| BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Basis of Financial Information The accounting and financial reporting policies
of the Company conform to generally accepted accounting principles (“GAAP”) in the United States and the preparation of the
CFS is in conformity with GAAP which requires management to make estimates and assumptions that affect reported amounts and disclosures. Reclassification Certain prior year amounts have been reclassified
for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. According to the significance thresholds, the
previously issued Consolidated Balance Sheet as of December 31, 2021 was reclassified certain amount of prepaid expenses and other current
assets into loan receivable. These reclassifications had no effect on the reported results of operations. The item was reclassified as
follows.
Previously reported
December 31, 2021 (Decrease)/ Increase December 31, 2021
(Reclassified)
Consolidated Balance Sheets
Current assets:
Loan receivable $ - $ 204,441 $ 204,441
Prepaid expenses and other current assets $ 360,552 $ (204,441 ) $ 156,111 Principles of Consolidation The accompanying consolidated financial statements
include financial information related to the Company and its wholly-owned subsidiaries and those variable interest entities (“VIEs”)
where the Company is the primary beneficiary. In preparing the CFS, all significant inter-company
accounts and transactions were eliminated. Assets held in an agency or fiduciary capacity are not included in the CFS. VIE Agreements with HiTek Due to PRC legal restrictions of foreign ownership
in certain sectors, neither we nor our subsidiaries own any equity interest in HiTek. Instead, WFOE, HiTek and HiTek’s shareholders
entered into a series of contractual arrangements (“VIE Agreements”) on March 31, 2018, which have not been tested in a court
of law. The VIE Agreements by and among WFOE, HiTek, and HiTek’s shareholders include (i) certain power of attorney agreements and
equity interest pledge agreement, which provide WFOE effective control over HiTek; (ii) an exclusive technical consulting and service
agreement which allows WFOE to receive substantially all of the economic benefits from HiTek; and (iii) certain exclusive equity interest
purchase agreements which provide WFOE with an exclusive option to purchase all or part of the equity interests in and/or assets of HiTek
when and to the extent permitted by PRC laws. Accordingly, the Company is considered the primary beneficiary of VIE for accounting purpose
and has consolidated the VIE and the VIE’s subsidiaries’ assets, liabilities, results of operations, and cash flows in the
accompanying consolidated financial statements. Each of the VIE Agreements is described in detail
below: Exclusive Technical Consulting and Service
Agreement Pursuant to the Exclusive Technical Consulting
and Service Agreement between HiTek and WFOE, WFOE provides HiTek with technical support, consulting services and other management services
relating to its day-to-day business operations and management, on an exclusive basis. The Exclusive Technical Consulting and Service Agreement
has come into effect as of March 31, 2018. For services rendered to HiTek by WFOE under this agreement, WFOE is entitled to collect a
service fee that shall be paid per quarter of 100% of HiTek’s quarterly profit. The term of the Exclusive Technical Consulting and
Service Agreement is ten years unless it is terminated by WFOE with 30-day prior notice. Equity Interest Pledge Agreement WFOE, HiTek and HiTek shareholders entered into
an Equity Interest Pledge Agreement, pursuant to which HiTek shareholders pledged all of their equity interests in HiTek to WFOE
in order to guarantee the performance of HiTek’s obligations under the Exclusive Technical Consulting and Service Agreement as described
above. The Equity Interest Pledge Agreement has come into effect as of March 31, 2018. During the term of the pledge, WFOE is entitled
to receive any dividends declared on the pledged equity interests of HiTek. The Equity Interest Pledge Agreement ends when
all contractual obligations under the Exclusive Technical Consulting and Service Agreement have been fully performed. Exclusive Equity Interests Purchase Agreement Under the Exclusive Equity Interests Purchase
Agreement, the HiTek Shareholders granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law,
part or all of their equity interests in HiTek. The option price is equal to the capital paid in by the HiTek Shareholders subject to
any appraisal or restrictions required by applicable PRC laws and regulations. The Exclusive Equity Interests Purchase Agreement remains
effective for a term of ten years and may be renewed at WFOE’s election. Power of Attorney Each shareholder of the HiTek has executed
an irrevocable power of attorney in favor of WFOE. Pursuant to this power of attorney, WFOE has full power and authority to exercise
all of such shareholders’ rights with respect to their equity interest in the VIE Companies, including HiTek, Huasheng and
Huoerguosi. The power of attorney will remain in force for so long as the shareholder remains a shareholder of HiTek. During the years ended December 31, 2022, 2021
and 2020, there were no transactions in HiTek Global Inc. and HiTek HK besides minimal capital transactions and professional fee payments.
As of December 31, 2022, our VIEs accounted for 96% and 98% of our total assets and total liabilities, respectively. As of December 31,
2021, our VIEs accounted for 93% and 100% of our total assets and total liabilities, respectively. As of December 31, 2022 and 2021, $955,941
and $1,557,325 of cash and equivalents were denominated in RMB, respectively. Use of Estimates and Assumptions The preparation of the CFS in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the CFS and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates reflected in
the Company’s CFS include allowance for doubtful accounts, inventory obsolescence, deferred taxes, and the useful lives of property
and equipment. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from
those estimates. Fair Values of Financial Instruments The U.S. GAAP accounting standards regarding FV
(“FV”) of financial instruments and related FV measurements define FV, establish a three-level valuation hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring FV. The three levels of inputs are defined as follows: Level 1 inputs to the valuation methodology
are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology
include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to the valuation methodology
are unobservable. ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at FV (FV option). The FV option may be elected
on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the FV option is elected for an instrument,
unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not
elect to apply the FV option to any outstanding instruments. The carrying amounts reported in the consolidated
balance sheets for cash, accounts receivable, accounts receivable – related party, advances to suppliers, deferred offering costs,
prepaid expenses and other, accounts payable and accrued liabilities, income taxes payable, VAT and other taxes payable, and due to related
parties approximate their FV based on the short-term maturity of these instruments. The Company’s investments measured at FV
on a recurring basis consist of trading securities and held-to-maturity debt securities. The valuation for the Level 1 position is based
on quoted prices in active markets. The following table presents information about our assets and liabilities that are measured at FV
on a recurring basis as of December 31, 2022 and 2021 and indicates the FV hierarchy of the valuation techniques we utilized to determine
such FV. The valuation techniques are based on the FV measurement on a recurring basis of trading securities and held-to-maturity debt
securities.
Quoted Significant Significant
Prices in Other Other
Active Observable Unobservable
December 31, Markets Inputs Inputs
2022 (Level 1) (Level 2) (Level 3)
Trading securities $ 2,408,772 $ 2,408,772 $ - $ -
Held-to-maturity debt securities 1,881,576 1,881,576 - -
Total $ 4,290,348 $ 4,290,348 $ - $ -
Quoted Significant Significant
Prices in Other Other
Active Observable Unobservable
December 31, Markets Inputs Inputs
2021 (Level 1) (Level 2) (Level 3)
Trading securities $ 5,197,015 $ 188,208 $ 5,008,807 $ -
Total $ 5,197,015 $ 188,208 $ 5,008,807 $ - Earnings Per Share Basic earnings per share is computed by dividing
net income by the weighted-average number of ordinary shares outstanding during the period. Diluted EPS is computed by dividing net income
by the weighted-average number of ordinary shares and dilutive potential ordinary shares outstanding during the period. For the years ended December 31, 2022, 2021 and
2020, there were no other contracts to issue ordinary shares, such as options, warrants or conversion rights, which would have a dilutive
effect on EPS. Cash Cash consists of cash on hand and cash in banks.
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company maintains cash with various financial institutions in the PRC. As of December 31, 2022 and 2021, cash balances held in PRC
banks are uninsured. The Company has not experienced any losses in bank accounts during the years ended December 31, 2022 and 2021. Concentrations of Credit Risk Currently, all of the Company’s operations
are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced
by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s
operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America.
The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of cash, short-term investments, trade accounts receivable, and accounts
receivable from related parties and advances to suppliers. A portion of the Company’s sales are credit sales which are to the customers
whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect
to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of
its customers to help further reduce credit risk. Impact of COVID-19 As
of the date of this amendment to annual report, the COVID-19 pandemic is generally considered
under control in China. In light of the current circumstances, in the absence of long-term
local lockdown, the Company estimates its financial results will not be adversely affected
in year 2023. The Company is closely monitoring the development of the COVID-19 pandemic
and continuously evaluating any further potential impact on its business, results of operations
and financial condition. If the outbreak persists or escalates, the Company may be subject
to further negative impact on its business operations and financial condition.
Short-term Investments Short-term investments consist of trading stock
and debt securities, which include mutual funds and wealth management products issued by commercial banks. The Company accounts for short
term investment in accordance with FASB ASC Topic 320 “Investments — Debt and Equity Securities.” Dividend and interest
income, including amortization of the premium and discount arising at acquisition, for all categories of investments in securities is
included in Consolidated Statements of Operations. Net realized and unrealized holding gains and losses for short term investments are
included in Consolidated Statements of Operations. If a security is acquired with the intent
of selling it within hours or days, the security is classified as a trading security. The Company classifies investments in trading
stock and mutual funds as trading securities. Unrealized holding gains and losses for trading securities are included in earnings. If the Company has positive intent and ability
to hold to maturity, the security is classified as held-to-maturity security. The Company classifies investments in wealth management
products issued by commercial banks as held-to-maturity securities as the Company intends to hold these investments in wealth management
products until maturity and the maturity terms of these investments are within one year. Due to the short-term maturity, the investments
in wealth management products are valued at carrying value, which approximates the amortized cost. For individual securities classified
as held-to-maturity securities, the Company evaluates whether a decline in FV below the amortized cost basis is other-than-temporary,
in accordance with ASC 320. Other-than-temporary impairment loss is recognized in earnings equal to the entire excess of the debt security’s
amortized cost basis over its FV at the balance sheet date of the reporting period for which the assessment is made. Accounts Receivable, Accounts Receivable from
Related Party and Concentration of Risk Accounts receivable is presented net of an allowance
for doubtful accounts. If any, the Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability
of its customers to make required payments. The Company reviews the collectability of its receivables on an ongoing basis. After all attempts
to collect a receivable have failed. The receivable is written off against the allowance. The Company reviews the accounts receivable on
a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating
the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s
historical payment history, its current credit-worthiness and current economic trends. The Company considers the following factors where
determining whether to permit a longer payment period:
● the customer’s past payment history;
● the customer’s general risk profile, including factors such as the customer’s size, age and public or private status;
● macroeconomic conditions that may affect a customer’s ability to pay; and
● the relative importance of the customer relationship to the Company’s business. The normal payment period is approximately six
months to one year after the customers received goods or are served. The Company gives customers different credit period considering
the above factors. For the large customers such as large-scale oil and coal mine customers, the Company gives a two-year credit period.
For IT outsourcing customers, the Company gives a year and half credit period. For small and medium customers, the Company gives a half
year credit period. In accordance with ASC 210-10-45, the non-current
accounts receivable and non-current accounts receivable from related parties represent the amounts that the Company does not reasonably
expect to be realized during the normal operating cycle of the Company based on the Company’s best estimates and customers’
historical payment behaviors. The Company uses approximately one-year time period as the basis to the separation of current and non-current
assets. Advances to Suppliers Advances to suppliers represent amounts prepaid
to suppliers for purchases of inventory. In evaluating the recoverability of such advances, the Company mainly considers the age of the
balance and ability of the suppliers to perform the related obligations. As of December 31, 2022 and 2021, advances to suppliers consisted
of the following:
2022 2021
Advances to suppliers - Inventories $ 483,435 $ 751,301
Advances to suppliers - Services - 366,903
Less: reserve for amount not recoverable (1,666 ) (7,281 )
Total $ 481,769 $ 1,110,923 As of December 31, 2021, advances to third-party
suppliers for services were $366,903, which includes $304,592 of advances for outsourcing software service, and $62,311 of advances for
sales commission. As of December 31, 2022, there was no advance to service suppliers as the related outsourcing software service contract
had expired. Deferred Offering Costs The Company complies with ASC 340-10-S99-1 and
SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering costs consist
of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Proposed
Public Offering. Deferred offering costs will be charged to shareholders’ equity upon the completion of the Proposed Public Offering.
Should the Proposed Public Offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will
be charged to operations. Inventories Inventories are stated at the lower of cost (weighted
average basis) or net realizable value. The methods of determining inventory costs are used consistently from year to year. Allowance
for inventory obsolescence is provided when the market value of certain inventory items is lower than the cost. Property, Equipment and Software Property, equipment and software are carried at
cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is
expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated
depreciation and amortization are removed from the accounts, and any resulting gains or losses are included in the statement of operations
in the year of disposition. The Company examines the possibility of decreases in the value of property, equipment and software, when events
or changes in circumstances reflect the fact that their recorded value may not be recoverable. Estimated useful lives are as follows, taking into account the assets’
estimated residual value:
Classification Estimated
Furniture and office equipment 2-3 years
Computer equipment 2-3 years
Transportation equipment 5 years
Buildings and improvements 20 years
Software 3 years Impairment of Long-lived Assets In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than
the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated FV and its
book value. The Company did not record any impairment charge for the years ended December 31, 2022, 2021 and 2020. Revenue Recognition The Company follows ASU 2014-09, Topic 606, “Revenue
from Contracts with Customers” and its related amendments (collectively referred to as “ASC 606”) for its revenue recognition
accounting policy that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to
which the Company expects to be entitled in exchange for those goods or services. In accordance with ASC 606, revenue is recognized when
all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in
the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize
revenue when (or as) each performance obligation is satisfied. The Company generates its revenues primarily from
three sources: (1) hardware sales, (2) software sales, and (3) tax devices and services. The Company recognizes revenue when performance
obligations under the terms of a contract with its customers are satisfied. This occurs when the control of the goods and services have
been transferred to the customer.
● Hardware sales Hardware revenues are generated primarily from
the sale of computer and network hardware to end users. The products include computers, printers, internet cables, certain internet servers,
cameras and monitors. The sales of hardware represent a single performance obligation. The Company usually recognizes the revenue at the
point in time when ownership is transferred to end customers. The Company’s revenue derived from sales of hardware is reported on
a gross basis since the Company is primarily obligated in the transaction, bears inventory and credit risk and has discretion in establishing
the prices. Hardware sales are classified as “Revenue-Hardware” on the Company’s consolidated statements of operations.
● Software sales HiTek also does business in software sales and
focuses on the perpetual licenses sales for one of the self-developed software Communication Interface System(“CIS”). CIS
is based on LINUX, which is a general embedded interface system used in petrochemical and coal enterprises. The system is used to communicate
the RCTX-X module, collect the work diagram, the electricity diagram, the pressure temperature and other measures, and can extract the
data and import it to the software of the windows platform to display analysis. Performance Obligations - Software contracts with
customers include multiple performance obligations such as sale of software license, installation of software, operation training service
and warranty. The installation and operation training are essential to the functionality of the software which are provided to the clients
prior to the acceptance of the software. The Company provides one-year warranty which mainly telephone supports. The Company estimates
that costs associated with warranty are de minimis to the overall contract. Therefore, the Company does not further allocate transaction
price. The Company recognizes revenue when the software
is accepted by the customer. Revenues from software sales contracts are classified as “Revenue-Software” on the Company’s
consolidated statements of operations.
● Tax Devices and Services Before January 21, 2021, all VAT general taxpayer
businesses in China are required to purchase the Anti-Counterfeiting Tax Control System (“ACTCS” or Golden Tax Disk or GTD)
tax devices to issue the VAT Invoice and for quarterly VAT filing. HiTek is authorized to carry out the implementation of ACTCS specialty
hardware retailing. The price of GTD and related supporting services are determined by the National Development and Reform Commission.
From January 21, 2021, the new taxpayers can receive electronic tax control ukey for free from the Tax authority. HiTek could provide
supporting services to the new taxpayers. Performance Obligations - Tax devices and services
contracts with customers include multiple performance obligations such as delivery of products, installation and after-sales supporting
services, tax control system risk investigation service, and tax invoicing management service, such as training service on issuing electronic
invoice, complete tax declaration automatically and back up data online. Revenue from the sales of GTD devices is recognized
when ownership is transferred to end customers. The Company provides the tax device after-sales supporting services and tax invoicing
management service, charging the service fee on an annual basis because the service period is usually one year. Revenue related to its
service is recognized as the services are performed and amounts are earned, using the straight-line method over the term of the related
services agreement. The Company also charges a one-time service charge for each investigation request. Revenue related to tax control
system risk investigation service is recognized at the point in time when the services are performed. Revenue is recognized based on each
performance obligation’s standalone selling price that are sold separately and charged to customers at contract inception. The Company’s revenue derived from its gross
billings is reported on a gross basis since the Company is primarily obligated in the transaction, is subject to inventory and credit
risk and has several but not all of the indications that revenue should be recorded on the gross basis. Revenue was comprised of the followings.
Years Ended December 31,
2022 2021 2020
Revenues
Hardware $ 2,504,426 $ 2,434,694 $ 2,360,362
Tax devices and service 1,803,650 1,970,363 2,254,176
Software 2,120,532 2,056,106 1,053,467
IT services - - 136,722
Total revenues $ 6,428,608 $ 6,461,163 $ 5,804,727
● Contract balances Prepayments received from customers prior to the
services being performed are recorded as deferred revenue. Deferred revenue consists of the annual service fees for Golden Tax Disk and
tax invoicing management service received from customers while the services have not yet been performed. The Company recognizes the service
fees amount as revenue on a straight-line basis in accordance with the service periods.
● Practical expedients and
exemptions The Company generally expenses sales commissions
as incurred because the amortization period would have been one year or less. Deferred Revenue Deferred revenue consists of the annual service
fees for Golden Tax Disk (defined below) received from customers but the services have not yet been performed. The Company recognizes
the service amount as revenue on a straight-line basis in accordance with the service periods. Deferred revenue as of December 31, 2022
and 2021 was $977,054 and $784,530, respectively. For the years ended December 31, 2022, 2021 and 2020, the Company recognized revenue
of $784,530, $752,286 and $763,191, respectively, that was included in the deferred revenue balance at the beginning of each year. Cost of Revenue Cost of revenue is comprised of (i) the direct
cost of our hardware products purchased from third parties; (ii) logistics-related costs, which primarily include product packaging and
freight-in charges; (iii) third-party royalties paid related to the GTD; and (iv) compensation for the employees who handle the products
and other costs that are necessary for us to provide the services to our customers. Selling Expenses Selling expenses consists of primarily shipping
and handling costs for products sold and advertisement, marketing expenses for promotion of our products. During the year ended December
31, 2022 and 2021, selling expenses also included sales commission paid to a third party for obtaining contracts with customers. General and Administrative Expenses General and administrative expenses consist primarily
of costs in salary and welfare expenses for our general administrative and management staff, facilities costs, depreciation and amortization
expenses, professional fees, accounting fees, meals and entertainment, utilities, and other miscellaneous expenses incurred in connection
with general operations. All depreciation and amortization expenses were recorded in general and administrative expenses because
fixed assets are mainly for sales and administrative purpose. Government Subsidies Grants are given by the government to mainly support
the Company for the increase in production and social insurance compensation for rural laborers. Grants are recognized as government subsidies
income in the consolidated statements of operations when received. Research and Development Expenses The Company follows FASB ASC 985-20, Cost of Software
to Be Sold, Leased or Marketed, regarding software development costs to be sold, leased, or otherwise marketed. FASB ASC 985-20-25 requires
research and development costs for software development to be expensed as incurred until the software model is technologically feasible.
Technological feasibility is established when the enterprise has completed all planning, designing, coding, testing, and identification
of risks activities necessary to establish that the product can be produced to meet its design specifications, features, functions, technical
performance requirements. A certain amount of judgment and estimation is required to assess when technological feasibility Is established,
as well as the ongoing assessment of the recoverability of capitalized costs. The Company’s products reach technological feasibility
shortly before the products are released and sold to the public. Therefore, research and development (“R&D”) costs are
generally expensed as incurred. The Company expenses R&D expenses as incurred
and are included as part of general and administrative expenses. R&D expenses for the years ended December 31, 2022, 2021 and 2020
were $42,052, $43,661 and 35,904, respectively. The Company defers certain costs related to the
software development activities associated with certain software which the Company has determined have future economic benefit. Management
periodically reviews and revises, when necessary, its estimate of the future benefit of these costs and expenses them if it deems there
no longer is a future benefit. The Company has two software (for internal use) (Finance and Taxation Service Platform Mobile Application
and Corporate Full-Service Platform Mobile Application) and they are fully amortized as of December 31, 2022. Income Taxes The Company is governed by the Income Tax Law
of the PRC. The Company accounts for income taxes using the asset/liability method prescribed by ASC 740, “Accounting for Income
Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting
and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected
to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it
is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a
change in tax rates is recognized as income or loss in the period that includes the enactment date. The Company applied the provisions of ASC 740-10-50,
“Accounting for Uncertainty in Income Taxes,” which provides clarification related to the process associated with accounting
for uncertain tax positions recognized in the Company’s CFS. Audit periods remain open for review until the statute of limitations
has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment
to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations
for any given quarterly or annual period based, in part, upon the results of operations for the given period. Value Added Taxes (“VAT”) Starting from April 1, 2019, the VAT rate for
revenue generated from providing products was changed from 16% to 13%. VAT is reported as a deduction of revenue when incurred. Entities
that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT
balance between input VAT and output VAT is recorded in taxes payable. Foreign Currency Translation The functional currency of the Company’s
operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The CFS are translated to U.S. dollars using the period end
rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the
period) |
