigation or collect evidence within China.
Shareholder claims or regulatory investigation
that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China,
there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated
outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities
of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory
authorities in the U.S. may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of
the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to
directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or
implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to
directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting
your interests.
21
Our principal business operation is conducted
in the PRC. If U.S. regulators carry out an investigation of us and there is a need to conduct investigation or collect evidence within
the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC
under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of
judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the
PRC.
Because we are a Cayman Islands corporation
and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce
any judgment you may obtain.
We are a company incorporated under the laws of
the Cayman Islands, we conduct substantially all of our operations in China, and substantially all of our assets are located in China.
In addition, all our senior executive officers reside within China for a significant portion of the time and are all PRC nationals. As
a result, it may be difficult for our shareholders to effect service of process upon us or those persons in the Cayman Islands or in China.
In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman
Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these
non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. See "Enforceability
of Civil Liabilities."
Shareholder claims that are common in the U.S.
including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China.
For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations
or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory
cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and
administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in
the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in
March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the
territory of the PRC.
In addition, our corporate affairs are governed
by our amended and restated memorandum and articles of association, the Companies Act or the common law of the Cayman Islands. The rights
of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors
to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands
is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions
of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and
the fiduciary responsibilities of our directors under Cayman Islands law are different from statutes or judicial precedent in some jurisdictions
in the U.S.. In particular, the Cayman Islands has a different body of securities laws as compared to the U.S.. In addition, Cayman Islands
companies may not have standing to initiate a shareholder derivative action in a Federal court of the U.S..
We have been advised by our Cayman Islands legal
counsel, Maples and Calder (Cayman) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments
of courts of the U.S. predicated upon the civil liability provisions of the federal securities laws of the U.S. or any state; and (ii)
in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of
the federal securities laws of the U.S. or any state, so far as the liabilities imposed by those provisions are penal in nature. In those
circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the U.S., the courts of the Cayman
Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits
based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for
which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment
must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman
Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement
of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be
held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought
elsewhere.
As a result of all of the above, public shareholders
may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or
controlling shareholders than they would as public shareholders of a U.S. company.
Economic conditions in China could impact
our business and results of operations in both lines of our business
The VIE entity and its subsidiaries' business
and operating results are impacted by Chinese economic conditions, such as a potential general reduction in net disposable income as a
result of fiscal measures adopted by Chinese government to address high levels of budgetary indebtedness, which may adversely affect our
business, results of operations and financial condition. The most recent global financial crisis and recession resulted in large-scale
business failures and tightened credit markets in China, which directly impacts the Chinese IT service market and VAT reporting service
industry. Future adverse economic developments in areas such as employment levels, business conditions, interest rates, tax rates, fuel
and energy costs and other matters could reduce discretionary spending and cause the industries where we operate to contract.
22
There may be changes in the regulations
of PRC government bodies and agencies relating to VAT collection procedure and ACTCS business
PRC laws, regulations and policies concerning
VAT collection procedures and ACTCS business are evolving and the PRC government authorities may promulgate new laws, regulations and
policies in the future. We cannot assure you that our practices would not be deemed to violate any PRC laws, regulations or policies either
now or in the future.
Moreover, developments in the ACTCS service industry
may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies,
which may limit or restrict the ACTCS hardware and services we offer. Furthermore, we cannot rule out the possibility that the PRC government
will institute a new licensing regime covering services we provide in the future. If such a licensing regime were introduced, we cannot
assure you that we would be able to obtain any newly required license in a timely manner, or at all, which could materially and adversely
affect our business and impede our ability to continue our operations.
Changes in the policies of the PRC government
could have a significant impact upon our ability to operate profitably in the PRC.
We conduct all of our operations and all of our
revenue is generated in the PRC. Accordingly, economic, political and legal developments in the PRC will significantly affect our business,
financial condition, results of operations and prospects. Policies of the PRC government can have significant effects on economic conditions
in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the PRC may be adversely affected
by changes in policies by the PRC government, including changes in laws, regulations or their interpretation, particularly those dealing
with the Internet, including censorship and other restriction on material which can be transmitted over the Internet, security, intellectual
property, money laundering, taxation and other laws that affect our ability to operate our website.
China's economic, political and social
conditions, laws and regulations, as well as possible interventions and influences of any government policies and actions are uncertain
and could have a material adverse effect on our business and the value of our Ordinary Shares.
China's economy differs from the economies
of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control
of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past two to three decades,
growth has been uneven, both geographically and among various sectors of the economy. Although China's economy has been transitioning
from a planned economy to a more market oriented economy since the late 1970s, the PRC government continues to play a significant role
in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China's
economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting
monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and
regulations could adversely affect the economy in China and could have a material adverse effect on our business.
The PRC government has implemented various measures
to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources. However,
we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have a negative
effect on us, or more specifically, we cannot assure you that the PRC government will not initiate possible governmental actions or scrutiny
to us, which could substantially affect our operation and the value of our Ordinary Shares may depreciate quickly. China's economic,
political and social conditions, as well as interventions and influences of any government policies, laws and regulations are uncertain
and could have a material adverse effect on our business.
23
Because our business is dependent upon government
policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair our ability to operate
profitably, if at all.
Although the PRC government has pursued been pursuing
a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic
growth in the PRC. Because of the nature of our business, we are dependent upon the PRC government pursuing policies that encourage private
ownership of businesses. Restrictions on private ownership of businesses would affect the VAT filing and collection in general and businesses
using ACTCS in particular. We cannot assure you that the PRC government will pursue policies favoring a market-oriented economy or that
existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption,
or other circumstances affecting political, economic and social life in the PRC.
Because our business is conducted in RMB
and the price of our Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect the value of
your investments.
Our business is conducted in the PRC, our books
and records are maintained in RMB, which is the currency of the PRC, and the financial statements that we file with the SEC and provide
to our shareholders are presented in U.S. dollars. Changes in the exchange rate between the RMB and dollar affect the value of our assets
and the results of our operations in U.S. dollars. The value of the RMB against the U.S. dollar and other currencies may fluctuate and
is affected by, among other things, changes in the PRC's political and economic conditions and perceived changes in the economy
of the PRC and the U.S.. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue and financial
condition. Further, our Ordinary Shares offered by this annual report are offered in U.S. dollars, we will need to convert the net proceeds
we receive into RMB in order to use the funds for our business. Changes in the conversion rate between the U.S. dollar and the RMB will
affect that amount of proceeds we will have available for our business.
Under the PRC Enterprise Income Tax Law,
or the EIT Law, we may be classified as a "resident enterprise" of China, which could result in unfavorable tax consequences
to us and our non-PRC shareholders.
The EIT Law and its implementing rules provide
that enterprises established outside of China whose "de facto management bodies" are located in China are considered "resident
enterprises" under PRC tax laws. The implementing rules promulgated under the EIT Law define the term "de facto management
bodies" as a management body which substantially manages, or has control over the business, personnel, finance and assets of an
enterprise. In April 2009, the State Administration of Taxation, or SAT, issued a circular, known as Circular 82, which provides certain
specific criteria for determining whether the "de facto management bodies" of a PRC-controlled enterprise that is incorporated
offshore is located in China. However, there are no further detailed rules or precedents governing the procedures and specific criteria
for determining "de facto management body." Although our board of directors and management are located in the PRC, it is unclear
if the PRC tax authorities would determine that we should be classified as a PRC "resident enterprise."
If we are deemed a PRC "resident enterprise,"
we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed to
us from our existing subsidiaries in China or the VIE and any other subsidiaries in China or the VIE which we may establish from time
to time could be exempt from the PRC dividend withholding tax due to our PRC "resident recipient" status. This could have
a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends, if
any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered
a PRC "resident enterprise", any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our
Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the case of
non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty).
It is unclear whether holders of our Ordinary Shares would be able to claim the benefits of any tax treaties between their country of
tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse effect
on the value of your investment in us and the price of our Ordinary Shares.
24
There are significant uncertainties under
the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore
subsidiaries may not qualify to enjoy certain treaty benefits.
Under the PRC EIT Law and its implementation rules,
the profits of a foreign invested enterprise generated through operations, which are distributed to its immediate holding company outside
the PRC, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and the PRC, such rate
may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Our PRC subsidiary
is wholly-owned by our Hong Kong subsidiary. Moreover, under the Notice of the State Administration of Taxation on Issues regarding the
Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer needs to satisfy certain conditions
to enjoy the benefits under a tax treaty. These conditions include: (1) the taxpayer must be the beneficial owner of the relevant dividends,
and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have continuously met the direct ownership thresholds
during the 12 consecutive months preceding the receipt of the dividends. Further, the State Administration of Taxation promulgated the
Notice on How to Understand and Recognize the "Beneficial Owner" in Tax Treaties on October 27, 2009, which limits the "beneficial
owner" to individuals, projects or other organizations normally engaged in substantive operations, and sets forth certain detailed
factors in determining the "beneficial owner" status. In current practice, a Hong Kong enterprise must obtain a tax resident
certificate from the relevant Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority
will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident
certificate from the relevant Hong Kong tax authority. As of the date of this annual report, we have not commenced the application process
for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that we will be granted
such a Hong Kong tax resident certificate.
Even after we obtain the Hong Kong tax resident
certificate, we are required by applicable tax laws and regulations to file required forms and materials with relevant PRC tax authorities
to prove we can enjoy the 5% lower PRC withholding tax rate. HiTek HK intends to obtain the required materials and file with the relevant
tax authorities when it plans to declare and pay dividends, but there is no assurance that the PRC tax authorities will approve the 5%
withholding tax rate on dividends received from HiTek HK.
The disclosures in our reports and other
filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.
We are regulated by the SEC and our reports and
other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities
Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of
any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by CSRC,
a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings
and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings
or any of our other public pronouncements.
We operate in an emerging and evolving market.
If our market does not grow as we expect, or if we fail to adapt and respond effectively to rapidly changing technology, evolving industry
standards, changing regulations, and changing customer needs, requirements or preferences, our products and solutions may become less
competitive.
There are uncertainties over the size and rate
at which the IT service market will grow, as well as whether our solutions and products will be widely adopted. Moreover, the ACTCS industry
is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements
and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on
a timely basis. If we are unable to develop new solutions and products that satisfy our customers and provide enhancements and new features
for our existing products that keep pace with rapid technological and industry change, our business, results of operations and financial
condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower
prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.
Our platform must also integrate with a variety
of network, hardware, software platforms and technologies, and we need to continuously modify and enhance our products and platform to
adapt to changes and innovation. For example, if customers adopt new software platforms or infrastructure, we may be required to develop
new versions of our products to be compatible with those new software platforms or infrastructure. This development effort may require
significant resources, which would adversely affect our business, results of operations and financial condition. Any failure of our products
and platform to operate effectively with evolving or new software platforms and technologies could reduce the demand for our products.
If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive
or obsolete, and our business, results of operations and financial condition could be adversely affected.
25
In light of recent events indicating greater
oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign
exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply
with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition,
results of operations, and the offering.
We are subject to various risks and costs associated
with to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information
and other data. This data is wide ranging and relates to our investors, employees, contractors and other counterparties and third parties.
Our compliance obligations include those relating to the Data Protection Act (As Revised) of the Cayman Islands and the relevant PRC laws
in this regard. These PRC laws apply not only to third-party transactions, but also to transfers of information between us, our WFOE,
the VIE, and the VIE's subsidiaries, and among us, our WFOE, the VIE, and the VIE's subsidiaries, and other parties with which
we have commercial relations. These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future.
Non-compliance could result in penalties or other significant legal liabilities.
Pursuant to the PRC Cybersecurity Law, promulgated
by the Standing Committee of the National People's Congress on November 7, 2016 and took effect on June 1, 2017, personal information
and important data collected and generated by a critical information infrastructure operator in the course of its operations in China
must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or
may affect national security, it should be subject to cybersecurity review by the CAC. Due to the lack of further interpretations, the
exact scope of "critical information infrastructure operator" remains unclear. On December 28, 2021, the CAC published the
CAC Revised Measures which further restates and expands the applicable scope of the cybersecurity review. The CAC Revised Measures took
effect on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding personal information of over
one million users seeks for "foreign" listing, it must apply for the cybersecurity review. In addition, operators of critical
information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such
purchasing activities. Although the CAC Revised Measures provides no further explanation on the extent of "network platform operator"
and "foreign" listing, as confirmed by our PRC counsel, Jingtian & Gongcheng, we are not subject to cybersecurity review
with the CAC , because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also
very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received
any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
However, we cannot guarantee that we will not be subject to cybersecurity review in the future as we offer IT services and sell hardware
and software in China. During such review, we may be required to suspend our operation experience other disruptions to our operations.
Cybersecurity review could also result in negative publicity with respect to our company and diversion of our managerial and financial
resources.
Furthermore, if we were found to be in violation
of applicable laws and regulations in China during such review, we could be subject to administrative penalties, such as warnings, fines,
or service suspension. Therefore, cybersecurity review could materially and adversely affect our business, financial condition, and results
of operations.
In addition, the PRC Data Security Law, promulgated
by the Standing Committee of the National People's Congress on June 10, 2021 and took effect on September 1, 2021, requires data
collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data protection, data processing
activities must be conducted based on data classification and hierarchical protection system for data security. As the Data Security Law
was recently promulgated, we may be required to make further adjustments to our business practices to comply with this law. If our data
processing activities were found to be not in compliance with this law, we could be ordered to make corrections, and under certain serious
circumstances, such as severe data divulgence, we could be subject to penalties, including the revocation of our business licenses or
other permits. Furthermore, the recently issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the
Law require (i) speeding up the revision of the provisions on strengthening the confidentiality and archives management relating to overseas
issuance and listing of securities and (ii) improving the laws and regulations relating to data security, cross-border data flow, and
management of confidential information. As there remain uncertainties regarding the further interpretation and implementation of those
laws and regulations, we cannot assure you that we will be compliant such new regulations in all respects, and we may be ordered to rectify
and terminate any actions that are deemed illegal by the regulatory authorities and become subject to fines and other sanctions. As a
result, we may be required to suspend our relevant businesses, shut down our website, take down our operating applications, or face other
penalties, which may materially and adversely affect our business, financial condition, and results of operations.
26
On August 20, 2021, the Standing Committee of
the National People's Congress of China promulgated the Personal Information Protection Law of the PRC, or the PIPL, which took
effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the
PRC, the PIPL provides, among others, that (i) an individual's consent shall be obtained to use sensitive personal information,
such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information
shall notify individuals of the necessity of such use and impact on the individual's rights, and (iii) where personal information
operators reject an individual's request to exercise his or her rights, the individual may file a lawsuit with a People's
Court. As uncertainties remain regarding the interpretation and implementation of the PIPL, we cannot assure you that we will comply with
the PIPL in all respects, we may become subject to fines and/or other penalties which may have material adverse effect on our business,
operations and financial condition.
While we take measures to comply with all applicable
data privacy and protection laws and regulations, we cannot guarantee the effectiveness of the measures undertaken by us and our business
partners. However, compliance with any additional laws could be expensive, and may place restrictions on our business operations and the
manner in which we interact with our users. In addition, any failure to comply with applicable cybersecurity, privacy, and data protection
laws and regulations could result in proceedings against us by government authorities or others, including notification for rectification,
confiscation of illegal earnings, fines, or other penalties and legal liabilities against us, which could materially and adversely affect
our business, financial condition, results of operations and the value of our Ordinary Shares. In addition, any negative publicity on
our website or platform's safety or privacy protection mechanism and policy could harm our public image and reputation and materially
and adversely affect our business, financial condition, and results of operations.
We are subject to anti-corruption, anti-bribery,
and similar laws, and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and
reputation.
We are subject to the U.S. Foreign Corrupt Practices
Act of 1977, and other anti-corruption, anti-bribery, anti-money laundering, and similar laws in China and the United States. Anti-corruption
and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees and agents
from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the public
sector. We leverage our business partners, including channel partners, to sell our products and solutions and host many of our facilities
for our network. We may also rely on our business partners to conduct our business abroad. We and our business partners may have direct
or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held
liable for the corrupt or other illegal activities of our business partners and intermediaries, our employees, representatives, contractors,
channel partners and agents, even if we do not explicitly authorize such activities.
We cannot assure you that all of our employees
and agents have complied with, or in the future will comply with, our policies and applicable law. The investigation of possible violations
of these laws, including internal investigations and compliance reviews that we may conduct from time to time, could have a material adverse
effect on our business. Noncompliance with these laws could subject us to investigations, severe criminal or civil sanctions, settlements,
prosecution, loss of export privileges, suspension or debarment from Chinese government contracts and other contracts, other enforcement
actions, the appointment of a monitor, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions,
whistleblower complaints, adverse media coverage and other consequences. Other internal and government investigations, regulatory proceedings,
or litigation, including private litigation filed by our shareholders, may also follow as a consequence. Any investigations, actions,
or sanctions could materially harm our reputation, business, results of operations, and financial condition. Further, the promulgation
of new laws, rules or regulations or new interpretations of current laws, rules or regulations could impact the way we do business in
other countries, including requiring us to change certain aspects of our business to ensure compliance, which could reduce revenues, increase
costs, or subject us to additional liabilities.
Failure to comply with laws and regulations
applicable to our business in China could subject us to fines and penalties and could also cause us to lose customers or otherwise harm
our business.
Our business is subject to regulation by various
governmental agencies in China, including agencies responsible for monitoring and enforcing compliance with various legal obligations,
such as value-added telecommunication laws and regulations, privacy and data protection-related laws and regulations, intellectual property
laws, employment and labor laws, workplace safety, environmental laws, consumer protection laws, governmental trade laws, import and export
controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain jurisdictions, these regulatory requirements
may be more stringent than in China. These laws and regulations impose added costs on our business. Noncompliance with applicable regulations
or requirements could subject us to:
●
investigations, enforcement actions, and sanctions;
●
mandatory changes to our network and products;
27
●
disgorgement of profits, fines, and damages;
●
civil and criminal penalties or injunctions;
●
claims for damages by our customers or channel partners;
●
termination of contracts;
●
loss of intellectual property rights;
●
failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings necessary to conduct our operations; and
●
temporary or permanent debarment from sales to public service organizations.
If any governmental sanctions are imposed, or
if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could
be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management's attention
and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results of operations,
and financial condition.
Additionally, companies in the technology industry
have recently experienced increased regulatory scrutiny. Any reviews by regulatory agencies or legislatures may result in substantial
regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations.
Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause us to change
our business practices. Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These
factors could negatively affect our business and results of operations in material ways.
Moreover, we are exposed to the risk of misconduct,
errors and failure to functions by our management, employees and parties that we collaborate with, who may from time to time be subject
to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance
with applicable laws and regulations, which could harm our reputation and business.
We face exposure to foreign currency exchange
rate fluctuations, and such fluctuations could adversely affect our business, results of operations and financial condition.
The conversion of Renminbi into foreign currencies,
including the U.S. dollar, is based on rates set by the People's Bank of China. The Renminbi has fluctuated against the U.S. dollar
and other currencies, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is
affected by changes in China's political and economic conditions and by China's foreign exchange policies, among other things.
We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar and other currencies
in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi
and U.S. dollar in the future.
Significant revaluation of the Renminbi may have
a material and adverse effect on your investment. For example, to the extent we need to convert U.S. dollars we received from our initial
public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on
the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose
of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi
would have a negative effect on the U.S. dollar amount available to us.
Very limited hedging options are available in
China to reduce our exposure to exchange rate fluctuations. As of the date of this annual report, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions
in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure,
or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to
convert Renminbi into foreign currency.
Substantially all of our revenues and costs are
denominated in Renminbi. We are a holding company and we rely on dividends paid by our operating subsidiaries in China for our cash needs.
Any significant revaluation of Renminbi may materially and adversely affect our results of operations and financial position reported
in Renminbi when translated into U.S. dollars. To the extent that we need to convert U.S. dollars we received from our initial public
offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi
amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends
on our Ordinary Shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect
on the U.S. dollar amount.
28
Increases in labor costs in the PRC may
adversely affect our business and results of operations.
China's economy has experienced increases
in labor costs in recent years. China's overall economy and the average wage in China are expected to continue to grow. The average
wage level for our employees has also increased in recent years. We expect that our staff costs, including wages and employee benefits,
will continue to increase. Unless we are able to pass on these increased labor costs to our customers by increasing prices for our products
or services, our profitability and results of operations may be materially and adversely affected.
In addition, we have been subject to stricter
regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including
housing, pension, medical insurance and unemployment insurance programs to designated government agencies for the benefit of our employees.
Compared with its predecessors, the current Labor Contract Law of the PRC imposes stricter requirements on employers in terms of signing
labor contracts, minimum wages, paying remuneration, determining the term of employees' probation and unilaterally terminating labor
contracts, further increasing our labor-related costs such as by limiting our ability to terminate some of our employees or otherwise
change our employment or labor practices in a cost-effective manner. In addition, as the interpretation and implementation of labor-related
laws and regulations are still developing, we cannot assure you that our employment practices have been or will at all times be deemed
in compliance with the labor-related laws and regulations in China. If we are subject to severe penalties in connection with labor disputes
or government investigations, our business, financial condition and results of operations will be adversely affected.
The Chinese government exerts substantial
influence over the manner in which we must conduct our business activities. Any actions by Chinese government, including any decision
to intervene or influence our operations or to exert control over any offering of securities conducted overseas and/or foreign investment
in China-based issuers, may cause us to make material changes to our operation, may limit or completely hinder our ability to offer or
continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.
The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Substantially
all of our operations are located in China. Our ability to operate in China may be harmed by changes in its laws and regulations, including
those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of
these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures
and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future,
including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional
or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular
regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
As such, our business may be subject to various
government and regulatory interference in the provinces in which we operate. We could be subject to regulation by various political and
regulatory entities, including various local and municipal agencies and government sub-divisions. We may incur increased costs necessary
to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.
Furthermore, it is uncertain when and whether
we will be required to obtain permission from the PRC government to offering securities in the U.S. in the future, and even when such
permission is obtained, whether we will be denied or rescinded. Although we are currently not required to obtain permission from any of
the PRC regulatory authorities to obtain such permission and has not received any denial regarding our listing on the Nasdaq Capital Market
and the entry into the VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws
and regulations relating to our business or industry.
29
PRC laws and regulations governing our current
business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.
There are uncertainties regarding the interpretation
and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement
and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject
to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation
of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected
if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these
laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.
We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.
The PRC legal system is a civil law system based
on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have
limited precedential value. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve,
the interpretations of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules
involves uncertainties.
In 1979, the PRC government began to promulgate
a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past
three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has
not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic
activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC
administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual
terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy.
These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or
tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts
to extract payments or benefits from us.
Furthermore, the PRC legal system is based in
part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect.
As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition,
any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management
attention.
From time to time, we may have to resort to administrative
and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion
in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and
court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is
based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive
effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties,
including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights,
and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede
our ability to continue our operations.
Recently, the General Office of the Central Committee
of the Communist Party of China and the General Office of the State Council jointly issued the "Opinions on Severely Cracking Down
on Illegal Securities Activities According to Law," or the Opinions, which was made available to the public on July 6, 2021. The
Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision
over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will
be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection
requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirement
in the future.
30
Risks Relating to Our Ordinary Shares
We do not intend to pay dividends for the
foreseeable future.
We currently intend to retain any future earnings
to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.
As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary Shares increases.
If securities or industry analysts do not
publish research or reports about our business, or if the publish a negative report regarding our Ordinary Shares, the price of our Ordinary
Shares and trading volume could decline.
The trading market for our Ordinary Shares may
depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control
over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Ordinary Shares would likely decline.
If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in
the financial markets, which could cause the price of our Ordinary Shares and the trading volume to decline.
The estimates of
market opportunity, forecasts of market growth included in this annual report may prove to be inaccurate, and any real or perceived inaccuracies
may harm our reputation and negatively affect our business. Even if the market in which we compete achieves the forecasted growth, our
business could fail to grow at similar rates, if at all.
Market opportunity estimates
and growth forecasts included in this annual report are subject to significant uncertainty and are based on assumptions and estimates
that may not prove to be accurate. The variables that go into the calculation of our market opportunities are subject to change over time,
and there is no guarantee that any particular number or percentage of addressable companies covered by our market opportunities estimates
will purchase our products and solutions at all or generate any particular level of revenues for us. Even if the market in which we compete
meets the size estimates and growth forecasted in this annual report, our business could fail to grow for a variety of reasons, including
reasons outside of our control, such as competition in our industry.
The market price of our Ordinary Shares
may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the
initial public offering price.
The initial public offering price for our Ordinary
Shares will be determined through negotiations between the underwriters and us and may vary from the market price of our Ordinary Shares
following our initial public offering. If you purchase our Ordinary Shares in our initial public offering, you may not be able to resell
those shares at or above the initial public offering price. We cannot assure you that the initial public offering price of our Ordinary
Shares, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions of
our shares that have occurred from time to time prior to our initial public offering. The market price of our Ordinary Shares may fluctuate
significantly in response to numerous factors, many of which are beyond our control, including:
●
actual or anticipated fluctuations in our revenue and other operating results;
●
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
●
actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
●
announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
●
price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
●
lawsuits threatened or filed against us; and
●
other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.
31
In addition, the stock markets have experienced
extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
Share prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.
In the past, shareholders have filed securities class action litigation following periods of market volatility. If we were to become involved
in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business,
and adversely affect our business.
Our management has broad discretion to determine how to use the funds raised in the offering and may use them in ways that may not enhance
our results of operations or the price of our Ordinary Shares.
We anticipate that we will use the net proceeds
from the our initial public offering for working capital and other corporate purposes. Our management will have significant discretion
as to the use of the net proceeds to us from the initial public offering and could spend the proceeds in ways that do not improve our
results of operations or enhance the market price of our Ordinary Shares.
Our lack of effective internal controls
over financial reporting may affect our ability to accurately report our financial results or prevent fraud which may affect the market
for and price of our Ordinary Share.
To implement Section 404 of the Sarbanes-Oxley
Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company's internal control
over financial reporting. We are subject to the requirement that we maintain internal controls and that management perform periodic evaluation
of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a
result, our business, financial condition, results of operations and prospects, as well as the market for and trading price of our Ordinary
Shares, may be materially and adversely affected if we do not have effective internal controls. We do not presently have the financial
resources or personnel to develop or implement systems that would provide us with the necessary information on a timely basis so as to
be able to implement financial controls. As a result, we may not discover any problems in a timely manner and current and potential shareholders
could lose confidence in our financial reporting, which would harm our business and the trading price of our Ordinary Shares. The absence
of internal controls over financial reporting may inhibit investors from purchasing our shares and may make it more difficult for us to
raise funds in a debt or equity financing.
Because we are an "emerging growth
company," we may not be subject to requirements that other public companies are subject to, which could affect investor confidence
in us and our Ordinary Shares.
As we are an "emerging growth company,"
we may not be subject to requirements that other public companies are subject to, which could other requirements applicable to other public
companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company and a smaller reporting company.
As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information
they may deem important.
We will incur increased costs as a result
of being a public company, particularly after we cease to qualify as an "emerging growth company."
We became a public company after completion of
our initial public offering and expect to incur significant legal, accounting and other expenses that we did not incur as a private company.
The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements
on the corporate governance practices of public companies. As an "emerging growth company" pursuant to the JOBS Act, we may
take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. We expect
these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming
and costlier. After we are no longer an "emerging growth company," we expect to incur significant additional expenses and
devote substantial management effort toward ensuring compliance increased disclosure requirements.
32
Since Mr. Shenping Yin, Chairman and his
wife, Ms. Xiaoyang Huang, chief executive office of the Board are able to exercise more than 50% of the total voting power of our issued
and outstanding share capital, Mr. Yin will have the ability to elect directors and approve matters requiring shareholder approval.
Mr. Shenping Yin, Chairman of the Board, and his
wife Ms. Xiaoyang Huang are currently the beneficial owner of 8,192,000 ordinary share or 57.74% of our outstanding shares, which are
directly held by Fortune Enterprise Holdings Limited, an entity 100% owned by Mr. Yin and Ms. Huang. As result, Mr. Yin and Ms. Huang
able to exert significant voting influence over fundamental and significant corporate matters and transactions. Depending on the percentage,
they may have the power to elect all directors and approve all matters requiring shareholder approval without the votes of any other shareholder.
They have significant influence over a decision to enter into any corporate transaction and has the ability to prevent any transaction
that requires the approval of shareholders, regardless of whether or not our other shareholders believe that such transaction is in our
best interests. Such concentration of voting power could have the effect of delaying, deterring, or preventing a change of control or
other business combination, which could, in turn, have an adverse effect on the market price of our Ordinary Shares or prevent our shareholders
from realizing a premium over the then-prevailing market price for their Ordinary Shares.
We are a "controlled company"
within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements
that provide protection to shareholders of other companies.
We are a "controlled company" as defined
under the NASDAQ Stock Market Rules because two of our principal shareholders, Shenping Yin, our Chairman of the Board, and Xiaoyang Huang
our CEO, who are husband and wife, beneficially own more than 50% of voting power for the election of directors. For so long as we are
a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance
rules, including:
●
an exemption from the rule that a majority of our board of directors must be independent directors;
●
an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and
●
an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.
As a result, you will not have the same protection
afforded to shareholders of companies that are subject to these corporate governance requirements.
If we cease to qualify as a foreign private
issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers,
and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.
As a foreign private issuer, we are exempt from
the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In
addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as
promptly as United States domestic issuers, and we are not required to disclose in our periodic reports all of the information that United
States domestic issuers are required to disclose. While we currently expect to qualify as a foreign private issuer, we may cease to qualify
as a foreign private issuer in the future.
Anti-takeover provisions in our memorandum
and articles of association may discourage, delay or prevent a change in control.
Some provisions of our memorandum and articles
of association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable,
including, among other things, the following:
●
provisions that authorize our board of directors to issue shares with preferred, deferred or other special rights or restrictions without any further vote or action by our shareholders; and
●
provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings
33
Our board of directors may decline to register
transfers of Ordinary Shares in certain circumstances.
Our board of directors may, in its sole discretion,
decline to register any transfer of any Ordinary Share which is not fully paid up or on which we have a lien. Our directors may also decline
to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the
shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor
to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly
stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred
does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as Nasdaq Capital
Market may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect
thereof.
If our directors refuse to register a transfer
they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee
notice of such refusal. The registration of transfers may, on 14 days' notice being given by advertisement in such one or more newspapers
or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time
to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than
30 days in any year.
You may be unable to present proposals before
general meetings or extraordinary general meetings not called by shareholders.
Cayman Islands law provides shareholders with
only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general
meeting. However, these rights may be provided in a company's articles of association. Our articles of association allow sour shareholders
holding shares representing in aggregate not less than ten per cent in par value of the issued Shares which as at that date carry the
right to vote at general meetings, to requisition an extraordinary general meeting of our shareholders, in which case our directors are
obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting. Although our articles of association
does not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings
not called by such shareholders, any shareholder may submit a proposal to our Board of Directors for consideration of inclusion in a proxy
statement. Advance notice of at least fifteen calendar days is required for the convening of our annual general shareholders' meeting
and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder
present or by proxy, representing not less than one-third in nominal value of the total issued voting shares in our company.
If we are classified as a passive foreign
investment company, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.
A non-U.S. corporation such as ourselves will
be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either
●
At least 75% of our gross income for the year is passive income; or
●
The average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.
Passive income generally includes dividends, interest,
rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition
of passive assets.
If we are determined to be a PFIC for any taxable
year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may
be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.
34
Based on our operations and the composition of
our assets we do not expect to be treated as a PFIC under the current PFIC rules. We must make a separate determination each year as to
whether we are a PFIC, however, and there can be no assurance with respect to our status as a PFIC for our current taxable year or any
future taxable year. Although the law in this regard is unclear, we are treating HiTek as being owned by us for United States federal
income tax purposes, not only because we control their management decisions, but also because we are entitled to the economic benefits
associated with HiTek, and as a result, we are treating HiTek as our wholly-owned subsidiary for U.S. federal income tax purposes. For
purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of
any entity in which it is considered to own at least 25% of the equity by value. Therefore, the income and assets of HiTek should be included
in the determination of whether or not we are a PFIC in any taxable year.
For a more detailed discussion of the application
of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see "Taxation — United
States Federal Income Taxation — Passive Foreign Investment Company."
Our Ordinary Shares may trade under $5.00
per share and thus will be a penny stock. Trading in penny stocks has certain restrictions and these restrictions could negatively affect
the price and liquidity of our shares.
Our Ordinary Shares may trade below $5.00 per
share after listing. As a result, our Ordinary Shares would be known as a "penny stock", which is subject to various regulations
involving disclosures to be given to you prior to the purchase of any penny stock. The SEC has adopted regulations which generally define
a "penny stock" to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions.
Depending on market fluctuations, our Ordinary Shares could be considered to be a "penny stock". A penny stock is subject
to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established
Members and accredited investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination
for the purchase of these securities. In addition, the broker/dealer must receive the purchaser's written consent to the transaction
prior to the purchase. The broker/dealer must also provide certain written disclosures to the purchaser. Consequently, the "penny
stock" rules may restrict the ability of broker/dealers to sell our securities, and may negatively affect the ability of holders
of our Ordinary Shares to resell them. These disclosures require you to acknowledge that you understand the risks associated with buying
penny stocks and that you can absorb the loss of your entire investment. Penny stocks generally do not have a very high trading volume.
Consequently, the price of the stock is often volatile and you may not be able to buy or sell the stock when you want to.
Item 4. INFORMATION ON THE COMPANY
A. History and development of the Company
We were incorporated in the Cayman Islands on
November 3, 2017. HiTek Hong Kong Limited ("HiTek HK"), our wholly-owned subsidiary, was incorporated in Hong Kong on November
20, 2017. Tian Dahai (Xiamen) Information Technology Co. Ltd. ("WFOE"), HiTek HK's wholly owned subsidiary, was organized
pursuant to PRC laws on March 15, 2018. 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. The variable interest entity, Xiamen Hengda HiTek Computer Network Co.,
Ltd., which we refer to as HiTek, was established on January 18, 1996 in Xiamen, Fujian Province, PRC pursuant to PRC laws. HiTek's
shareholders include certain PRC residents and corporate entities controlled by PRC residents.
Our Ordinary Shares started to trade on the Nasdaq
Capital Market under the ticker symbol "HKIT" on March 31, 2023and on April 4, 2023, the Company completed its initial public
offering of 3,200,000 Ordinary Shares at a public offering price of $5.00 per share. The total net proceeds to the Company from the initial
public offering, after deducting discounts, expense allowance, and expenses, were approximately $13,523,140.
35
Our current registered office in Cayman Islands
is at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our principal
executive offices are located at Unit 304, No. 30 Guanri Road, Siming District, Xiamen City, Fujian Province, People's Republic
of China, and our phone number is +86 592-5395967. We maintain a corporate website at
http://www.xmhitek.com/
. The information
contained in, or accessible from, our website or any other website does not constitute a part of this annual report. The SEC maintains
an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC and state the address of that site (http://www.sec.gov).
Selected Condensed Consolidating Financial Statements of Parent,
Subsidiaries, VIE and its Subsidiaries
The following tables present Selected condensed
consolidating financial data of the Parent (HiTek Global Inc.), HiTek HK (HiTek Hong Kong Limited), WFOE and its Subsidiary (Tian Dahai
(Xiamen) Information Technology Co. Ltd. and Xiamen Haitian Weilai Technology Co., Ltd.), the VIE (Xiamen Hengda HiTek Computer Network
Co., Ltd.) and its Subsidiaries (Xiamen Huasheng HiTek Computer Network Co., Ltd and Huoerguosi Hengda Information Technology Co., Ltd).
Such financial data include condensed consolidating balance sheets data as of December 31, 2022 and 2021 and the related condensed consolidating
statements of operations and cash flows data for the years ended December 31, 2022, 2021 and 2020. The Parent records its investments
in its subsidiaries under the equity method of accounting. Such investments are presented in the selected condensed consolidating balance
sheets of the Parent as "investments in non-VIE subsidiaries" and "equity in the VIE and its subsidiaries through the
VIE agreements" and the profit of the subsidiaries is presented as "Income for Non-VIE subsidiaries" and "Income
for VIE and its subsidiaries" in the selected condensed consolidating statements of operations.
SELECTED CONDENSED CONSOLIDATING STATEMENTS
OF OPERATIONS
For the Year Ended December 31, 2022
Parent
HiTek HK
WFOE
and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Revenues
$
-
$
-
$
353,836
$
6,228,595
$
(153,823
)
$
6,428,608
Cost of revenues
$
-
$
-
$
(212,995
)
$
(2,832,393
)
$
153,823
$
(2,891,565
)
Income for Non-VIE subsidiaries
$
1,798,894
$
1,801,042
$
-
$
-
$
(3,599,936
)
$
-
Income for VIE and its subsidiaries
$
-
$
-
$
1,684,992
$
-
$
(1,684,992
)
$
-
Net income
$
1,415,745
$
1,798,894
$
1,801,042
$
1,684,992
$
(5,284,928
)
$
1,415,745
Comprehensive income
$
1,415,745
$
1,798,894
$
1,803,198
$
667,389
$
(5,284,928
)
$
400,298
For the Year Ended December 31, 2021
Parent
HiTek HK
WFOE
and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Revenues
$
-
$
-
$
53,344
$
6,473,638
$
(65,819
)
$
6,461,163
Cost of revenues
$
-
$
-
$
(104,115
)
$
(2,542,922
)
$
65,819
$
(2,581,218
)
Income for Non-VIE subsidiaries
$
1,994,595
$
1,997,821
$
-
$
-
$
(3,992,416
)
$
-
Income for VIE and its subsidiaries
$
-
$
-
$
2,061,517
$
-
$
(2,061,517
)
$
-
Net income
$
1,669,357
$
1,994,595
$
1,997,821
$
2,061,517
$
(6,053,933
)
$
1,669,357
Comprehensive income
$
1,669,357
$
1,994,595
$
1,996,896
$
2,352,849
$
(6,053,933
)
$
1,959,764
For the Year Ended December 31, 2020
Parent
HiTek HK
WFOE
and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Revenues
$
-
$
-
$
-
$
5,804,727
$
-
$
5,804,727
Cost of revenues
$
-
$
-
$
-
$
(2,633,455
)
$
-
$
(2,633,455
)
Income for Non-VIE subsidiaries
$
1,733,051
$
1,734,927
$
-
$
-
$
(3,467,978
)
$
-
Income for VIE and its subsidiaries
$
-
$
-
$
1,735,341
$
-
$
(1,735,341
)
$
-
Net income
$
1,688,859
$
1,733,051
$
1,734,927
$
1,735,341
$
(5,203,319
)
$
1,688,859
Comprehensive income
$
1,688,859
$
1,733,051
$
1,734,901
$
2,257,281
$
(5,203,319
)
$
2,210,773
36
SELECTED CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2022
Parent
HiTek HK
WFOE
and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Cash and cash equivalents
$
226,578
$
6,457
$
126,420
$
843,705
$
-
$
1,203,160
Total current assets
$
586,420
$
6,457
$
242,429
$
12,747,913
$
(1,481,061
)
$
12,102,158
Investments in non-VIE subsidiaries
$
14,299,036
$
14,399,652
$
-
$
-
$
(28,698,688
)
$
-
Equity in the VIE and its subsidiaries Through the VIE Agreements
$
-
$
-
$
14,346,554
$
-
$
(14,346,554
)
$
-
Total non-current assets
$
14,299,036
$
14,399,652
$
14,350,741
$
9,102,933
$
(43,049,429
)
$
9,102,933
Total Assets
$
14,885,456
$
14,406,109
$
14,593,170
$
21,850,846
$
(44,530,490
)
$
21,205,091
Total Liabilities
$
1,358,930
$
20,000
$
193,518
$
7,504,292
$
(1,398,175
)
$
7,678,565
Total Shareholders' Equity
$
13,526,526
$
14,386,109
$
14,399,652
$
14,346,554
$
(43,132,315
)
$
13,526,526
Total Liabilities and Shareholders' Equity
$
14,885,456
$
14,406,109
$
14,593,170
$
21,850,846
$
(44,530,490
)
$
21,205,091
As of December 31, 2021
Parent
HiTek HK
WFOE
and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Cash and cash equivalents
$
509,728
$
8,605
$
86,664
$
1,486,311
$
-
$
2,091,308
Total current assets
$
969,570
$
8,605
$
218,969
$
13,425,543
$
(1,655,548
)
$
12,967,139
Investments in non-VIE subsidiaries
$
13,515,589
$
13,740,060
$
-
$
-
$
(27,255,649
)
$
-
Equity in the VIE and its subsidiaries Through the VIE Agreements
$
-
$
-
$
13,805,168
$
-
$
(13,805,168
)
$
-
Total non-current assets
$
13,515,589
$
13,740,060
$
13,809,284
$
4,173,234
$
(41,064,933
)
$
4,173,234
Total Assets
$
14,485,159
$
13,748,665
$
14,028,253
$
17,598,777
$
(42,720,481
)
$
17,140,373
Total Liabilities
$
1,358,930
$
20,000
$
288,193
$
3,793,609
$
(1,446,587
)
$
4,014,145
Total Shareholders' Equity
$
13,126,229
$
13,728,665
$
13,740,060
$
13,805,168
$
(41,273,894
)
$
13,126,228
Total Liabilities and Shareholders' Equity
$
14,485,159
$
13,748,665
$
14,028,253
$
17,598,777
$
(42,720,481
)
$
17,140,373
SELECTED CONDENSED CONSOLIDATING STATEMENTS
OF CASH FLOWS
For the Year Ended December 31, 2022
Parent
HiTek HK
WFOE and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Net cash (used in) provided by operating activities
$
(283,149
)
$
(2,148
)
$
47,909
$
4,061,438
$
-
$
3,824,050
Net cash (used in) provided by investing activities
$
-
$
-
$
-
$
(7,349,231
)
$
-
$
(7,349,231
)
Net cash provided by financing activities
$
-
$
-
$
-
$
2,749,498
$
-
$
2,749,498
37
For the Year Ended December 31, 2021
Parent
HiTek HK
WFOE and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Net cash (used in) provided by operating activities
$
(276,777
)
$
(3,226
)
$
69,801
$
(278,773
)
$
274,400
$
(214,575
)
Net cash (used in) provided by investing activities
$
(10,000
)
$
-
$
-
$
392,254
$
17,752
$
400,006
Net cash provided by financing activities
$
280,300
$
10,000
$
7,752
$
-
$
(298,052
)
$
-
For the Year Ended December 31, 2020
Parent
HiTek HK
WFOE and its
Subsidiary
VIE and its
Subsidiaries
Eliminations
Consolidated
Net cash (used in) provided by  operating activities
$
(290,054
)
$
(1,876
)
$
(414
)
$
1,527,162
$
698,032
$
1,932,850
Net cash used in investing activities
$
-
$
-
$
-
$
(981,392
)
$
116,345
$
(865,047
)
Net cash provided by financing activities
$
745,570
$
-
$
7,345
$
-
$
(752,915
)
$
-
For the year ended December 31, 2022 and 2021,
net cash provided by financing activities of HiTek Global Inc., or the "parent", was $nil and $280,300, which was mainly because
that parent received sales collection dominated in USD on behalf of the VIE and its subsidiaries.
LONG-TERM INVESTMENTS ROLL-FORWARD
Investments
in Non-VIE
subsidiaries and
VIE and its
subsidiaries
As of December 31, 2019
$
8,975,622
Equity pick-up during the period
1,733,051
Foreign currency translation adjustment
521,914
As of December 31, 2020
11,230,587
Equity pick-up during the period
1,994,595
Foreign currency translation adjustment
290,407
As of December 31, 2021
$
13,515,589
Equity pick-up during the period
1,798,894
Foreign currency translation adjustment
(1,015,447
)
As of December 31, 2022
14,299,036
38
B. Our Business
We are an information technology ("IT")
consulting and solutions service provider focusing on delivering services to business in various industry sectors in China. As of the
date of annual report, we have two lines of businesses— 1) services to small and medium businesses ("SMEs"), which consists
of Anti-Counterfeiting Tax Control System ("ACTCS") tax devices, including Golden Tax Disk ("GTD") and printers,
ACTCS services, and IT services, and 2) services to large businesses, which consists of hardware sales and software sales. We expect to
actively develop our system integration services and online service platform in the near future. Our vision is to become a one-stop consulting
destination for holistic IT and other business consulting services in China.
Value added tax ("VAT") reporting
is mandatory for all business enterprises in China. The ACTCS is one of the two major VAT control systems that a business entity may choose
to comply with the VAT reporting requirements. Developed by the PRC government, ACTCS was intended to effectively eliminate counterfeit
invoices, providing accurate and complete tax information for the regional and national audit system. We provide our customers with the
necessary ACTCS for their value added tax ("VAT") reporting, collection and processing. The VIE entity, HiTek, is authorized
to carry out the sales of GTD. We are authorized by the State Taxation Bureau, Xiamen Branch, as one of the first ACTCS service providers
in the Xiamen metropolitan area. GTD is an ACTCS device necessary for normal operation of ACTCS software. The purchase of GTD is allowed
only in conjunction with the use of the ACTCS software and its supporting services. Currently, there are three ACTCS services providers
for Xiamen business enterprises, and we are one of them.
While we are confident that our competitive strengths
will continue improving our business, we are aware of the challenges that our business faces, especially the challenges in our services
to SMEs which are exempted from the ACTCS services. The services provided to the SMEs are restricted in the Xiamen metropolitan areas
since authorization by the State Taxation Bureau, Xiamen Branch to provide ACTCS services is required. Prices of GTD and ACTCS annual
service fees are regulated and subject to the State Tax Administration's pricing mandates. We are not able to adjust such pricing
and as such our profit margin is limited. The Chinese tax regulators have been rolling out electronic invoicing starting from 2018. The
electronic invoices enable enterprises to apply for, issue, transfer and check the invoices through the unified online electronic invoice
management system of the Chinese Tax authority. Electronic invoices are very useful in helping business entities reduce operating costs
and streamline service process, since they do not involve printing, storage and postage procedures. From January 21, 2021, new taxpayers
can receive electronic tax control ukey for free from the Tax authority. Increased use of electronic invoices and the free distribution
of GTD will reduce our annual service fee revenue and thus negatively affect our total revenue. Our client base growth may be limited
in spite of our marketing efforts, since it is beyond our control how many new SMEs will open each year in the Xiamen metropolitan area.
Complementing our physical service center, we
started our developing online service platform in 2018 to enable businesses in the Xiamen metropolitan area to securely process VAT reporting
and payment from their desktop virtually anytime and anywhere. Currently, our customers range from small, medium to large enterprises
across industries in the Xiamen metropolitan area. Coupled with our first-mover advantage, this broad applicability has been driving our
client base, resulting in around 54,872 active users, or approximately 27.3% of Xiamen's tax collection market as of December 31,
2022, according to the Xiamen Province Taxation Bureau's statistics. We plan to offer business management service, such as agent
accounting services and online IT outsourcing services, to the SME clients using our ACTCS services. We also plan to expand our service
to large businesses to other geographic regions.
In April 2021, WFOE established a wholly-owned
subsidiary, Haitian Weilai under the laws of the PRC to integrate tax invoicing management services from Hitek to Haitian Weilai.
As part of the services provided to large businesses,
HiTek currently sells Communication Interface System ("CIS"), its self-developed software which provides embedded system interface
solutions for large businesses. CIS is a universal embedded interface system used in petrochemical and coal businesses to collect industrial,
electricity, facility pressure and temperature statistics and convert to readable format for analytical purposes.
39
As part of our services to large businesses, Huasheng
sold hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers, cameras
and monitors. After we launched CIS sales, we also introduced our hardware products to our CIS users. Our major business strategy in the
market is to connect and source through exclusive relationships with manufacturers so that Huasheng can offer competitively priced hardware.
From the beginning of 2022, Huasheng transferred the above business to the VIE. We plan to market large scale hardware integration systems
such as router for commercial use, industrial switch, server, large internet firewall etc. in the future. We established the online support
system in the beginning of 2018. The online system further enhances our customer experience, which is complemented by highly trained professionals
and attractive physical store environment.
Services
For the year ended December 31, 2022, HiTek's
two business lines operated three revenue streams. Within the first business line, the services to large businesses, including the hardware
sales, were 39% of the total revenue, and the software sales were for 33% of the total revenue. The second business line, ACTCS devices
and services, was 28% of the total revenue.
For the year ended December 31, 2021, HiTek's
two business lines operated in three revenue streams. Within the first business line, the services to large businesses, including hardware
sales, accounted for 38% of total revenue and the software sales were 32% of total revenue. The second business line, ACTCS devices and
services, were 31% of the total revenue.
In recent years, the Chinese tax regulators have
been rolling out an electronic invoicing system. Electronic invoices enable enterprises to apply for, issue, transfer and check invoices
through the unified online electronic invoice management system of Chinese Tax authority. Electronic invoices are very useful in helping
business entities reduce operating costs and streamline service process, since they do not involve printing, storage and postage procedures.
From January 21, 2021, new taxpayers can receive electronic tax control ukey for free from the Tax authority. Increased use of electronic
invoices and the free distribution of GTD will reduce our annual service fee revenue and thus negatively affect our total revenue. Our
client base growth may be limited in spite of our diligent marketing efforts, since it is beyond our control how many new SMEs will open
each year in the Xiamen metropolitan area.
ACTCS Device and Services
For ACTCS supporting services, we charge fees
on a yearly basis. This service guarantees smooth functions of ACTCS software covers any technical breakdowns related to the ACTCS software.
For tax control system risk investigation service, we charge a one-time service charge for each investigation request.
Our ACTCS device consist primarily of selling
GTD. For ACTCS devices sales, we charge one a piece-by-piece basis.
Revenue generated from our ACTCS device and services
was 30.5% and 28.0%, respectively, of the total revenue derived from our businesses for the years ended December 31, 2021 and 2022.
In January 2019, we began to operate new service
areas such as online agent accounting platforms and online IT outsourcing platforms. We intend to actively grow such general business
management services.
Software Sales
For our software sales, we sell our self-developed
Communication Interface System ("CIS"). This software provides embedded system interface solutions for large businesses. CIS
is a universal embedded interface system used in petrochemical and coal businesses to collect industrial, electricity, facility pressure
and temperature statistics and convert to readable format for analytical purposes. Currently, almost all of the software sales revenue
comes from sales of CIS. We do not resell any software developed by any third party.
Revenue generated from our software sales was 31.8% and 33.0%, respectively,
of the total revenue derived from our businesses for the years ended December 31, 2021 and 2022.
40
Hardware Sales
We also generate revenue from our hardware sales,
which includes sales of computer hardware such as laptops, printers, desktop computers and associated accessories, together with certain
internet servers, cameras and monitors. We have established a carefully designed sales network in the Xiamen metropolitan area that combines
online platforms developed in the beginning of 2018 and our retail storefront. We have developed our hardware sale client base over time
via our marketing from our physical store. After we launched CIS sales, we also introduced our hardware products to our CIS users. We
plan to market large scale hardware integration systems such as router for commercial use, industrial switch, server, large internet firewall
etc. to large businesses in the future.
Revenue generated from our hardware sales was
37.7% and 39.0%, respectively, of the total revenue derived from our businesses for the years ended December 31, 2021 and 2022.
Our Technology
We provide effective information technology services
and secured tax solutions to business enterprises across a variety of monetization models. We have a dedicated team of three highly skilled
in-house IT specialists, which includes three full-time IT professionals responsible for research and development. The following is a
list of our self-developed software.
Technology
Completion Date
Certificate Date
General Functions
Mobile Invoice System ("MIS")
October 15, 2013
June 15, 2015
MIS enables our clients to generate invoices anywhere, anytime.
Micro Service System ("MSS")
July 30, 2014
June 16, 2015
MSS resolves service issues between service providers and our customers.
Secured Coordination System ("SCS")
April 10, 2013
June 16, 2015
SCS provides real-time backup for the invoicing information generated by the users.
Communication Interface System ("CIS")
April 17, 2014
June 15, 2015
CIS is based on LINUX, which is a general embedded interface system used in petrochemical and coal enterprises. The system can be used to communicate the RCTX-X module and collect data from work diagrams, electricity diagrams, pressure diagrams and temperature diagrams. It can generate the data from the txt, and then copy and import it to the software of the windows platform to display analysis.
Universal Invoice System ("UIS")
February 13, 2014
June 16, 2015
AIS facilitates data transmission between users' management and financial systems and ACTCS software.
Invoice Query Management System ("IQMS")
October 30, 2013
June 15, 2015
IQMS facilitates users' invoice inquiries and verification process.
Micro-App System ("MAS")
August 10, 2017
December 1, 2017
MAS diagnoses and resolves user-end application issues.
WeChat Cloud Business System ("WCBS")
May 10, 2017
December 1, 2017
WCBS facilitates online transactions between the Company and its clients.
Collaborative Management System ("CMS")
October 10, 2017
December 1, 2017
CMS facilitates our clients' business and data management process amongst multiple operating systems.
HiTek APP application software
November 25, 2018
December 10, 2018
It is another name of "enterprise service platform". It worked as HiTek's online service platform, including IT services, sales and financial and tax services, etc.
HiTek network background management system
November 25, 2018
December 10, 2018
It is used for backstage unified management of HiTek's app and HiTek online service platform.
Remote monitoring system
October 19, 2018
October 19, 2018
It is used for remote monitoring, debugging and early warning of the App.
41
Customers
We rely upon several of our large customers from
whom we generated substantial revenue each year, and the composition of our largest customers has changed from year to year. For the year
ended December 31, 2022, two customers accounted for 49% of total HiTek's revenues, the largest of which represented 36%. For the
year ended December 31, 2021, two customers accounted for 42% of total HiTek's revenues, the largest of which represented 28%. While
we believe that one or more of our major customers could account for a significant portion of our sales for at least the year 2021, we
anticipate that our customer base will continue to expand and that in the future we will be less dependent on major customers.
Suppliers
Aside from a set number of suppliers from whom
we purchase general hardware for our resale business, we are required by the government to purchase our ACTCS devices from specific suppliers.
For the year ended December 31, 2022, four suppliers accounted for 55% of the total purchases. For the year ended December 31, 2021, two
suppliers accounted for 21% of the total purchases.
We enter into procurement agreements in the ordinary
course of business with our suppliers, pursuant to a form of supply order typically on a "deal by deal" basis.
Marketing and Sales
Since inception, our user base in both the services
to large businesses and service to SMEs has grown primarily through word of mouth recommendations, digital advertising, and social media
advertising. We accumulated a loyal customer base to our hardware sales via our physical store. In general, we focus on delivering a superior
user experience through better products and services, which we believe can expand our user base and enhance our brand. We do not have
a specific budget for advertising since we have built our brand with very low marketing costs.
While we have benefited from the effects of word
of mouth recommendation, digital advertising, and social media advertising, we are considering cooperating with professional advertising
companies to initiate campaigns designed to further promote our brand and services. We will finalize a definitive plan for this marketing
initiation after our initial public offering on NASDAQ.
With respect to the services to SMEs, given the
geographic limitation of our ACTCS services, we plan to focus on marketing and promotion of the business management service, which will
include agent accounting services, online IT outsourcing services, IT internet operation and maintenance service and equipment purchasing
and delivery Door-to-Door service to the SMEs. On the services to large business side, we plan to focus on marketing and promotion of
hardware integration system going forward.
Intellectual Property
Protection of our intellectual property is a strategic
priority for our business. We rely on a combination of copyright, trademark and trade secret laws, as well as confidentiality agreements,
to establish and protect our proprietary rights. Except for Chinese government developed ACTCS software used in connection with our day-to-day
operations, we generally do not rely on third-party licenses of intellectual property for use in our business
.
Our research and development activities ("R&D")
are project based and the number of projects we work on varies annually. As of December 31, 2022, we had 3 full-time R&D professionals.
We were successful in developing 12 software products and had obtained 6 Registration of Computer Software Copyright Certificates (the
"Certificates") in 2015, 3 Certificates in 2017 and 3 Certificates in 2018. Our Certificates last indefinitely. In the beginning
of 2018, we established 3 joint IT research collaborative syndicates with other Internet technology companies for innovative Internet
service projects such as the Tax Service Mobile APP, WeChat Cloud Charging System and Remote monitoring system. In addition to the foregoing
protections, we generally control access to and use of our proprietary and other confidential information through the use of internal
and external controls, such as use of confidentiality agreements with our employees and outside consultants.
42
Corporate Information
Our principal executive offices are located at
Unit 304, No. 30 Guanri Road, Siming District, Xiamen City, Fujian Province, PRC, and our phone number is +86 592-5395967. We maintain
a corporate website at
http://www.xmhitek.com/
. The information contained in, or accessible from, our website or any other website
does not constitute a part of this annual report.
C. Organizational Structure
Our corporate structure as of the date of this
annual report is as follows:
43
D. Property
Our headquarters are located at Unit 304, No.
30 Guanri Road, Siming District, Xiamen City, Fujian Province, PRC, where we own the office building with a floor area of 495 square meters.
This includes our sales and marketing, communication and business development personnel and our management and operations facilities and
customer services.
We currently lease 83 square meters of office
space at Room 101, NO.77 Tianhu Road, Siming District, Xiamen, China. The lease expires on November 19, 2023 and can be renewed subject
to mutual agreements. In addition, the Company also leased three other locations in Xiamen as warehouses.
Item 4A. Unresolved Staff Comments
Not required.
Item 5. Operating and Financial Review and
Prospects
A. Operating Results
The following discussion and analysis should be
read in conjunction with our financial statements and related notes thereto.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This report contains certain statements that
may be deemed "forward-looking statements" within the meaning of United States of America securities laws.  All
statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project,
believe or anticipate and similar expressions or future conditional verbs such as will, should, would, could or may occur in the future
are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of
their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe
to be appropriate.
These statements include, without limitation,
statements about our anticipated expenditures, including those related to general and administrative expenses; the potential size
of the market for our services, future development and/or expansion of our services in our markets, our ability to generate revenues,
our ability to obtain regulatory clearance and expectations as to our future financial performance. Our actual results will likely differ,
perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including: our need and
ability to raise additional cash. The forward-looking statements included in this report are subject to a number of additional material
risks and uncertainties, including but not limited to the risks described in our filings with the Securities and Exchange Commission.
The following discussion and analysis of our
financial condition and results of operations should be read together with our financial statements and the related notes to those statements
included in this filing. In addition to historical financial information, this discussion may contain forward-looking statements reflecting
our current plans, estimates, beliefs and expectations that involve risks and uncertainties. As a result of many important factors, our
actual results and the timing of events may differ materially from those anticipated in these forward-looking statements.
Overview
We are an offshore holding company incorporated
in the Cayman Islands. As a holding company with no material operations, our operations were conducted in China by our subsidiaries and
through VIE Agreements, with HiTek and its subsidiaries. This is an offering of the ordinary shares of the offshore holding company in
Cayman Islands. You are not investing in HiTek, the VIE. Neither we nor our subsidiaries own any share in HiTek. The VIE Agreements are
designed so that the operations of the VIE are solely for the benefit of the Company. As such, through the VIE Agreements among WFOE,
HiTek and HiTek's shareholders, we are deemed to have a controlling financial interest in, and be the primary beneficiary of, the
VIE for accounting purposes only and must consolidate the VIE because it met the conditions under U.S. GAAP to consolidate the VIE. However,
the VIE agreements have not been tested in a court of law, and the VIE structure cannot completely replicate a foreign investment in China-based
companies, as the investors will not and may never hold equity interests in the Chinese operating entities. Instead, the VIE structure
provides contractual exposure to foreign investment in us. See "Business — Contractual Arrangements between WFOE and
HiTek" for a summary of these VIE Agreements.
44
We are an IT consulting and solutions service
provider focusing on delivering services to business in various industry sectors in China. As of the date of this annual report, we have
two lines of businesses— 1) services to small and medium businesses ("SMEs"), which consists of Anti-Counterfeiting
Tax Control System ("ACTCS") tax devices, ACTCS services, and 2) services to large businesses, which consists of hardware
sales and software sales. We expect to actively develop our system integration services and online service platform in the near future.
Our vision is to become a one-stop consulting destination for holistic IT and other business consulting services in China.
VAT reporting is mandatory for all business enterprises
in China. The ACTCS is one of the two major VAT control systems that a business entity may choose to comply with the VAT reporting requirements.
Developed by the government-owned entity China Aerospace Science and Technology Corporation ("CASTC"), ACTCS was intended
to effectively eliminate counterfeit invoices, providing accurate and complete tax information for the regional and national audit system.
The VIE entity, HiTek, is authorized to carry out the sales of GTD. We provide our customers with the necessary ACTCS for their VAT reporting,
collection and processing. We are authorized by the State Taxation Bureau, Xiamen Branch, as one of the first ACTCS service providers
in the Xiamen metropolitan area. GTD is an ACTCS hardware necessary for normal operation of ACTCS software. The purchase of GTD is allowed
only in conjunction with the use of the ACTCS software and its supporting services. Currently, there are three ACTCS services providers
for Xiamen business enterprises, and we are one of them.
While we are confident that our competitive strengths
will continue improving our business, we are keenly aware of the challenges that our business faces, especially the challenges in our
services to SMEs which are stemmed from the ACTCS services. The services provided to the SMEs are restricted in the Xiamen metropolitan
areas since authorization by the State Taxation Bureau, Xiamen Branch to provide ACTCS services is required which is the cornerstone of
our services to the SMEs. Prices of GTD and ACTCS annual service fees are regulated and subject to the State Tax Administration's
pricing mandates. We are not able to adjust such pricing and as such our profit margin is limited. The Chinese tax regulators have been
rolling out the electronic invoicing system starting from 2018. The electronic invoices enable enterprises to apply for, issue, transfer
and check the invoices through the unified online electronic invoice management system of Chinese Tax authority. Electronic invoices are
very useful in helping business entities reduce operating costs and streamline service process, since they do not involve printing, storage
and postage procedures. From January 21, 2021, new taxpayers can receive electronic tax control ukey for free from the Tax authority.
Increased use of electronic invoices and the free distribution of GTD will reduce our annual service fee revenue and thus negatively affect
our total revenue. Our client base growth may be limited in spite of our diligent marketing efforts, since it is beyond our control how
many new SMEs will open each year in the Xiamen metropolitan area.
Complementing our physical service center, we
started developing online service platform in 2018. As of January 2019, the online service platform enables tens of thousands of businesses
in the Xiamen metropolitan area to securely process. Coupled with our first-mover advantage, this broad applicability has been driving
our client base, resulting in around 54,872 active users, or approximately 27.3%   of Xiamen's tax device service market
shares as of December 31, 2022 according to the Xiamen Province Taxation Bureau's statistics. We plan to offer business management
service, such as agent accounting services and online IT outsourcing services, to the SME clients using our ACTCS services. We also plan
to expand our service to large businesses to other geographic regions.
In April 2021, WFOE established a wholly-owned
subsidiary, Haitian Weilai under the laws of the PRC.  The strategy purpose of establishing the new subsidiary is for the integration
of tax invoicing management services from Hitek to Haitian Weilai.
As part of the services to large businesses, HiTek
currently sells Communication Interface System ("CIS"), its self-developed software which provides embedded system interface
solutions for large businesses. CIS is a universal embedded interface system used in petrochemical and coal businesses to collect industrial,
electricity, facility pressure and temperature statistics and convert to readable format for analytical purposes.
45
As part of our services provided to large businesses,
Huasheng sold hardware such as laptops, printers, desktop computers and associated accessories, together with certain internet servers,
cameras and monitors. After we launched CIS sales, we also introduced our hardware products to our CIS users. Our major business strategy
in the market is to connect and source through exclusive relationships with manufacturers so that Huasheng can offer competitively priced
hardware. From the beginning of 2022, Huasheng transferred the above business to the VIE. We plan to market large scale hardware integration
systems such as router for commercial use, industrial switch, server, large internet firewall etc. in the future. We have established
the online support system in the beginning of 2018. The online system further enhances our customer experience, which is complemented
by highly trained professionals and attractive physical store environment.
For the year ended December 31, 2022, HiTek's
two business lines operated three revenue streams. The first business line, services to large businesses, include hardware sales, was
39.0% of the total revenue, and the software sales, was 33.0% of the total revenue, and the second business line, ACTCS devices and services,
was 28.0% of the total revenue. For the year ended December 31, 2021, HiTek's two business lines operated in three revenue streams
the first business line, services to large businesses, include hardware sales, accounting for 37.7% of total revenue, and software sales,
accounting for 31.8% of total revenue, and the second business line, ACTCS devices and services accounted for 30.5% of the total revenue.
In recent years, the Chinese tax regulators have been rolling out the electronic invoicing system.
In early December 2022, China announced a nationwide
loosening of its zero-COVID policy, and the country may face a wave in infections after the lifting of these restrictions. 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 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.
Holding Company Structure
Overview
We are a holding company with no material operations
of our own. We conduct substantially all of our business in China through contractual arrangements with Xiamen Hengda HiTek Computer Network
Co., Ltd., the variable interest entity, and its subsidiaries. See "Business — Contractual Agreements between WFOE
and HiTek" for a summary of these VIE arrangements. As of December 31, 2022, the VIE and its subsidiaries accounted for 96% and
98% of our total assets and total liabilities, respectively. As of December 31, 2021, the VIE and its subsidiaries accounted for 93% and
100% of our total assets and total liabilities, respectively.
As of December 31, 2020, the variable
interest entities accounted for 87% and 100% of our total assets and total liabilities, respectively.
As of December 31,
2022, 2021, and 2020, $955,941, $1,557,325
and $1,335,727
of cash was denominated in
RMB, respectively.
Conducting our operations through contractual
arrangements with the variable interest entities entails a risk that we may lose the power to direct the activities that most significantly
affect the economic performance of the variable interest entities, which may result in our being unable to consolidate their financial
results with our results and may impair our access to their cash flow from operations and thereby reduce our liquidity. See "Risk
Factors — Risks Relating to Doing Business in the PRC" for more information, including the risk factors titled "Our
contractual arrangements with HiTek and its shareholders may not be effective in providing control over HiTek" and "Because
we conduct our business through HiTek, a VIE, if we fail to comply with applicable law, we could be subject to severe penalties and our
business could be adversely affected."
In addition, any transfer of funds from us to
any of our subsidiaries in China or VIEs, either as a shareholder loan or as an increase in registered capital, is subject to certain
statutory limit requirements and registration or approval of the relevant PRC governmental authorities, including the relevant administration
of foreign exchange and/or the relevant examining and approval authority.  Our subsidiaries in China and VIEs are not permitted under
PRC law to directly lend money to one another.
Therefore, it is difficult to change our capital
expenditure plans once the relevant funds are remitted from our company to our subsidiaries in China or VIEs.  These limitations
on the free flow of funds between us and our subsidiaries in China and VIEs could restrict our ability to act in response to changing
market conditions and reallocate funds internally in a timely manner.
46
Dividend Distributions
We intend to keep any future earnings to re-invest
in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.
Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided
that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary
course of business. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent
on receipt of funds from our Hong Kong subsidiary, HiTek HK.
Current PRC regulations permit our indirect subsidiaries
in China to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits
each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China
is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be
set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other
ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve
funds are not distributable as cash dividends except in the event of liquidation.
The PRC government also imposes controls on the
conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in
completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits,
if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict
their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations
through the current VIE Agreements, we may be unable to pay dividends on our Ordinary Shares.
Cash dividends, if any, on our Ordinary Shares
will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas
shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.
In order for us to pay dividends to our shareholders,
we will rely on payments made from HiTek to WFOE, pursuant to VIE Agreements between them, and the distribution of such payments to HiTek
HK as dividends from WFOE. Certain payments from our HiTek to WFOE are subject to PRC taxes, including business taxes and VAT.
Pursuant to the Arrangement between Mainland China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance
Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project.
However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation
that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold
no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current
practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding
tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that
we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding
tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiary to its immediate holding
company, HiTek HK. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong
tax authority. HiTek HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to HiTek HK. See
"Risk Factors - There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary,
and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits."
47
Risks in relation to the VIE structure
The VIE structure through contractual arrangements
has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently
subject to foreign investment restrictions in China. The MOFCOM published a discussion draft of the proposed PRC Foreign Investment Law
("FIL") in January 2015, or the 2015 Draft FIL, according to which, variable interest entities that are controlled via contractual
arrangements would also be deemed as foreign-invested entities, if they are ultimately "controlled" by foreign investors.
In March 2019, the PRC National People's Congress promulgated the PRC FIL, and in December 2019, the State Council promulgated the
Implementing Rules of PRC FIL, or the Implementing Rules, to further clarify and elaborate the relevant provisions of the PRC FIL. The
PRC FIL and the Implementing Rules both became effective from January 1, 2020 and replaced the major previous laws and regulations governing
foreign investments in the PRC. Pursuant to the PRC FIL, "foreign investments" refer to investment activities conducted by
foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or indirectly in the
PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely
or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights
and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other
investors, and (iv) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council.
The PRC FIL and the Implementing Rules do not introduce the concept of "control" in determining whether a company would be
considered as a foreign-invested enterprise, nor do they explicitly provide whether the VIE structure would be deemed as a method of foreign
investment. However, the PRC FIL has a catch-all provision that includes into the definition of "foreign investments" made
by foreign investors in China in other methods as specified in laws, administrative regulations, or as stipulated by the State Council,
and as the PRC FIL and the Implementing Rules are newly adopted and relevant government authorities may promulgate more laws, regulations
or rules on the interpretation and implementation of the PRC FIL, the possibility cannot be ruled out that the concept of "control"
as stated in the 2015 Draft FIL may be embodied in, or the VIE structure adopted by us may be deemed as a method of foreign investment
by, any of such future laws, regulations and rules. If our consolidated VIE was deemed as a foreign-invested enterprise under any of such
future laws, regulations and rules, and any of the businesses that we operate would be in any "negative list" for foreign
investment and therefore be subject to any foreign investment restrictions or prohibitions, further actions required to be taken by us
under such laws, regulations and rules may materially and adversely affect our business, financial condition and results of operations.
Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to
existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner,
or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could
materially and adversely affect our current corporate structure, business, financial condition and results of operations.
Tabular Disclosure of Contractual Obligations
Below is a table setting forth all of our contractual
obligations as of December 31, 2022:
Payment Due by Period
Less than
More than
Contractual Obligations
Total
1 year
1 – 3 years
3 – 5 years
5 years
Operating lease obligations
$
6,948
$
3,474
$
3,474
$
-
$
-
Loan Obligations
Principal
2,677,628
506,578
2,171,050
-
-
Interest
285,855
285,855
-
-
-
Total
$
2,970,431
$
795,907
$
2,174,524
$
-
$
-
Below is a table setting forth all of our contractual
obligations as of December 31, 2021:
Payment Due by Period
Less than
More than
Contractual Obligations
Total
1 year
1 – 3 years
3 – 5 years
5 years
Operating lease obligations
$
44,256
$
26,051
$
18,205
$
-
$
-
Total
$
44,256
$
26,051
$
18,205
$
-
$
-
48
Below is a table setting forth all of our contractual
obligations as of December 31, 2020:
Payment Due by Period
Less than
More than
Contractual Obligations
Total
1 year
1 – 3 years
3 – 5 years
5 years
Operating lease obligations
$
84,059
$
44,740
$
39,319
$
-
$
-
Total
$
84,059
$
44,740
$
39,319
$
-
$
-
Consolidation
The Company provides substantially all of its
services to large businesses and SMEs in China via the VIE and its subsidiaries, due to PRC legal restrictions of foreign ownership in
certain sectors. Substantially all of the Company's revenues, costs and net income in China are directly or indirectly generated
through the VIE and its subsidiaries. The Company has signed various agreements with the VIE and legal shareholders of the VIE to allow
the transfer of economic benefits from the VIE to the Company and to direct the activities of the VIE.
Total assets and liabilities presented on the
Company's consolidated balance sheets and revenue, expense, net income presented on consolidated statement of operations and comprehensive
income as well as the cash flow from operating, investing and financing activities presented on the consolidated statement of cash flows
are substantially the financial position, operation and cash flow of the Company's VIE and VIE's subsidiaries. The Company
has not provided any financial support to the VIE and the VIE's subsidiaries for the years ended December 31, 2022, 2021 and 2020.
As of December 31, 2022, the VIE and its subsidiaries accounted for 96% and 98% of our total assets and total liabilities, respectively.
As of December 31, 2021, the VIE and its subsidiaries accounted for 93% and 100% of our total assets and total liabilities, respectively.
As of December 31, 2020, the VIEs accounted for an aggregate of 87% and 100% of our total assets
and total liabilities, respectively.
As of December 31, 2022 and December 31, 2021, $955,941, $1,557,325
and
$1,335,727
of cash and equivalents were denominated in RMB, respectively. The following table sets forth the assets, liabilities,
results of operations and changes in cash, cash equivalents the VIE and its subsidiaries taken as a whole, which were included in the
Company's consolidated balance sheets and statements of comprehensive income and statements of cash flows with intercompany transactions
eliminated:
As of December 31,
2022
2021
2020
Current assets
$
11,276,852
$
11,779,996
$
8,952,038
Total non-current assets
$
9,102,933
$
4,173,234
$
3,628,891
Total Assets
$
20,379,785
$
15,953,230
$
12,580,929
Total liabilities
$
5,329,843
$
3,793,609
$
3,238,595
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
$
-
$
-
49
Revenue Recognition
The Company follows ASU 2014-09, Topic 606, "Revenue
from Contracts with Customers" and its related amendments (collectively referred to as "FASB ASC 606") for its new 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. Under 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 a 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, 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.
50
Revenue from 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 before the
services are 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 service
fees 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.
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.
51
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 were served. The Company gave customers different credit period considering the
above factors. For 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 six months
credit period.
In accordance with ASC 210-10-45, the non-current
accounts receivable and non-current accounts receivable from related parties are 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 a one-year time period as the basis for the separation of current and non-current assets.
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.
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 is 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.
52
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
consolidated financial statements ("CFS").
The Company does not believe other recently issued
but not yet effective accounting standards, if currently adopted, would have a material effect on our CFS.
Results of Operations
The following consolidated results of operations
include the results of operations of the Company, its wholly owned subsidiary and consolidated VIEs.
Our historical reporting results are not necessarily
indicative of the results to be expected for any future period.
Year Ended December 31, 2022 Compared to
Year Ended December 31, 2021
Revenue
Increase /
Percentage
2022
2021
(Decrease)
Change
Hardware
$
2,504,426
$
2,434,694
$
69,732
2.9
%
CIS Software
2,120,532
2,056,106
64,426
3.1
%
Tax devices and service
1,803,650
1,970,363
(166,713
)
(8.5
)%
Total revenues
$
6,428,608
$
6,461,163
$
(32,555
)
(0.5
)%
We have the following three streams - hardware
retail and wholesale, software sales, and ACTCS sales and services. The Hardware sales slightly increase was mainly from small retail
sales. The Software sales consist of software sales and software services. The sales of software slightly increased was due to increase
of maintenance service revenue. Tax Devices and service sales were decreased due to the new policies carried from January 2021 that the
new taxpayers in Xiamen could get free tax Ukeys from the Tax authorization. We expect the tax devices and service sales will be affected
in the future. Our total revenues for the year ended December 31, 2022 were $6,428,608, a decrease of $32,555 or 0.5% from $6,461,163
for the year ended December 31, 2021. The overall decrease in revenue was mainly resulted from the decrease of tax device and service
due to the new policy carried from January 2021.
The Company expects to expand tax control system
risk investigation service for SMEs and also increase orders for software and hardware sales from major customers in 2023.
53
Cost and Margin
Increase /
Percentage
2022
2021
(Decrease)
Change
Total revenues
$
6,428,608
$
6,461,163
$
(32,555
)
(0.5
)%
Cost of revenues
2,891,565
2,581,218
310,347
12.0
%
Gross profit
3,537,043
3,879,945
(342,902
)
(8.8
)%
Margin %
55.0
%
60.1
%
(5.1
)%
Cost of revenue is comprised of (i) the direct
cost of our hardware products purchased from third parties; (ii) logistics-related costs, which primarily include product packaging and
freight-in charges; (iii) third-party royalties paid related to the GTD (iv) compensation for the employees who handle the products and
perform Tax invoicing management services and other costs that are necessary for us to provide the services to our customers; and (v)
outsourcing costs, which primarily include software outsourcing service cost to the third parties.
Cost of revenues increased to $2,891,565 for the
year ended December 31, 2022 from $2,581,218 for 2021. An increase of $310,347 or 12.0%. This increase was mainly due to cost of sales
of software increased in 2022 compared to 2021.
Gross Profit.
Our gross profit decreased to $3,537,043 for the year ended December 31, 2022 from $3,879.945 for 2021. Our gross profit as a
percentage of revenue decreased to 55.0% for the year ended December 31, 2022 from 60.1% for 2021. This was mainly due to the increase
of cost of software,
for
the software maintenance service from March 20, 2021 to July 31, 2021 is
provided by Huoerguosi itself, which resulting in a reduction in costs and a higher GP% in 2021. The Company expects to continue to focus
on projects with high gross profit such as services for SMEs, and at the same time, increase the hardware and software sales of large
customers.
Operating Expenses
Increase /
Percentage
2022
2021
(Decrease)
Change
Selling expenses
$
437,185
$
76,477
$
360,708
471.7
%
% of revenue
6.8
%
1.2
%
5.6
%
-
General and administrative expenses
1,472,648
1,699,934
(227,286
)
(13.4
)%
% of revenue
22.9
%
26.3
%
(3.4
)%
-
Operating expenses
$
1,909,833
$
1,776,411
$
133,422
7.5
%
Selling Expenses
. Selling expenses consist
primarily of shipping and handling costs for products sold and advertisement and marketing expenses for promotion of our products. Selling
expenses increased by 471.7% or $360,708 to $437,185 in the year ended December 31, 2022 from $76,477 in 2021. The increase
was mainly because of the increase of the Company's sales commission in connection with obtaining new orders. Selling expenses were
6.8% of total revenue for the year ended December 31, 2022 and 1.2% of total revenue in 2021. The Company expects to maintain the current
ratio of selling expenses to revenue in 2023.
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 expenses, professional fees, accounting fees, and other miscellaneous expenses incurred in connection with
general operations. General and administrative expenses decreased in 13.4% or $227,286 to $1,472,648 for the year ended December
31, 2022 from $1,699,934 in 2021. The decrease was mainly due to the decrease of bad debt recovery of $124,847, and offset with the
decrease of depreciation expense of $333,857. General and administrative expenses were 22.9% of total revenue for the year ended December
31, 2022 and 26.3% of total revenue in 2021. The Company expects to maintain the current ratio of general and administrative expenses
to revenue in 2023.
54
Net Income
Increase /
Percentage
2022
2021
(Decrease)
Change
Operating income
$
1,627,210
$
2,103,534
$
(476,324
)
(22.6
)%
Total other income
241,753
108,676
133,077
122.5
%
Income before income taxes
1,868,963
2,212,210
(343,247
)
(15.5
)%
Income tax expense
(453,218
)
(542,853
)
89,635
(16.5
)%
Net income
$
1,415,745
$
1,669,357
$
(253,612
)
(15.2
)%
Effective tax rate
24.2
%
24.5
%
0.3
%
Operating income
. Operating income was
$1,627,210 for the year ended December 31, 2022, compared to $2,103,534 for 2021. The decrease in operating income in 2022 was primary
due to the decrease in gross profit.
Other income
. Other income includes government
subsidy income, net investment income (loss), and interest income and expenses. Other income was $241,753 and $108,676 for the years ended
December 31, 2022 and 2021, respectively. The increase was primarily due to the increase of interest income related to the loan receivables
in the amount of $570,707 offset by the increase of interest expense for the borrowings of $285,353.
Income tax expense
. Income tax expense
was $453,218 for the year ended December 31, 2022, compared to $542,853 for 2021. The decrease in income tax expense was due primarily
to the decrease in gross profit.
Effective tax rate
. Effective tax rate
was 24.2% for the year ended December 31, 2022, compared to 24.5% for 2021.
Net income
. As a result of the factors
described above, net income was $1,415,745 for the year ended December 31, 2022, a decrease of $253,612 from net income $1,669,357 for
2021.
Year Ended December
31, 2021 Compared to Year Ended December 31, 2020
Revenue
For the Years Ended December 31,
Increase /
Percentage
2021
2020
(Decrease)
Change
Hardware
$
2,434,694
$
2,360,362
$
74,332
3.1
%
CIS Software
2,056,106
1,053,467
1,002,639
95.2
%
IT Services
-
136,722
(136,722
)
(100
)%
Tax devices and service
1,970,363
2,254,176
(283,813
)
(12.6
)%
Total revenues
$
6,461,163
$
5,804,727
$
656,436
11.3
%
We had the following
four revenue streams - hardware retail and wholesale, software sales, outsourced IT services, and ACTCS sales and services. For the year
ended December 31, 2021, we did not recognize the IT revenue because we could not reasonably be assured of collections of payments, and
we will recognize the IT revenue when cash is collected in the future. From January 21, 2021, the new taxpayers can receive electronic
tax control ukey for free from the Tax authorization, and the hardware sales of golden tax disks have decreased significantly, which was
offset by the increase of tax device service due to the increased demand for electronic invoicing technical service. We expect the tax
devices and service sales will be affected in the future. Our total revenues for the year ended December 31, 2021 were $6,461,163, an
increase of $656,436 or 11.3% from $5,804,727 for the year ended December 31, 2020. The overall increase in revenue was mainly resulted
from the increase of software sales as the business recovery from coronavirus outbreak in 2020.
55
Cost and Margin
For the Years Ended December 31,
Increase /
Percentage
2021
2020
(Decrease)
Change
Total revenues
$
6,461,163
$
5,804,727
$
656,436
11.3
%
Cost of revenues
2,581,218
2,633,455
(52,237
)
(2.0
)%
Gross profit
3,879,945
3,171,272
708,673
22.3
%
Margin %
60.1
%
54.6
%
5.5
%
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 perform IT services and other costs that are necessary for us to provide the services to our customers.
Cost of revenues decreased
to $2,581,218 for the year ended December 31, 2021 from $2,633,455 for the same period in 2020. A decrease of $52,237 or 2.0%. This decrease
was mainly caused by the decrease of IT services sales and costs, and a significant increase in high-margin software revenue.
Gross Profit. Our gross
profit increased to $3,879.945 for the year ended December 31, 2021 from $3,171,272 for the same period in 2020. Our gross profit as
a percentage of revenue increased to 60.1% for the year ended December 31, 2021 from 54.6% for the same period in 2020. This was mainly
due to the increase of sales in software, which has a relatively high gross profit margin compared with other revenue streams. The Company
expects to continue to focus on projects with high gross profit such as services for SMEs, and at the same time, increase the hardware
and software sales of large customers.
Operating Expenses
For the Years Ended December 31,
Increase /
Percentage
2021
2020
(Decrease)
Change
Selling expenses
$
76,477
$
2,012
$
74,465
3,701.0
%
% of revenue
1.18
%
0.03
%
1.15
%
-
General and administrative expenses
1,699,934
1,415,484
284,450
20.1
%
% of revenue
26.3
%
24.4
%
1.9
%
-
Operating expenses
$
1,776,411
$
1,417,496
$
358,915
25.3
%
Selling Expenses
.
Selling expenses consist primarily of shipping and handling costs for products sold and advertisement and marketing expenses for promotion
of our products. Selling expenses increased by 3,701.0% or $74,465 to $76,477 in the year ended December 31, 2021 from $2,012 in the same
period of 2020. The increase was mainly because of the increase of the company's sales commission in connection with obtaining new
orders. Selling expenses were 1.18% of total revenue for the year ended December 31, 2021 and 0.03% of total revenue in the same period
of 2020. The company expects to maintain the current ratio of Selling expenses to revenue in 2022.
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 expenses, professional fees, accounting fees, and other miscellaneous expenses incurred
in connection with general operations. General and administrative expenses increased in 20.1% or $284,450 to $1,699,934 for
the year ended December 31, 2021from $1,415,484 in the same period of 2020. The increase was mainly due to the increase of social
security expense of $52,651 and professional service fee of $371,269, and offset with the decrease of depreciation expense of $22,856
and $95,552 of bad debt provision. General and administrative expenses were 26.3% of total revenue for the year ended December 31, 2021
and 24.4% of total revenue in the same period of 2020. The company expects to maintain the current ratio of G&A expenses to revenue
in 2022.
56
Net Income
For the Years Ended December 31,
Increase /
Percentage
2021
2020
(Decrease)
Change
Operating income
$
2,103,534
$
1,753,776
$
349,758
19.9
%
Total other income
108,676
204,325
(95,649
)
(46.8
)%
Income before income taxes
2,212,210
1,958,101
254,109
13.0
%
Income tax expense
(542,853
)
(269,242
)
(273,611
)
101.6
%
Net income
$
1,669,357
$
1,688,859
$
(19,502
)
(1.2
)%
Effective tax rate
24.5
%
13.8
%
10.8
%
Operating income
.
Operating income was $2,103,534 for the year ended December 31, 2021, compared to $1,753,776 for the same period of 2020. The increase
in operating income in 2021was primary due to the increase in revenue and gross profit.
Other income
.
Other income includes government subsidy income, net investment income (loss), and interest income and expenses. Other income was $108,676
and $204,325 for the year ended December 31, 2021 and 2020, respectively. The decrease was primarily due to the Government subsidies in
the amount of $101,965 for the year ended December 31, 2020, compared with the Government subsidies in the amount of $6,883 for the same
period of 2021.
Income tax expense
.
Income tax expense was $542,853 for the year ended December 31, 2021, compared to $269,242 for the same period of 2020. The increase in
income tax expense was mainly because that the total profit was increased to $2,212,210 for the year ended December 31, 2021 from $1,958,101
in the same period of 2020, and Hitek no longer enjoys preferential tax rates for small and micro businesses in 2021.
Effective tax rate
. Effective tax rate was 24.5% for the year ended December 31, 2021, compared to 13.8% for the same period of 2020.
Net income
. As
a result of the factors described above, net income was 1,669,357 for the year ended December 31, 2021, a decrease of $19,502 from net
income $1,688,859 for the same period of 2020.
B. Liquidity and Capital Resources
Year Ended December 31, 2022 Compared to
Year Ended December 31, 2021
As of December 31, 2022 and 2021, we had cash
of $1,203,160 and $2,091,308 respectively.
Working Capital
. Working capital as of
December 31, 2022 was $7,898,463 compared to $10,178,635 as of December 31, 2021. The decrease was mainly due to a decrease in short-term
investments of $906,667, advances to suppliers of $629,154 and deferred offering cost of $109,121 which offset by an increase in accounts
receivable of $914,104, loan receivable of $808,716 and inventory of $21,649. Current liabilities amounted to $4,203,695 as of December
31, 2022, compared to $2,788,504 as of December 31, 2021. This increase of liabilities was attributable mainly to an increase in accounts
payable of $177,995, deferred revenue of $192,524, loan payable of $506,578 and tax payable of $372,175.
Capital Resources and Capital Needs
. To
date, we have financed our operations primarily through cash flows from operations and third-party loans. With the uncertainty of the
current market, our management believes it is necessary to enhance collection of outstanding accounts receivable and other receivables,
and to be cautious on operational decisions and project selection. Our management believes that our current operations can satisfy our
daily working capital needs.
During 2020, the Company engages an external vendor
to develop software APP. As of December 31, 2022, the Company paid product development costs of $421,679 and the total contract amount
was $434,210. In March 2021, the Company signed a supplementary agreement to postpone the official launch after closing of the Company's
initial public offering. The Company had made a payment of $119,405 (VAT included) in January 2022 for the development costs and will
make the final payment of $12,531 in 2023.
57
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 loan is due by January
20, 2024, July 27, 2022 and June 13, 2023, at 12%. RMB1,500,000 ($217,205) of the principal was paid as of December 31, 2022.
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. Our management
is confident in the collecting account receivables and other receivables. The accounts receivable, net and the accounts receivable of
related party, net balance was $7,480,764 and $399,465 as of December 31, 2022, respectively. Subsequent to April 25, 2023, the Company
collected receivables of $1,145,325.
The Company gives customers different credit periods
considering the scale of the customer and past credit experience. For large customers such as large-scale oil and coal mine customers,
the Company gives a two-year credit period starting from March 2019 because of these customers' long repayment cycle. Net balance
of the accounts receivable was $6,802,306 and $6,171,410 as of December 31, 2022 and 2021, respectively. Subsequent to April 25, 2023,
the Company has collected receivables of $978,411.
For IT outsourcing customers, the Company gives
18 months credit period. The accounts receivable, net balance was $nil and $64,478 as of December 31, 2022 and 2021, respectively.
For small and medium customers, the Company gives
six months credit period. The accounts receivable, net balance was $1,077,923 and $218,621 as of December 31, 2022 and 2021, respectively.
Off-Balance Sheet Arrangements
.
We have not entered into any financial guarantees
or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts
that are indexed to our own shares and classified as shareholders' equity, or that are not reflected in our financial statements.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit,
liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Cash Flows Analysis
(a)
Operating Activities
(1)
Net cash provided by operating activities was $3,824,050 for the year ended December 31, 2022, while, net cash used in operating activities was $214,575 for the year ended December 31, 2021. The increase of $4,038,625 in net cash provided by operating activities for the year ended December 31, 2022 was mainly due to (1) an increase of $5,043,891 in short-term investments, (2) an increase of $744,721 in advances to suppliers, (3) an increase of $218,773 in inventory, (4) an increase of $97,776 in accounts payable, (5) an increase of $249,767 in deferred revenue, and (6) an increase of $160,612 in taxes payable. These were partially offset by a decrease of $1,390,669 in account receivable, $680,330 in prepaid expenses and other current assets.
(b)
Investing Activities
(2)
Net cash used in investing activities was $7,349,231
    for the year ended December 31, 2022, while, net cash provided by investing activities was $400,006 for the year ended December 31, 2021.
    The increase of $7,749,237 in net cash used in investing activities for the year ended December 31, 2022 was mainly due to (1) an increase
    of $5,142,402 in loans lent to third parties, (2) an increase of $1,705,453 in redemption of held-to-maturity investments, (3) an increase
    of $691,751 in purchase of held-to-maturity investments, (4) an increase of $117,596 in recovery of third-party loans and (5) an increase
    of $92,035 in advance payment for software development.
On January 21, 2022, March 28, 2022, and June 14, 2022, HiTek, Beijing
Baihengda Petroleum Technology Co., Ltd. ("Beijing Baihengda," together with HiTek, the Lenders) and Guangxi Beihengda Mining
Co., Ltd. ("Guangxi Beihengda," or the Borrower) entered into three loan agreements with similar terms, pursuant to which
the Lenders loaned of RMB 40 million ($5.79 million with an exchange rate of 0.1447 as of December 31, 2022) (collectively, the "Loans")
to the Borrower at a monthly interest rate of 1%. Each of HiTek and Baihengda funded RMB 20 million of the Loans ($2.89 million with an
exchange rate of 0.1447 as of December 31, 2022). As of the date of this annual report, the aggregate outstanding principal amount of
the Loans is RMB37 million ($5.36 million with an exchange rate of 0.1447 as of December 31, 2022). The loans will be due by January 20,
2024, and June 13, 2023, respectively. The Borrower can pre-pay the outstanding loan amount after twelve months without penalty.
58
(c)
Financing Activities
Net cash provided by financing activities was
$2,749,498 and $nil for the years ended December 31, 2022 and 2021. For the year ended December 31, 2022, we had $2,749,498 cash inflow
from borrowing from third parties.
Year Ended December 31, 2021 Compared to
Year Ended December 31, 2020
As of December 31, 2021,
and December 31, 2020, we had cash in the amount of approximately $2,091,308 and $1,861,554, respectively.
Working Capital
.
Total working capital as of December 31, 2021 amounted to $10,178,635 compared to $8,394,937 as of December 31, 2020. The increase was
mainly due to an increase in short term investments of $2,370,960, accounts receivable of $227,831, advances to suppliers of $ 208,463
and inventory of $289,212, which partially offset by a decrease in accounts receivable – related parties of $281,447 and prepaid
expenses and other current assets of $714,647. Current liabilities amounted to $2,788,504 as of December 31, 2021 as compared to $2,381,231
as of December 31, 2020. This increase of liabilities was attributable mainly to an increase in tax payable of $355,695 and accounts payable
of $139,326 which partially offset by a decrease in accrued expenses and other current liabilities of $121,150.
Capital Resources
and Capital Needs
. To date, we have financed our operations primarily through cash flows from operations. With the uncertainty of
the current market, our management believes it is necessary to enhance collection of outstanding accounts receivable and other receivables,
and to be cautious on operational decisions and project selection. Our management believes that our current operations can satisfy our
daily working capital needs.
During 2020, we engaged
an external vendor to develop software application. As of December 31, 2021, we paid product development costs totaled $333,717 and the
total contract amount was $472,000. In March 2021, we signed a supplementary agreement to postpone the official launch after closing of
our initial public offering. We planned to restart the project and make the final payment of $138,283 in December 2022, regardless of
whether the IPO is completed or not.
We review the accounts
receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances.
Our management is confident in the collecting account receivables and other receivables. The account receivable, net and the account receivable
of related party balance was $5,491,475 and $963,034 as of December 31, 2021, respectively. Subsequent to December 31, 2021 we had collected
receivables in the total amount of $1,077,273 as of the date of the filing. As of December 31, 2022, we expected to collect additional
$1,694,480. We may also raise capital through public offerings.
We gave customers different
credit period considering the scale of the customer and past credit experience. For large customers such as large-scale oil and coal mine
customers, the Company gave a two-year credit period starting from March 2019 because of these customers' long repayment cycle.
The account receivable, net balance was $6,171,410 and $4,769,470 as of December 31, 2021 and 2020, respectively. From January 2022 to
April 2022, these companies have repaid $827,200. As of December 31, 2022, the Company expects to collect additional $1,680,395.
For IT outsourcing customers,
we gave a year and half credit period. The accounts receivable, net balance was $64,478 and $592,859 as of December 31, 2021 and 2020,
respectively. From January 2022 to April 2022, these companies have repaid $31,452. As of December 31, 2022, we expected to collect additional
$14,084.
For small and medium
customers, we gave a half year credit period. The account receivable, net balance was $218,621 and $286,103 as of December 31, 2021 and
2020, respectively. We had collected the remaining balance by April 30, 2022.
59
Off-Balance Sheet
Arrangements
.
We have not entered into
any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered
into any derivative contracts that are indexed to our own shares and classified as shareholders' equity, or that are not reflected
in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated
entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development
services with us.
Cash Flows Analysis
(a)
Operating Activities
(1)
Net cash used in operating activities were $214,575 for the years ended December 31, 2021, while, Net cash provided by operating activities were $1,932,850 for the years ended December 31, 2020. The decrease of $2,147,425 in net cash provided by operating activities for the year ended December 31, 2021 was mainly due to (1) a decrease of $2,034,581 in accounts receivable, (2) a decrease of $2,450,837 in short-term investments, (3) a decrease of $674,275 in inventory. These were partially offset by an increase of $391,934 in account receivable-related party, $664,280 in advances to suppliers and $1,442,932 in prepaid expenses and other current assets,
(b)
Investing Activities
(2)
Net cash provided by investing activities was $400,006 for the year ended December 31, 2021, while, Net cash used in investing activities was $865,047 for the year ended December 31, 2020. The increase of $1,265,053 in net cash provided by investing activities for the year ended December 31, 2021 was mainly due to (1) an increase of $259,764 in advance payment for software development, (2) an increase of $317,059 in repayment from third-party loans, (3) an increase of $1,223,403 in purchase of Held-to-maturity investments. These were partially offset by a decrease of $323,503 in redeem of Held-to-maturity investments.
C. Research and Development, Patents and Licenses,
etc.
We have a dedicated team of three highly skilled
in-house IT specialists, which includes three full-time IT professionals responsible for controlling the direction of outsourced R&D
projects. Among all the software we have developed, CIS is the only software product we are currently marketing and generated revenue.
D. Trend information.
Other than as disclosed elsewhere in this annual
report, we are not aware of any material recent trends in production, sales and inventory, the state of the order book and costs and selling
prices since our last fiscal year. We are also unaware of any known trends, uncertainties, demands, commitments or events for the year
ended December 31, 2022 that are reasonably likely to have a material adverse effect on our revenues, net income, profitability, liquidity
or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results
or financial conditions.
E. Critical Accounting Estimates
Our CFS are prepared in accordance with accounting
principles generally accepted in the U.S., which require us to make estimates and assumptions that affect the reported amounts of assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those estimates that may have a significant effect on our financial
condition and results of operations. Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements.
The following discussion of critical accounting policies addresses those policies that are both important to the portrayal of our financial
condition and results of operations and require significant judgment and estimates. We base our estimates and judgment on historical experience
and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates
under different assumptions or conditions.
60
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
Our directors and executive officers are as follows:
Name
Age
Position(s)
Shenping Yin
53
Chairman of the Board
Xiaoyang Huang
53
Chief Executive Officer and Director
Tianyu Xia
33
Chief Financial Officer
Bo Shi
48
Chief Technology Officer
Wenhua Yang
54
Independent Director*
Jianben Song
64
Independent Director*
Lawrence Venick
50
Independent Director*
*
Appointment effective upon the
closing of the Company's initial public offering
Below is a summary of the business experience
of each of our executive officers and directors:
Shenping Yin
Mr. Shenping Yin has been our Chairman since our
inception. Mr. Yin has been the Chief Executive Officer and a director of Recon Technology, Ltd. (NASDAQ: RCON) since 2007. In 2003, Mr.
Yin founded Nanjing Recon, a Chinese company that provides services to automate and enhance the extraction of petroleum in China, and
has been the Chief Executive Officer since that time. Mr. Yin has founded and operated a number of companies engaged in the IT industry
including: Xiamen Hengda Haitian Computer Network Co., Ltd. (1994), Baotou Hengda Haitian Computer Network Co., Ltd. (1997), Beijing Jingke
Haitian Electronic Technology Development Co., Ltd. (1999), and Jingsu Huasheng Information Technology Co., Ltd. (2000). Mr. Yin received
his bachelor's degree in 1991 from Nanjing Agricultural University in Information Systems.
Xiaoyang Huang
Ms. Xiaoyang Huang has been our CEO since our
inception. Ms. Huang was appointed as our director upon closing of our initial public offering on April 4, 2023. She has been the Chief
Executive Officer of HiTek, the VIE since 2000. Ms. Huang graduated from Nanjing Agricultural University and majored in Agricultural Information.
She also went through a one-year accounting program in Renmin University of China from 2010 to 2011.
Tianyu Xia
Ms. Tianyu Xia has been our CFO since August 15,
2018. From April 2014 to December 2015, she worked as an Investor Relations Manager at Recon Technology Ltd. From December 2015 to October
2017, she worked as an Investor Relations Manager at Smartisan Technology Co., Ltd. Ms. Xia graduated from Saint Louis University, John
Cook School of Business in 2012 and received her bachelor's degree in Accounting. She also minored in Information Technology Management.
Ms. Xia received her Master's degree in Investor Relations from Fordham University, Graduate School of Business in 2013. She received
her Master's degree in Business Administration from Cheung Kong Graduate School of Business in 2018.
Bo Shi
Mr. Bo Shi has been our CTO since our inception.
From July 1996 to March 1998, he worked as a maintenance engineer at Xiamen Automotive Friction and Sealing Material Co., Ltd. He has
been working for HiTek since March 1998 and has undertaken various responsibilities such as maintenance engineer, technical manager, technical
director, deputy general manager and general manager. He is now the general manager of HiTek. Mr. Shi graduated from Wuhan University
of Technology (formerly known as "Wuhan Automotive University") in July 1996, with a bachelor's degree in Computer Science
and Application.
61
Wenhua Yang
Mr. Wenhua Yang has been our independent director
since April 4, 2023. He was the Vice President of Beijing Huaxia Bank, Guanghua Road Branch from July 2002 to May 2004. From June 2004
to September 2006, he served as the Vice President of Beijing Guangda Bank, Guanghua Road Branch. From April 2006 to date, he served as
the general manager of Beijing Nengju Trading Development Co., Ltd. He has worked for 15 years in the banking and business industries.
Mr. Yang holds a Bachelor's Degree in Accounting and a Master's Degree in Business Management at Capital University of Economics
and Business.
Jianben Song
Mr. Jianben Song has been our independent director
since April 4, 2023. Mr. Song has been the data architect of Charter Communications since February 2013. From November 2010 to January
2013, he worked as a data architect for Bank of America, where he was responsible for designing databases. He has extensive experience
in software engineering. Mr. Song graduated from Tsinghua University with a Bachelor's degree in physics. He holds a Master's
degree in biophysics from the Institute of Biophysics, Academia China. He holds a Ph.D. in biophysics at the University of Rochester,
New York.
Lawrence Venick
Mr. Lawrence Venick has been our independent director
since April 4, 2023. Mr. Venick has been a Partner at Loeb & Loeb LLP since 2007. He is a corporate and securities lawyer focusing
his practice on United States capital market transactions and corporate governance matters involving U.S. listed companies. Over the course
of his career, Mr. Venick has represented a number of publicly traded companies listed on NASDAQ and The NYSE. Mr. Venick currently splits
his time between Loeb & Loeb LLP's Hong Kong and Beijing offices. He serves as the Managing Partner of the Hong Kong office
and is the Chief Legal Representative of the Beijing office. From 2004 to 2012, Mr. Venick worked as a corporate lawyer in Loeb &
Loeb LLP's Los Angeles office. Prior to that time, Mr. Venick worked as a corporate lawyer in Wilson Sonsini Goodrich & Rosati
PC's Palo Alto office. Mr. Venick holds a B.A. from the University of California at Santa Barbra and a J.D. from Loyola Law School.
B. Compensation
Executive Compensation
The following table represents compensation earned
by our executive officers in the fiscal year ended December 31, 2022 and 2021:
Summary Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Share Awards
($)
Option Awards
($)
Non-Equity Incentive Plan
Compensation
Deferred Compensation Earnings
Other
Total
($)
Xiaoyang Huang,
2022
12,484
56,476
0
0
0
0
0
68,960
Chief Executive Officer
2021
13,023
62,016
0
0
0
0
0
75,040
Bo Shi,
2022
28,706
29,724
58,430
Chief Technology Officer
2021
28,861
31,008
0
0
0
0
0
59,869
Tianyu Xia,
2022
53,504
0
0
0
0
0
0
53,504
Chief Financial Officer
2021
55,815
0
0
0
0
0
0
55,815
62
Grants of Plan Based Awards
None.
Employment Agreements
We entered into employment agreements with our
CEO and CTO on July 1, 2018, and with our CFO on September 2, 2018. Each of our executive officers is employed for a specified time period,
which will be renewed upon both parties' agreement thirty days before the end of the current employment term. We may terminate the
employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including but not limited
to the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of
a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe neglect
of his or her duties. An executive officer may terminate his or her employment at any time with a one-month prior written notice. Each
executive officer has agreed to hold, both during and after the employment agreement expires, in strict confidence and not to use or disclose
to any person, corporation or other entity without written consent, any confidential information. In addition, each executive officer
has agreed to be bound by non-competition and non-solicitation restrictions during the term of his employment and for one year following
termination of the employment.
Our employment agreement with Xiaoyang Huang,
our CEO, provides her term of one year with an annual salary of $70,000. Unless terminated pursuant to the terms thereof, the employment
agreement will be renewed automatically for an additional one-year term. As of the date of this annual report, the employment agreement
with Xiaoyang Huang has been renewed and is currently in effect.
Our employment agreement with Bo Shi, our CTO,
provides his term of one year with an annual salary of $55,000. Unless terminated pursuant to the terms thereof, the employment agreement
will be renewed automatically for an additional one-year term. As of the date of this annual report, the employment agreement with Bo
Shi has been renewed and is currently in effect.
Our employment agreement with Tianyu Xia, our
CFO, provides her term of three years with an annual salary of $60,000. Unless terminated pursuant to the terms thereof, the employment
agreement will be renewed automatically for an additional one-year term. As of the date of this annual report, the employment agreement
with Tianyu Xia has been renewed and is currently in effect.
Outstanding Equity Awards at Fiscal Year-End;
Option Exercises and Stock Vested
None.
Pension Benefits
None of the named executives currently participates
in or has account balances in qualified or nonqualified defined benefit plans sponsored by us.
Nonqualified Deferred Compensation
None of the named executives currently participates
in or has account balances in nonqualified defined contribution plans or other deferred compensation plans maintained by us.
Other than as disclosed above, we have not entered
into any agreements or arrangements with our executive officers or directors, and have not made any agreements to provide benefits upon
termination of employment.
63
C. Board Practices
Committees of the Board of Directors
We have three committees under the board of directors
on April 4, 2023, upon closing of Company's initial public offering: an Audit Committee, a Compensation Committee and a Nominating
and Corporate Governance Committee. Even though we are exempted from corporate governance standards because we are a Foreign Private Issuer
("FPI"), we have voluntarily adopted a charter for each of the three committees. Each committee's members and functions
are described below.
Audit Committee
. Our audit committee consists
of Mr. Wenhua Yang, Mr. Jianben Song and Mr. Lawrence Venick. Mr. Wenhua Yang is the chairman of our audit committee. We have determined
that Mr. Yang, Mr. Song and Mr. Venick satisfy the "independence" requirements of Section 5605(a)(2) of the Nasdaq Listing
Rules and Rule 10A-3 under the Securities Exchange Act. Our board also has determined that Mr. Yang qualifies as an audit committee financial
expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit
committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit
committee is responsible for, among other things:
●
appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;
●
reviewing with the independent auditors any audit problems or difficulties and management's response;
●
discussing the annual audited financial statements with management and the independent auditors;
●
reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;
●
reviewing and approving all proposed related party transactions;
●
meeting separately and periodically with management and the independent auditors; and
●
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
Compensation Committee.
Our compensation
committee consists of Mr. Wenhua Yang, Mr. Jianben Song and Mr. Lawrence Venick. Mr. Song is the chairman of our compensation committee.
We have determined that Mr. Yang, Mr. Song and Mr. Venick satisfy the "independence" requirements of Section 5605(a)(2) of
the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act. The compensation committee assists the board in reviewing and
approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief
executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee
is responsible for, among other things:
●
reviewing and approving to the board with respect to the total compensation package for our most senior executive officers;
●
approving and overseeing the total compensation package for our executives other than the most senior executive officers;
●
reviewing and recommending to the board with respect to the compensation of our directors;
●
reviewing periodically and approving any long-term incentive compensation or equity plans;
●
selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person's independence from management; and
●
programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.
64
Nominating and Corporate Governance Committee.
Our nominating and corporate governance committee consists of Mr. Wenhua Yang, Mr. Jianben Song and Mr. Lawrence Venick upon the effectiveness
of their appointments. Mr. Venick is the chairperson of our nominating and corporate governance committee. Mr. Yang, Mr. Song and Mr.
Venick satisfy the "independence" requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the
Securities Exchange Act. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified
to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee
is responsible for, among other things:
●
identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy;
●
reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us;
●
identifying and recommending to our board the directors to serve as members of committees;
●
advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and
●
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
Board Diversity
The table below provides
certain information regarding the diversity of our board of directors as of the date of this annual report.
Board Diversity Matrix
Country of Principal Executive Offices:
China
Foreign Private Issuer
Yes
Disclosure Prohibited under Home Country Law
No
Total Number of Directors
5
Female
Male
Non-
Binary
Did Not
Disclose
Gender
Part I: Gender Identity
Directors
1
4
0
0
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction
0
LGBTQ+
0
Did Not Disclose Demographic Background
0
Family Relationships
None of our directors or executive officers has
a family relationship as defined in Item 401 of Regulation S-K.
D. Employees
We had 60, 66 and 75 employees as of December
31, 2022, 2021 and 2020, respectively. The following table sets forth the numbers of our employees categorized by function as of December
31, 2022:
Function:
Management Department (HiTek)
8
Financial Department (HiTek)
4
Technical Service Department (HiTek)
11
Sales Training Department (HiTek)
7
Hotline Service Department (HiTek)
11
Research and Development Department (HiTek)
4
Operation and Maintenance Department (HiTek)
1
Financial Department (Huasheng)
1
Technical Service Department (Huasheng)
1
Management Department (Huoerguosi)
3
Operation and Maintenance Department (Huoerguosi)
2
Technical Service Department (weilai)
5
Financial Department (weilai)
2
Total
60
65
As of December 31, 2022, our employees were located
in Xiamen
,
Fujian province and Huoerguosi, Xinjiang, China.
As required by PRC laws and regulations, we participate
in various employee social security plans that are organized by municipal and provincial governments, including housing, pension, medical
insurance and unemployment insurance programs. We are required under Chinese law to make contributions to employee benefit plans at specified
percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government
from time to time.
We believe that we maintain a good working relationship
with our employees, and we have not experienced any labor disputes.
E. Share ownership.
The following table sets forth information regarding
the beneficial of our ordinary shares as of April 25, 2023:
●
each person known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares;
●
each of our executive officers and directors; and
●
all our executive officers and directors as a group.
The beneficial ownership of ordinary shares is
determined in accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared
voting or investment power. For purposes of the table below, we deem shares subject to options, warrants or other exercisable or convertible
securities that are exercisable or convertible currently or within 60 days of
April 25, 2023,
to
be outstanding and to be beneficially owned by the person holding the options, warrants or other currently exercisable or convertible
securities for the purposes of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose
of computing the percentage ownership of any other person. Unless otherwise indicated below, to our knowledge, all persons named in the
table have sole voting and investment power with respect to their shares, except to the extent authority is shared by spouses under community
property laws.
Ordinary Shares
Beneficially Owned
Number
%
Directors and Executive Officers:
Shenping Yin
8,192,000
(1)(2)
57.74
%
Xiaoyang Huang
8,192,000
(1)(2)
57.74
%
Tianyu Xia
-
Bo Shi
431,000
(3)
3.04
%
Wenhua Yang
-
Jianben Song
-
Lawrence Venick
-
All Directors and Executive Officers:
8,623,000
60.78
%
5% Shareholders:
Fortune Enterprise Holdings Limited
8,192,000
(1)(2)
57.74
%
(1)
These Ordinary Shares are deemed
as beneficially owned by Shenping Yin and Xiaoyang Huang as they are husband and wife.
(2)
These Ordinary Shares are held
by Fortune Enterprise Holdings Limited, a British Virgin Islands company. Since Mr. Yin and Ms. Huang are the shareholders and directors
of Fortune Enterprise Holdings Limited, they are deemed as the beneficial owners of these securities.
(3)
Represents 431,000 Ordinary Shares
held by Star Discover Global Limited, a British Virgin Islands company which Bo Shi owns and controls 60% equity interest and voting
power.
66
F. Disclosure of A Registrant's Action
to Recover Erroneously Awarded Compensation
None.
Item 7. Major Shareholders and Related Party
Transactions
A. Major shareholder
Please refer to Item 6 "Directors, Senior
Management and Employees—E. Share Ownership."
B. Related party transactions.
Contractual Arrangements with WFOE, HiTek
and Its Shareholders
To comply with PRC laws restricting foreign ownership
in the IT business in China, we conduct our IT business through HiTek, a VIE entity that we control through a series of contractual arrangements
between our PRC subsidiary WFOE, HiTek and its shareholders, Xiaoyang Huang, Shenping Yin, Bo Shi, Zhishuang Wang, Liuqing Huang, Jingru
Li, Mian Tang, Ce Tian, Xianfeng Lin, Inner Mongolia Guangxin Investment Co., Ltd. and Baotou Zhongzhe Hengtong Technology Co., Ltd. Such
contractual arrangements provide us (i) the power over HiTek, (ii) the exposure or rights to variable returns from our involvement with
HiTek, and (iii) the ability to affect those returns through use of our power over HiTek to affect the amount of our returns. Therefore,
we control HiTek. For a description of these contractual arrangements, see "Business — Our History and Corporate Structure".
B. Related Party Transactions
Advances from Related Parties
As of December 31, 2022, Company had outstanding
advances owed to Fengqi (Beijing) Zhineng Technology Co., Ltd., 3.04% owned by HiTek's Chairman Mr. Shenping Yin, in the amount
$598. The advances are due on demand and non-interest bearing.
As of December 31, 2021, Company had outstanding
advances owed to Fengqi (Beijing) Zhineng Technology Co., Ltd., 5.7% owned by HiTek's Chairman Mr. Shenping Yin, in the amount $4,163.
The advances are due on demand and non-interest bearing.
Accounts receivables from related parties
As of December 31, 2022, accounts receivable from
Beijing Zhongzhe Yuantong Technology Co., Ltd. was $399,465.
As of December 31, 2021, accounts receivable from
Beijing Zhongzhe Yuantong Technology Co., Ltd. was $963,034.
Sales revenues from related parties
The Company generated sales revenues from Beijing
Zhongzhe Yuantong Technology Co., Ltd., which is under the same common control with Baotou Zhongzhe Hengtong Technology Co., Ltd., in
hardware sales of $nil for fiscal year ended December 31,2022 and 2021, and $255,344 for fiscal year ended December 31, 2020; and software
sales of $nil for fiscal year ended December 31, 2022 and 2021, and $353,977 for fiscal year ended December 31, 2020.
Cost of revenues from related parties
The Company purchased from Fengqi (Beijing) Zhineng
Technology Co., Ltd., 3.04% owned by HiTek's Chairman Mr. Shenping Yin, in hardware of $11,830, $52,961 and $nil for fiscal years
ended December 31, 2022, 2021 and 2020.
Employment Agreements
See "Item 6.B — Compensation — Employment
Agreements".
C. Interests of experts and counsel.
Not applicable.
67
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial
Information
Financial Statements
We have appended CFS filed as part of this report.
See Item 18 "Financial Statements."
Legal Proceedings
We are currently not a party to any material legal
or administrative proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in
the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result
in substantial cost and diversion of our resources, including our management's time and attention.
Dividends
We have not paid dividends on our ordinary shares
and do not anticipate paying such dividends in the foreseeable future.
B. Significant Changes
Except as disclosed elsewhere in this annual report,
we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual
report.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our Ordinary Shares are listed on the Nasdaq Capital
Market under the symbol "HKIT".
B. Plan of Distributions
Not applicable.
C. Markets
Our Ordinary Shares are listed on the Nasdaq Capital
Market under the symbol "HKIT".
D. Selling Shareholders
Not applicable.
E. Dilution
Note applicable.
F. Expenses of the Issue.
Note applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The following description of our memorandum and
articles of association, as amended and restated from time to time, are summaries and do not purport to be complete.
As of the date of this annual report, our authorized
share capital consists of $50,000 divided into 500,000,000 shares, par value US$0.0001 per share, comprised of 490,000,000 ordinary Shares,
and 10,000,000 preference shares.
Our amended and restated memorandum and articles
of association provide that our authorized share capital is $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. Our directors may, in their absolute discretion and without the approval
of our shareholders, create and designate out of the unissued preference shares of our company one or more classes or series of preference
shares, comprising such number of preference shares, and having such designations, powers, preferences, privileges and other rights,
including dividend rights, voting rights, conversion rights, terms of redemption and liquidation preferences, as our directors may determine.
As of the date hereof, there are 14,187,679 Ordinary Shares issued and outstanding. The following are summaries of material provisions
of our amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms
of our ordinary shares .
68
Ordinary shares
Dividends.
Subject to any rights and restrictions
of any other class or series of shares, our board of directors may, from time to time, declare dividends on the shares issued and authorize
payment of the dividends out of our lawfully available funds. No dividends shall be declared by the board out of our company except the
following:
●
profits; or
●
"share premium account," which represents the excess of the price paid to our company on issue of its shares over the par or "nominal" value of those shares, which is similar to the U.S. concept of additional paid in capital.
However, no dividend shall bear interest against
the Company.
Voting Rights.
Holders of our ordinary
shares vote as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Subject
to any special rights or restrictions as to voting attached to any shares, every shareholder who is present in person and every person
representing a shareholder by proxy shall have one vote for each share of which he or the person represented by proxy is the holder. At
any general meeting a resolution put to the vote of the meeting shall be decided by poll.
Any ordinary resolution to be made by the shareholders
requires the affirmative vote of a simple majority of the votes of the ordinary shares cast in a general meeting, while a special resolution
requires the affirmative vote of no less than two-thirds of the votes of the ordinary shares cast.
Under Cayman Islands law, some matters, such as
amending the memorandum and articles of association, changing the name or resolving to be registered by way of continuation in a jurisdiction
outside the Cayman Islands, require approval of shareholders by a special resolution.
There are no limitations on non-residents or foreign
shareholders in the memorandum and articles of association to hold or exercise voting rights on the ordinary shares imposed by foreign
law or by the charter or other constituent document of our company. However, no person will be entitled to vote at any general meeting
or at any separate meeting of the holders of the ordinary shares unless the person is registered as of the record date for such meeting
and unless all calls or other sums presently payable by the person in respect of ordinary shares in the Company have been paid.
Winding Up; Liquidation.
Upon the winding
up of our company, after the full amount that holders of any issued shares ranking senior to the ordinary shares as to distribution on
liquidation or winding up are entitled to receive has been paid or set aside for payment, the holders of our ordinary shares are entitled
to receive any remaining assets of the Company available for distribution as determined by the liquidator. The assets received by the
holders of our ordinary shares in a liquidation may consist in whole or in part of property, which is not required to be of the same kind
for all shareholders.
Calls on Ordinary Shares and Forfeiture of
Ordinary Shares.
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary
shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. Any ordinary shares
that have been called upon and remain unpaid are subject to forfeiture.
Redemption of Ordinary Shares.
We may issue
shares that are, or at its option or at the option of the holders are, subject to redemption on such terms and in such manner as it may,
before the issue of the shares, determine. Under the Companies Law, shares of a Cayman Islands company may be redeemed or repurchased
out of profits of the company, out of the proceeds of a fresh issue of shares made for that purpose or out of capital, provided the memorandum
and articles of association authorize this and it has the ability to pay its debts as they come due in the ordinary course of business.
No Preemptive Rights.
Holders of ordinary
shares will have no preemptive or preferential right to purchase any securities of our company.
Variation of Rights Attaching to Shares.
If at any time the share capital is divided into different classes of shares, the rights attaching to any class (unless otherwise provided
by the terms of issue of the shares of that class) may, subject to the memorandum and articles of association, be varied or abrogated
with the consent in writing of the holders of three-fourth of the issued shares of that class or with the sanction of a special resolution
passed at a general meeting of the holders of the shares of that class.
Anti-Takeover Provisions.
Some provisions
of our current memorandum and articles of association may discourage, delay or prevent a change of control of our company or management
that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference shares in one
or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further
vote or action by our shareholders.
69
Exempted Company.
We are an exempted company
with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies.
Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered
as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted
company:
●
does not have to file an annual return of its shareholders with the Registrar of Companies;
●
is not required to open its register of members for inspection;
●
does not have to hold an annual general meeting;
●
may issue shares with no par value;
●
may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
●
may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
●
may register as a limited duration company; and
●
may register as a segregated portfolio company.
"Limited liability" means that the
liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
Register of Members
Under Cayman Islands law, we must keep a register
of members and there shall be entered therein:
(a)
the names and addresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be considered as paid, on the shares of each member;
(b)
the date on which the name of any person was entered on the register as a member; and
(c)
the date on which any person ceased to be a member.
Under Cayman Islands law, the register of members
of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a presumption of fact on
the matters referred to above unless rebutted) and a member registered in the register of members shall be deemed as a matter of Cayman
Islands law to have legal title to the shares as set against its name in the register of members. Upon the closing of this public offering,
the register of members shall be immediately updated to reflect the issue of shares by us. Once our register of members has been updated,
the shareholders recorded in the register of members shall be deemed to have legal title to the shares set against their name.
However, there are certain limited circumstances
where an application may be made to a Cayman Islands court for a determination on whether the register of members reflects the correct
legal position. Further, the Cayman Islands court has the power to order that the register of members maintained by a company should be
rectified where it considers that the register of members does not reflect the correct legal position. If an application for an order
for rectification of the register of members were made in respect of our ordinary shares, then the validity of such shares may be subject
to re-examination by a Cayman Islands court.
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Preference shares
Our amended and restated memorandum and articles
of association authorizes the issuance of 10,000,000 preference shares with such designation, rights and preferences as may be determined
from time to time by our board of directors. Accordingly, our board of directors is empowered, without shareholder approval, to issue
preference shares with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other
rights of the holders of ordinary shares. We may issue some or all of the preference shares to effect a business combination. In addition,
the preference shares could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do
not currently intend to issue any preference shares, we cannot assure you that we will not do so in the future.
Certain Differences in Corporate Law
Cayman Islands companies are governed by the Companies
Law. The Companies Law is modeled on English Law but does not follow recent English Law statutory enactments, and differs from laws applicable
to United States corporations and their shareholders. Set forth below is a summary of the material differences between the provisions
of the Companies Law applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.
Mergers and Similar Arrangements.
In certain circumstances, the Companies Law allows
for mergers or consolidations between two Cayman Islands companies, or between a Cayman Islands company and a company incorporated in
another jurisdiction (provided that is facilitated by the laws of that other jurisdiction).
Where the merger or consolidation is between two
Cayman Islands companies, the directors of each company must approve a written plan of merger or consolidation containing certain prescribed
information. That plan or merger or consolidation must then be authorized by either (a) a special resolution (usually a majority of 66.6%
in value) of the shareholders of each company; or (b) such other authorization, if any, as may be specified in such constituent company's
articles of association. No shareholder resolution is required for a merger between a parent company (i.e., a company that owns at least
90% of the issued shares of each class in a subsidiary company) and its subsidiary company. The consent of each holder of a fixed or floating
security interest of a constituent company must be obtained, unless the court waives such requirement. If the Cayman Islands Registrar
of Companies is satisfied that the requirements of the Companies Law (which includes certain other formalities) have been complied with,
the Registrar of Companies will register the plan of merger or consolidation.
Where the merger or consolidation involves a foreign
company, the procedure is similar, save that with respect to the foreign company, the director of the Cayman Islands company is required
to make a declaration to the effect that, having made due enquiry, he is of the opinion that the requirements set out below have been
met: (i) that the merger or consolidation is permitted or not prohibited by the constitutional documents of the foreign company and by
the laws of the jurisdiction in which the foreign company is incorporated, and that those laws and any requirements of those constitutional
documents have been or will be complied with; (ii) that no petition or other similar proceeding has been filed and remains outstanding
or order made or resolution adopted to wind up or liquidate the foreign company in any jurisdictions; (iii) that no receiver, trustee,
administrator or other similar person has been appointed in any jurisdiction and is acting in respect of the foreign company, its affairs
or its property or any part thereof; (iv) that no scheme, order, compromise or other similar arrangement has been entered into or made
in any jurisdiction whereby the rights of creditors of the foreign company are and continue to be suspended or restricted.
Where the surviving company is the Cayman Islands
company, the director of the Cayman Islands company is further required to make a declaration to the effect that, having made due enquiry,
he is of the opinion that the requirements set out below have been met: (i) that the foreign company is able to pay its debts as they
fall due and that the merger or consolidated is bona fide and not intended to defraud unsecured creditors of the foreign company; (ii)
that in respect of the transfer of any security interest granted by the foreign company to the surviving or consolidated company (a) consent
or approval to the transfer has been obtained, released or waived; (b) the transfer is permitted by and has been approved in accordance
with the constitutional documents of the foreign company; and (c) the laws of the jurisdiction of the foreign company with respect to
the transfer have been or will be complied with; (iii) that the foreign company will, upon the merger or consolidation becoming effective,
cease to be incorporated, registered or exist under the laws of the relevant foreign jurisdiction; and (iv) that there is no other reason
why it would be against the public interest to permit the merger or consolidation.
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Where the above procedures are adopted, the Companies
Law provides for a right of dissenting shareholders to be paid a payment of the fair value of his shares upon their dissenting to the
merger or consolidation if they follow a prescribed procedure. In essence, that procedure is as follows (a) the shareholder must give
his written objection to the merger or consolidation to the constituent company before the vote on the merger or consolidation, including
a statement that the shareholder proposes to demand payment for his shares if the merger or consolidation is authorized by the vote; (b)
within 20 days following the date on which the merger or consolidation is approved by the shareholders, the constituent company must give
written notice to each shareholder who made a written objection; (c) a shareholder must within 20 days following receipt of such notice
from the constituent company, give the constituent company a written notice of his intention to dissent including, among other details,
a demand for payment of the fair value of his shares; (d) within seven days following the date of the expiration of the period set out
in paragraph (b) above or seven days following the date on which the plan of merger or consolidation is filed, whichever is later, the
constituent company, the surviving company or the consolidated company must make a written offer to each dissenting shareholder to purchase
his shares at a price that the company determines is the fair value and if the company and the shareholder agree the price within 30 days
following the date on which the offer was made, the company must pay the shareholder such amount; (e) if the company and the shareholder
fail to agree a price within such 30 day period, within 20 days following the date on which such 30 day period expires, the company (and
any dissenting shareholder) must file a petition with the Cayman Islands Grand Court to determine the fair value and such petition must
be accompanied by a list of the names and addresses of the dissenting shareholders with whom agreements as to the fair value of their
shares have not been reached by the company. At the hearing of that petition, the court has the power to determine the fair value of the
shares together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value. Any dissenting
shareholder whose name appears on the list filed by the company may participate fully in all proceedings until the determination of fair
value is reached. These rights of a dissenting shareholder are not be available in certain circumstances, for example, to dissenters holding
shares of any class in respect of which an open market exists on a recognized stock exchange or recognized interdealer quotation system
at the relevant date or where the consideration for such shares to be contributed are shares of any company listed on a national securities
exchange or shares of the surviving or consolidated company.
Moreover, Cayman Islands law also has separate
statutory provisions that facilitate the reconstruction or amalgamation of companies in certain circumstances, schemes of arrangement
will generally be more suited for complex mergers or other transactions involving widely held companies, commonly referred to in the Cayman
Islands as a "scheme of arrangement" which may be tantamount to a merger. In the event that a merger was sought pursuant to
a scheme of arrangement (the procedure of which are more rigorous and take longer to complete than the procedures typically required to
consummate a merger in the United States), the arrangement in question must be approved by a majority in number of each class of shareholders
and creditors with whom the arrangement is to be made and who must in addition represent three-fourths in value of each such class of
shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meeting summoned
for that purpose. The convening of the meetings and subsequently the terms of the arrangement must be sanctioned by the Grand Court of
the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction should not
be approved, the court can be expected to approve the arrangement if it satisfies itself that:
●
we are not proposing to act
illegally or beyond the scope of our corporate authority and the statutory provisions as to majority vote have been complied with;
●
the shareholders have been
fairly represented at the meeting in question;
●
the arrangement is such as
a businessman would reasonably approve; and
●
the arrangement is not one
that would more properly be sanctioned under some other provision of the Companies Law or that would amount to a "fraud on the
minority."
If a scheme of arrangement or takeover offer (as
described below) is approved, any dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily
be available to dissenting shareholders of United States corporations, providing rights to receive payment in cash for the judicially
determined value of the shares.
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Squeeze-out Provisions
.
When a takeover offer is made and accepted by
holders of 90% of the shares to whom the offer relates within four months, the offeror may, within a two-month period, require the holders
of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands
but this is unlikely to succeed unless there is evidence of fraud, bad faith, collusion or inequitable treatment of the shareholders.
Further, transactions similar to a merger, reconstruction
and/or an amalgamation may in some circumstances be achieved through other means to these statutory provisions, such as a share capital
exchange, asset acquisition or control, through contractual arrangements, of an operating business.
Shareholders' Suits
.
Our Cayman Islands counsel is not aware of any
reported class action having been brought in a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts,
and the Cayman Islands courts have confirmed the availability for such actions. In most cases, we will be the proper plaintiff in any
claim based on a breach of duty owed to us, and a claim against (for example) our officers or directors usually may not be brought by
a shareholder. However, based both on Cayman Islands authorities and on English authorities, which would in all likelihood be of persuasive
authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:
●
a company is acting, or proposing
to act, illegally or beyond the scope of its authority;
●
the act complained of, although
not beyond the scope of the authority, could be effected if duly authorized by more than the number of votes which have actually been
obtained; or
●
those who control the company
are perpetrating a "fraud on the minority."
A shareholder may have a direct right of action
against us where the individual rights of that shareholder have been infringed or are about to be infringed.
Enforcement of civil liabilities
.
The Cayman Islands has a different body of securities
laws as compared to the United States and may provide less protection to investors. Additionally, Cayman Islands companies may not have
standing to sue before the Federal courts of the United States.
We have been advised by our Cayman Islands legal
counsel that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States
predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original
actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal
securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those
circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts
of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial
on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay
the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands,
such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent
with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of
a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple
damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings
are being brought elsewhere.
Special Considerations for Exempted Companies
.
We are an exempted company with limited liability
under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies. Any company that
is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted
company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges
listed below:
●
annual reporting requirements are minimal and consist mainly of a statement that the company has conducted its operations mainly outside of the Cayman Islands and has complied with the provisions of the Companies Law;
73
●
an exempted company's register of members is not open to inspection;
●
an exempted company does not have to hold an annual general meeting;
●
an exempted company may issue negotiable or bearer shares or shares with no par value;
●
an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
●
an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
●
an exempted company may register as a limited duration company; and
●
an exempted company may register as a segregated portfolio company.
VStock Transfer, LLC is the transfer agent and
registrar for our Ordinary Shares as its principal office at 18 Lafayette Place, Woodmere, New York 11598.
C. Material Contracts
We have not entered into any material contracts
other than in the ordinary course of business and other than those described in "Item 4. Information on the Company," "Item
7. Major Shareholders and Related Party Transactions—B. Related Party Transactions," or elsewhere in this annual report on
Form 20-F.
D. Exchange Controls
Cayman Islands
There are currently no exchange control regulations
in the Cayman Islands applicable to us or our shareholders.
The PRC
China regulates foreign currency exchanges primarily
through the following rules and regulations:
●
Foreign Currency Administration Rules of 1996, as amended; and
●
Administrative Rules of the Settlement, Sale and Payment of Foreign Exchange of 1996.
Renminbi is not a freely convertible currency
at present. Under the current PRC regulations, conversion of Renminbi is permitted in China for routine current-account foreign exchange
transactions, including trade and service related foreign exchange transactions, payment of dividends and service of foreign debts. Conversion
of Renminbi for most capital-account items, such as direct investments, investments in PRC securities markets and repatriation of investments,
however, is still subject to the approval of SAFE.
Pursuant to the above-mentioned administrative
rules, foreign-invested enterprises may buy, sell and/or remit foreign currencies for current account transactions at banks in China with
authority to conduct foreign exchange business by complying with certain procedural requirements, such as presentment of valid commercial
documents. For capital-account transactions involving foreign direct investment, foreign debts and outbound investment in securities and
derivatives, approval from SAFE is a pre-condition. Capital investments by foreign-invested enterprises outside China are subject to limitations
and requirements in China, such as prior approvals from the PRC Ministry of Commerce or SAFE.
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E. Taxation
The following summary of the material Cayman Islands,
PRC and U.S. tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect
as of the date hereof, all of which are subject to change, possibly with retroactive effect. This summary is not intended to be, nor should
it be construed as, legal or tax advice and is not exhaustive of all possible tax considerations. This summary also does not deal with
all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local, non-U.S.,
non-PRC, and non-Cayman Islands tax laws. Investors should consult their own tax advisors with respect to the tax consequences of the
acquisition, ownership and disposition of our ordinary shares.
People's Republic of China Enterprise
Taxation
The following brief description of Chinese enterprise
laws is designed to highlight the enterprise-level taxation on our earnings, which will affect the amount of dividends, if any, we are
ultimately able to pay to our shareholders. See "Dividend Policy."
We are a holding company incorporated in the Cayman
Islands and we gain substantial income by way of dividends paid to us from our subsidiaries in China. The EIT Law and its implementation
rules provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that
are non-resident enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor's
jurisdiction of incorporation has a tax treaty with China that provides for a preferential tax rate or a tax exemption.
Under the EIT Law, an enterprise established outside
of China with a "de facto management body" within China is considered a "resident enterprise," which means that
it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the
EIT Law define "de facto management body" as a managing body that actually, comprehensively manage and control the production
and operation, staff, accounting, property and other aspects of an enterprise, the only official guidance for this definition currently
available is set forth in SAT Notice 82, which provides guidance on the determination of the tax residence status of a Chinese-controlled
offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that
has a PRC enterprise or enterprise group as its primary controlling shareholder. Although Hitek Global Inc. does not have a PRC enterprise
or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise
within the meaning of SAT Notice 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth
in SAT Notice 82 to evaluate the tax residence status of Hitek Global Inc. and its subsidiaries organized outside the PRC.
According to SAT Notice 82, a Chinese-controlled
offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a "de facto management body" in
China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met: (i) the
places where senior management and senior management departments that are responsible for daily production, operation and management of
the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions (such as money borrowing,
lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal and salary and wages) are decided
or need to be decided by organizations or persons located within the territory of China; (iii) main property, accounting books, corporate
seal, the board of directors and files of the minutes of shareholders' meetings of the enterprise are located or preserved within
the territory of China; and (iv) one half (or more) of the directors or senior management staff having the right to vote habitually reside
within the territory of China.
We believe that we do not meet some of the conditions
outlined in the immediately preceding paragraph. For example, as a holding company, the key assets and records of Hitek Global Inc., including
the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located
and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to
ours that has been deemed a PRC "resident enterprise" by the PRC tax authorities. Accordingly, we believe that Hitek Global
Inc. and its offshore subsidiaries should not be treated as a "resident enterprise" for PRC tax purposes if the criteria for
"de facto management body" as set forth in SAT Notice 82 were deemed applicable to us. However, as the tax residency status
of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of
the term "de facto management body" as applicable to our offshore entities, we will continue to monitor our tax status.
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The implementation rules of the EIT Law provide
that, (i) if the enterprise that distributes dividends is domiciled in the PRC or (ii) if gains are realized from transferring equity
interests of enterprises domiciled in the PRC, then such dividends or gains are treated as China-sourced income. It is not clear how "domicile"
may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore,
if we are considered as a PRC tax resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders which are
non-resident enterprises as well as gains realized by such shareholders from the transfer of our shares may be regarded as China-sourced
income and as a result become subject to PRC withholding tax at a rate of up to 10%. We are unable to provide a "will" opinion
because Jingtian& Gongcheng, our PRC counsel, believes that it is possible but highly unlikely that the Company and its offshore subsidiaries
would be treated as a "resident enterprise" for PRC tax purposes because they do not meet some of the conditions outlined
in SAT Notice 82. In addition, we are not aware of any offshore holding companies with a corporate structure similar to ours that has
been deemed a PRC "resident enterprise" by the PRC tax authorities as of the date of the annual report. Therefore, it is possible
but highly unlikely that the income received by our overseas shareholders will be regarded as China-sourced income.
Cayman Islands Tax Considerations
The following is a discussion on certain Cayman
Islands income tax consequences of an investment in the securities of the Company. The discussion is a general summary of present law,
which is subject to prospective and retroactive change. It is not intended as tax advice, does not consider any investor's particular
circumstances, and does not consider tax consequences other than those arising under Cayman Islands law.
Under Existing Cayman Islands Laws:
Payments of dividends and capital in respect of
our securities will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend
or capital to any holder of the securities nor will gains derived from the disposal of the securities be subject to Cayman Islands income
or corporation tax. The Cayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax
or gift tax.
No stamp duty is payable in respect of the issue
of the warrants. An instrument of transfer in respect of a warrant is stampable if executed in or brought into the Cayman Islands.
No stamp duty is payable in respect of the issue
of our Ordinary Shares or on an instrument of transfer in respect of such shares.
The Company has been incorporated under the laws
of the Cayman Islands as an exempted company with limited liability and, as such, has applied for and expects to obtain after the effectiveness
of the registration statement on Form F-1 (File No. 333-228498) an undertaking from the Financial Secretary of the Cayman Islands in the
following form:
The Tax Concessions Law (2018 Revision)
Undertaking as to Tax Concessions
In accordance with the provision of Section 6
of The Tax Concessions Law (2018 Revision), the Financial Secretary undertakes with Hitek Global Inc. ("the Company"):
1.
That no law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Company or its operations; and
2.
In addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable:
a.
On or in respect of the shares, debentures or other obligations of the Company; or
b.
by way of the withholding in whole or part, of any relevant payment as defined in Section 6(3) of the Tax Concessions Law (2018 Revision).
These concessions shall be for a period of twenty
years from the date hereof.
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United States Federal Income Taxation
The following does not address the tax consequences
to any particular investor or to persons in special tax situations such as:
●
banks;
●
financial institutions;
●
insurance companies;
●
regulated investment companies;
●
real estate investment trusts;
●
broker-dealers;
●
traders that elect to mark-to-market;
●
U.S. expatriates;
●
tax-exempt entities;
●
persons liable for alternative minimum tax;
●
persons holding our Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction;
●
persons that actually or constructively own 10% or more of our voting shares;
●
persons who acquired our Ordinary Shares pursuant to the exercise of any employee share option or otherwise as consideration; or
●
persons holding our Ordinary Shares through partnerships or other pass-through entities.
Prospective purchasers are urged to consult their
own tax advisors about the application of the U.S. Federal tax rules to their particular circumstances as well as the state, local, foreign
and other tax consequences to them of the purchase, ownership and disposition of our Ordinary Shares.
Taxation of Dividends and Other Distributions
on our Ordinary Shares
Subject to the passive foreign investment company
rules discussed below, the gross amount of distributions made by us to you with respect to the Ordinary Shares (including the amount of
any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but
only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal
income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction
allowed to corporations in respect of dividends received from other U.S. corporations.
With respect to non-corporate U.S. Holders, including
individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that
(1) the Ordinary Shares are readily tradable on an established securities market in the U.S., or we are eligible for the benefits of an
approved qualifying income tax treaty with the U.S. that includes an exchange of information program, (2) we are not a passive foreign
investment company (as discussed below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3)
certain holding period requirements are met. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose
of clause (1) above to be readily tradable on an established securities market in the U.S. because they are listed on the Nasdaq Capital
Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our
Ordinary Shares, including the effects of any change in law after the date of this annual report.
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Dividends will constitute foreign source income
for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of
the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the
dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed
by us with respect to our Ordinary Shares will constitute "passive category income" but could, in the case of certain U.S.
Holders, constitute "general category income."
For the year ended December 31, 2022, we have
not declared any dividends on our Ordinary Shares. To the extent the distribution exceeds our current and accumulated earnings and profits
(as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary
Shares, and to the extent the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate
our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be
treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under
the rules described above.
Taxation of Dispositions of Ordinary Shares
Subject to the passive foreign investment company
rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to
the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Ordinary Shares.
The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held
the Ordinary Shares for more than one year, you will be eligible for (a) reduced tax rates of 0% (for individuals in the 10% or 15% tax
brackets), (b) higher tax rates of 20% (for individuals in the 39.6% tax bracket) or (c) 15% for all other individuals. The deductibility
of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source
income or loss for foreign tax credit limitation purposes.
Passive Foreign Investment Company (PFIC)
Consequences
Based on our current and anticipated operations
and the composition of our assets, we do not expect to be treated as a passive foreign investment company, or PFIC, for U.S. federal income
tax purposes for our current taxable year. PFIC status is a factual determination for each taxable year which cannot be made until the
close of the taxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either:
●
at least 75% of its gross income is passive income; or
●
at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the "asset test").
We will be treated as owning our proportionate
share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly,
at least 25% (by value) of the stock.
We must make a separate determination each year
as to whether we are a PFIC. As a result, our PFIC status may change from no to yes. In particular, because the value of our assets for
purposes of the asset test will generally be determined based on the market price of our Ordinary Shares, our PFIC status will depend
in large part on the market price of our Ordinary Shares. Accordingly, fluctuations in the market price of the Ordinary Shares may cause
us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition
of our income and assets will be affected by how, and how quickly, we spend the cash we raise in our initial public offering. If we are
a PFIC for any year during which you hold Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years during which
you hold Ordinary Shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a
"deemed sale" election with respect to the Ordinary Shares.
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If we are a PFIC for any taxable year during which
you hold Ordinary Shares, you will be subject to special tax rules with respect to any "excess distribution" that you receive
and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary Shares, unless you make a "mark-to-market"
election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions
you received during the shorter of the three preceding taxable years or your holding period for the Ordinary Shares will be treated as
an excess distribution. Under these special tax rules:
●
the excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares;
●
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and
●
the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
The tax liability for amounts allocated to years
prior to the year of disposition or "excess distribution" cannot be offset by any net operating losses for such years, and
gains (but not losses) realized on the sale of the Ordinary Shares cannot be treated as capital, even if you hold the Ordinary Shares
as capital assets.
A U.S. Holder of "marketable stock"
(as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you
make a mark-to-market election for the Ordinary Shares, you will include in income each year an amount equal to the excess, if any, of
the fair market value of the Ordinary Shares as of the close of your taxable year over your adjusted basis in such Ordinary Shares. You
are allowed a deduction for the excess, if any, of the adjusted basis of the Ordinary Shares over their fair market value as of the close
of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the Ordinary Shares included
in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual
sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible
portion of any mark-to-market loss on the Ordinary Shares, as well as to any loss realized on the actual sale or disposition of the Ordinary
Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary
Shares. Your basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market
election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that
the lower applicable capital gains rate for qualified dividend income discussed above under "— Taxation of Dividends and Other
Distributions on our Ordinary Shares" generally would not apply.
The mark-to-market election is available only
for "marketable stock", which is stock that is traded in other than de minimis quantities on at least 15 days during each
calendar quarter ("regularly traded") on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations),
including the Nasdaq Capital Market. For the year ended December 31, 2022, our Ordinary Share have not been listed on the Nasdaq Capital
Market. Our Ordinary Shares started trading on the Nasdaq Capital Market on March 31, 2023. If the Ordinary Shares are regularly traded
on the Nasdaq Capital Market and if you are a holder of Ordinary Shares, the mark-to-market election would be available to you were we
to be or become a PFIC.
Alternatively, a U.S. Holder of stock in a PFIC
may make a "qualified electing fund" election with respect to such PFIC to elect out of the tax treatment discussed above.
A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable
year such holder's pro rata share of the corporation's earnings and profits for the taxable year. However, the qualified electing
fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as
required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable
you to make a qualified electing fund election. If you hold Ordinary Shares in any year in which we are a PFIC, you will be required to
file U.S. Internal Revenue Service Form 8621 regarding distributions received on the Ordinary Shares and any gain realized on the disposition
of the Ordinary Shares.
You are urged to consult your tax advisors regarding
the application of the PFIC rules to your investment in our Ordinary Shares and the elections discussed above.
79
Information Reporting and Backup Withholding
Dividend payments with respect to our Ordinary
Shares and proceeds from the sale, exchange or redemption of our Ordinary Shares may be subject to information reporting to the U.S. Internal
Revenue Service and possible U.S. backup withholding at a current rate of 24%. Backup withholding will not apply, however, to a U.S. Holder
who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form
W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must
provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the
application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts
withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service
and furnishing any required information. We do not intend to withhold taxes for individual shareholders.
Under the Hiring Incentives to Restore Employment
Act of 2010, certain U.S. Holders are required to report information relating to Ordinary Shares, subject to certain exceptions (including
an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue
Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold Ordinary Shares.
U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding
rules.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
The Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and will file reports, registration statements and other information with the SEC.
The Company's reports, registration statements and other information can be inspected on the SEC's website at www.sec.gov.
You may also visit us on the World Wide Web at http http://www.xmhitek.com/. However, information contained on our website does not constitute
a part of this annual report.
I. Subsidiary Information
Not applicable.
80
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Interest Rate Risk
We deposit surplus funds with Chinese banks earning
daily interest. We do not invest in any instruments for trading purposes. Most of our outstanding debt instruments carry loan prime rates
plus basis points of interest. Our operations generally are not directly sensitive to fluctuations in interest rates and we currently
do not have any long-term debt outstanding. Management monitors the banks' prime rates in conjunction with our cash requirements
to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions
in an effort to reduce our exposure to interest rate risk.
Foreign Exchange Risk
While our reporting currency is the U.S. dollar,
substantially all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. Substantially all of our assets
are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected
by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of
our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated
at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and equity is translated
at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining
other comprehensive income, a component of equity. The depreciation of the RMB against the U.S. dollar in 2022 increased our comprehensive
loss to $279,251 based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of December 31, 2022.
As of December 31, 2022. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.
The value of RMB against the U.S. dollar and other
currencies is affected by, among other things, changes in China's political and economic conditions. Since July 2005, RMB has not
been pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent
significant short-term fluctuations in the exchange rate, RMB may appreciate or depreciate significantly in value against the U.S. dollar
in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in RMB
exchange rate and lessen intervention in the foreign exchange market.
Inflation
Inflationary factors such as increases in the
cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a
material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse
effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net
revenues if the selling prices of our products do not increase with these increased costs.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES
A. Debt Securities.
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares.
Not applicable.
81
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES
AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE
RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
See "Item 10. Additional Information"
for a description of the rights of securities holders, which remain unchanged.
Use of Proceeds
The following "Use of Proceeds" information
relates to the post-effective amendment to the registration statement on Form F-1, as amended (File Number 333-228498) for our initial
public offering, which was declared effective by the SEC on March 30, 2023. In April 2023, we completed our initial public offering in
which we issued and sold an aggregate of 3,200,000 Ordinary Shares, at a price of $5.00 per share for $16 million.
We incurred approximately $2,476,860 in expenses
in connection with our initial public offering, which included approximately $1,360,000	in underwriting discounts, approximately $250,000
in expenses paid to or for underwriters, and approximately $866,860 in other expenses. None of the transaction expenses included payments
to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates.
None of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers
or their associates, persons owning 10% or more of our equity securities or our affiliates.
The net proceeds raised from the initial public
offering were $13,523,140 after deducting underwriting discounts and the offering expenses payable by us. As of today, we have not used
any of the proceeds yet. We plan to use the net proceeds we receive from our initial public offering for the following purposes:
Use of net proceeds
Research and development
approximately US$2,700,000
Recruit additional employees
approximately US$3,380,000
Enhance our information technology systems
approximately US$4,730,000
General working capital
approximately US$2,710,000
Total
US$13,520,000
ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our
chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b)
under the Exchange Act. Based on the foregoing evaluation, our principal executive officer and principal financial officer concluded that,
as of December 31, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material
weaknesses described below.
Management's Report on Internal Control
over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting ("ICFR"), as defined in Rules 13a-15 (f) under the
Exchange Act. Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness
of our ICFR based on criteria established in the framework in Internal Control—Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the 2013 Framework, our principal executive officer
and principal financial officer have concluded that our ICFR was not effective as of December 31, 2022 due to the following material weaknesses:
●
We had insufficient financial reporting and accounting with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues;
●
We do not have sufficient systems and procedures in place to ensure effective supervision and monitoring of our annual financial statements preparation process;
A material weakness is a deficiency, or a combination
of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented
or detected on a timely basis.
We plan to address the weaknesses identified above
by implementing the following measures:
(1)
recruiting qualified professionals
with appropriate levels of knowledge and experience to assist in resolving accounting issues in non-routine or complex transactions;
(2)
investing in technology infrastructure
to support our financial reporting function; and
(3)
improving the communication
between management, board of directors and chief financial officer.
82
Attestation Report of the Registered Public
Accounting Firm
Because the Company is a non-accelerated filer,
this annual report does not include an attestation report of our registered public accounting firm regarding ICFR.
Changes in Internal Control Over Financial
Reporting
There were no changes in our internal control
over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or
are reasonably likely to materially affect, our ICFR
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Mr. Wenhua Yang  qualifies as an "audit
committee financial expert" as defined in Item 16A of Form 20-F.  Mr. Yang also is an independent director as defined
by the rules of the NASDAQ Stock Market as well as qualifies as an audit committee financial expert as defined by the rules of the NASDAQ
Stock Market, Inc. and Rule 10A-3 under the Exchange Act.
ITEM 16B. CODE OF ETHICS
On July 9, 2019, we have adopted a code of ethics
applicable to our directors, officers, and employees in accordance with applicable federal securities law and NASDAQ rules.
ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees
by categories specified below in connection with certain professional services rendered by UHY LLP, our former independent registered
public accounting firm, for the year ended December 31, 2021, and Wei, Wei & Co., LLP for the year ended December 31, 2022. We did
not pay any other fees to our independent registered public accounting firm during the periods indicated below.
2022
2021
Audit fees
(1)
$
180,000
$
181,380
Audit related fees
(2)
-
-
Tax fees
(3)
-
-
All other fees
(4)
-
-
TOTAL
$
180,000
$
181,380
(1)
"Audit fees" means
the aggregate fees billed or to be billed for each of the fiscal years for professional services rendered by our principal accountant
for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years.
(2)
"Audit related fees"
means the aggregate fees billed or to be billed for each of the fiscal years for assurance and related services by our principal accountant
that are reasonably related to the performance of the audit or review of our financial statements and are not reported under paragraph
(1).
(3)
"Tax Fees" represents
the aggregate fees billed or to be billed in each of the fiscal years listed for the professional tax services rendered by our principal
auditors.
(4)
"All Other Fees" represents
the aggregate fees billed or to be billed in each of the fiscal years listed for services rendered by our principal auditors other than
services reported under "Audit fees," "Audit-related fees" and "Tax fees."
The policy of our audit committee and our board
of directors is to pre-approve all audit and non-audit services provided by our principal auditors, including audit services, audit-related
services, and other services as described above, other than those for de minimis services which are approved by the audit committee or
our board of directors prior to the completion of the services.
83
ITEM 16D. EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES
BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F. CHANGE IN REGISTRANT'S
CERTIFYING ACCOUNTANTS
On December 2, 2022, UHY LLP ("
UHY
")
notified the Company of its intention to resign as the Company's auditor on January 1, 2023. The auditor's report of UHY on
the Company's consolidated financial statements as of and for the years ended December 31, 2021 and 2020 did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. Furthermore,
during the fiscal years ended December 31, 2021 and 2020, and the subsequent interim period through January 1, 2023, there has been: (1)
no disagreement (as described under Item 16F(a)(1)(iv) of Form 20-F and the related instructions thereto) with UHY on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to UHY's
satisfaction, would have caused UHY to make reference to the subject matter of the disagreement in connection with its reports on the
Company's consolidated financial statements for such years, and (2) no "reportable events" (as defined under Item 16F(a)(1)(v)
of the instructions to Form 20-F), except the material weaknesses in the Company's internal control over financial reporting previously
reported in Item 15 "Controls and Procedures" in the Company's Annual Reports on Form 20-F for the years ended December
31, 2021 and 2020, respectively. The material weaknesses previously reports were: (i) the Company had insufficient financial reporting
and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP
accounting issues; and (ii) the Company did not have sufficient systems and procedures in place to ensure effective supervision and monitoring
of our annual financial statements preparation process.
On February 15, 2023, the Company engaged of Wei,
Wei & Co., LLP ("
WWC
") to serve as the independent registered public accounting firm of the Company. During the
two most recent fiscal years and through the subsequent interim period preceding WWC's engagement, the Company has not consulted
with WWC regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type
of audit opinion that might be rendered on the Company's financial statements, and neither a written report was provided to the
Company nor oral advice was provided that WWC concluded was an important factor considered by the Company in reaching a decision as to
the accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a disagreement (as defined in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as described in
Item 304(a)(1)(v) of Regulation S-K).
The Company provided UHY with a copy of the above
disclosure and requested that UHY furnish the Company with a letter addressed to the Commission stating whether or not it agrees with
the above statement. A copy of UHY's letter is filed as Exhibit 16.1 to the Form 6-K filed on February 21, 2023, and is incorporated
by reference herein.
ITEM 16G. CORPORATE GOVERNANCE
Other than as described in this section, our corporate
governance practices do not differ from those followed by domestic companies listed on the NASDAQ Capital Market. NASDAQ Listing Rule
5635 generally provides that shareholder approval is required of U.S. domestic companies listed on the NASDAQ Capital Market prior to
issuance (or potential issuance) of securities (i) equaling 20% or more of the company's Ordinary Shares or voting power for less
than the greater of market or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant
to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially
amended. Notwithstanding this general requirement, NASDAQ Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home
country practice rather than these shareholder approval requirements. The Cayman Islands do not require shareholder approval prior to
any of the foregoing types of issuances. The Company, therefore, is not required to obtain such shareholder approval prior to entering
into a transaction with the potential to issue securities as described above. The Board of Directors of the Company has elected to follow
the Company's home country rules as to such issuances and will not be required to seek shareholder approval prior to entering into
such a transaction.
Nasdaq Listing Rule 5605(b)(1) requires
listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we
are permitted to, and we may follow home country practice in lieu of the above requirements. The corporate governance practice in our
home country, the British Virgin Islands, does not require a majority of our board to consist of independent directors. Currently, a majority
of our board members are independent. However, if we change our board composition such that independent directors do not constitute a
majority of our board of directors, our shareholders may be afforded less protection than they would otherwise enjoy under Nasdaq's
corporate governance requirements applicable to U.S. domestic issuers.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
84
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements
pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
Results of Operations and Financial Condition
Following are the audited financial results for
the years ended December 31, 2022, 2021 and 2020 of Hitek Global Inc.
85
INDEX TO FINANCIAL STATEMENTS
HITEK GLOBAL INC. AND SUBSIDIARIES
Page
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
(Wei, Wei & Co., LLP PCAOB ID: 2388)
F-2
Report of Independent Registered Public Accounting Firm
(UHY LLP, PCAOB ID:
1195
)
F-3
Consolidated Balance Sheets as of December 31, 2022 and 2021
F-4
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020
F-5
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2022,2021 and 2020
F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 202
1, and 2020
F-7
Notes to Consolidated Financial Statements
F-8
F-
1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Hitek Global Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Hitek
Global Inc. and Subsidiaries (the "Company") as of December 31, 2022, and the related consolidated statements of operations
and comprehensive income, changes in shareholders' equity, and cash flows for the year then ended December 31, 2022, and the related
notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the
year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
/s/ Wei, Wei & Co., LLP
Flushing, New York
April 26, 2023
We have served as the Company's auditor since 2023.
F-
2
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
of Hitek Global Inc.
Opinion on the Financial
Statements
We have audited the accompanying
consolidated balance sheet of Hitek Global Inc. (the "Company") as of December 31, 2021 and the related consolidated
statements of operations and comprehensive income, changes in shareholders' equity, and cash flows for each of the years in the
two-year period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2021, and the results of their operations and their cash flows for each of the years in the two-year period ended
December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we
are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/
UHY LLP
We have served as the Company's auditor since 2017.
New York, New York
May 13, 2022
F-
3
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
9,102,933
4,173,234
Total Assets
$
21,205,091
$
17,140,373
Liabilities and Shareholders' Equity
Current
l
iabilities
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
1,099
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
*
Retrospectively restated for effect
of Reverse Split.
The accompanying notes are an integral part of
these consolidated financial statements.
F-
4
HITEK GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
Years Ended December 31,
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
3,171,272
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
– Basic and diluted
$
0.13
$
0.15
$
0.15
Weighted average number of ordinary shares outstanding
– Basic and diluted
10,987,679
10,987,679
10,987,679
*
Retrospectively restated for effect
of Reverse Split.
The accompanying notes are an integral part of
these consolidated financial statements.
F-
5
HITEK GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
Years Ended December 31, 2022, 2021 and 2020
Ordinary Shares*
Additional
Accumulated
other
Number of
shares
Amount
paid-in
capital
Statutory
reserve
Retained
earnings
comprehensive
(loss) income
Total Equity
Balance as of January 1, 2020
10,987,679
1,099
$
2,628,356
$
664,747
$
5,737,614
$
(
76,125
)
$
8,955,691
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 as of December 31, 2020
10,987,679
1,099
2,628,356
713,737
7,377,483
445,789
11,166,464
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 as of December 31, 2021
10,987,679
1,099
2,628,356
767,207
8,993,370
736,196
13,126,228
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 as of December 31, 2022
10,987,679
$
1,099
$
2,628,356
$
836,215
10,340,107
$
(
279,251
)
$
13,526,526
*
Retrospectively restated for effect
of Reverse Split.
The accompanying notes are an integral part of
these consolidated financial statements.
F-
6
HITEK GLOBAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December31,
2022
2021
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
$
-
-
The accompanying notes are an integral part of
these consolidated financial statements.
F-
7
HITEK GLOBAL INC. AND SUBSIDIARIES
Notes
to CONSOLIDATED Financial Statements
December 31, 2022 and 2021
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.
F-
8
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.
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.
F-
9
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.
F-
10
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
$
-
F-
11
Earnings Per Share
("EPS")
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.
F-
12
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.
F-
13
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
useful life
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.
F-
14
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.
F-
15
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.
F-
16
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.
F-
17
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
December 31,
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 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
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
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.
F-
18
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
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.
F-
19
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
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
F-
20
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.
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
.
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
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 RMB
1,300,000
($
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 RMB
30,000,000
($
4,342,100
with an exchange rate of
0.1447
as of December 31, 2022),
RMB
3,000,000
($
434,210
with an exchange rate of
0.1447
as of December 31, 2022) and RMB
7,000,000
($
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 RMB
120,000
($
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).
F-
21
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.
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.
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
F-
22
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
for fiscal year ended December 31,2022
and 2021, and $
255,344
for fiscal year ended December 31, 2020; and software sales of $
nil
for fiscal year ended December 31, 2022 and
2021, and $
353,977
for fiscal year ended December 31, 2020. As of December 31, 2022 and 2021, accounts receivable from Beijing Zhongzhe
Yuantong Technology Co., Ltd. is $
399,465
and $
963,034
, respectively. As of April, 25, 2023, Beijing Zhongzhe subsequently repaid $
399,465
.
(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
for fiscal year ended December 31, 2022, 2021 and 2020, respectively. As of December
31, 2022 and 2021, the Company has outstanding advances owed to Fengqi (Beijing) Zhineng Technology Co., Ltd., in the amount of $
598
and $
4,163
, respectively. The advances are due on demand and non-interest bearing.
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
%
F-
23
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
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
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 RMB
15,000,000
($
2,171,050
with an exchange rate of
0.1447
as of December 31, 2022),
RMB
1,500,000
($
217,205
with an exchange rate of
0.1447
as of December 31, 2022) and RMB
3,500,000
($
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. RMB
1,500,000
($
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
and $
nil
. respectively.
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.
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.
F-
24
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
)
F-
25
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.
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
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
%
F-
26
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
%
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.
F-
27
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.
F-
28
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
$
-
$
-
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.
F-
29
December 31, 2022
Actual
Pro Forma
As Adjusted
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
iabilities
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
).
F-
30
ITEM 19. EXHIBITS
EXHIBIT INDEX
Incorporated by reference to
Filed
Exhibit No.
Description
Form
Exhibit
Filing Date
herewith
1.1
Articles of Association
F-1
3.1
December 31, 2018
1.2
Memorandum of Association
F-1
3.2
December 31, 2018
1.3
Form of Restated and Amended Memorandum and Articles of Association
F-1
3.3
January 7, 2020
2.1
Specimen Certificate for Ordinary Shares
F-1
4.1
January 7, 2020
2.2
Description of Securities
X
4.1
Employment Agreement by and between CEO Xiaoyang Huang and the Company dated July 1, 2018
F-1
10.1
November 20, 2018
4.2
Employment Agreement by and between CTO Bo Shi and the Company dated July 1, 2018
F-1
10.2
November 20, 2018
4.3
Employment Agreement by and between CFO Tianyu Xia and the Company on September 2, 2018
F-1
10.3
November 20, 2018
4.4
Exclusive Technical Consultation and Service Agreement dated March 31, 2018, between WFOE and the Company
F-1
10.4
December 31, 2018
4.5
Equity Interests Pledge Agreement dated March 31, 2018, between WFOE and Huang Xiaoyang, Yin Shenping, Shi Bo, Wang Zhishuang, Huang Liuqing, Li Jingru, Tang Mian, Tian Ce, Lin Xianfeng, Inner Mongolia Guangxin Investment Co., Ltd., Baotou Zhongzhe Hengtong Technology Co., Ltd. ***
F-1
10.5
December 31, 2018
4.6
Exclusive Equity Interests Purchase Agreement dated March 31, 2018, amongst WFOE, Huang Xiaoyang, Yin Shenping, Shi Bo, Wang Zhishuang, Huang Liuqing, Li Jingru, Tang Mian, Tian Ce, Lin Xianfeng, Inner Mongolia Guangxin Investment Co., Ltd., Baotou Zhongzhe Hengtong Technology Co., Ltd., and HiTek***
F-1
10.6
December 31, 2018
4.7
Form of Power of Attorney dated March 31, 2018, between WFO and Huang Xiaoyang, Yin Shenping, Shi Bo, Wang Zhishuang, Huang Liuqing, Li Jingru, Tang Mian, Tian Ce, Lin Xianfeng, Inner Mongolia Guangxin Investment Co., Ltd., Baotou Zhongzhe Hengtong Technology Co., Ltd.***
F-1
10.7
December 31, 2018
8.1
List of Subsidiaries
X
11.1
Code of Business Conduct and Ethics of the Registrant
F-1
99.1
July 19, 2019
12.1
Certification of the Chief Executive Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.
X
12.2
Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended
X
13.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*
13.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*
15.1
Consent Letter of Jingtian & Gongcheng
X
16.1
Letter of UHY LLP to the U.S. Securities and Exchange Commission dated February 21, 2023
6-K
16.1
February 21, 2023
101.
The following financial statements from the Company's Annual Report on Form 20-F for the year ended December 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Changes in Shareholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
X
*
Furnished herewith.
86
SIGNATURES
The registrant hereby certifies that it meets
all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report
on its behalf.
HiTek Global Inc.
By:
/s/ Xiaoyang Huang
Name:
Xiaoyang Huang
Title:
Chief Executive Officer
(Principal Executive Officer)
Dated:
April 27, 2023
87