Core Viewpoint - Hongli Steel (HLP) experienced a stock price increase of 5.14% on August 5, 2023, closing at $0.654 per share with a total market capitalization of $48.03 million [1] Financial Performance - As of December 31, 2024, Hongli Steel reported total revenue of $14.11 million, representing a year-over-year decrease of 11.83% [1] - The company recorded a net profit attributable to shareholders of -$1.88 million, which is a significant decline of 317.6% year-over-year [1] Company Overview - Hongli Group is a Cayman Islands-registered holding company primarily operating through its domestic subsidiary, Shandong Hongli Special Pipe Co., Ltd. [1] - Shandong Hongli Special Pipe Co., Ltd. was established in September 1999 and is located in Weifang, known as the Kite Capital [1] - The company specializes in producing customized cold-formed profiles, rolled products, steel-aluminum composite pipes, as well as deep processing services like 3D bending, 3D laser cutting, and drilling [1] Product Applications - Hongli Steel's high-quality products are utilized in various sectors, including construction machinery cabins, automotive body components, building products, curtain wall partitions, power plant equipment, conveying devices, solar equipment, communication devices, and furniture [1]

Core Viewpoint - Hongli Steel (HLP) experienced a 4.6% increase in stock price, closing at $0.651 per share with a total market capitalization of $47.7793 million as of August 4 [1] Financial Performance - For the fiscal year ending December 31, 2024, Hongli Steel reported total revenue of $14.1056 million, reflecting a year-over-year decrease of 11.83% [1] - The company recorded a net profit attributable to shareholders of -$1.8816 million, which represents a significant decline of 317.6% compared to the previous year [1] Company Overview - Hongli Group is a Cayman Islands-registered holding company that primarily operates through its domestic subsidiary, Shandong Hongli Special Pipe Co., Ltd [1] - Shandong Hongli Special Pipe Co., Ltd, established in September 1999, is located in Weifang, known as the Kite Capital [1] - The company specializes in producing customized open and closed cold-formed profiles, rolled products, steel-aluminum composite pipes, as well as deep processing services like 3D bending, 3D laser cutting, and drilling [1] Product Applications - The high-quality products manufactured by the company are utilized in various sectors, including construction machinery cabins, automotive body components, building products, curtain wall partitions, power plant equipment, conveyor systems, solar equipment, communication devices, and furniture [1]

资料显示，宏力集团公司是一家在开曼群岛注册成立的境外控股母公司,主要通过其境内实体子公司山 东宏力异型管有限公司运营。 山东宏力异型钢管有限公司坐落于美丽的风筝之都一潍坊,成立于1999年9月。生产客户定制的多种开口 闭合或者开放冷弯型材,辊压产品,钢铝复合管等以及3D弯管,3D激光切割,钻铣等深加工。 7月31日，宏力型钢(HLP)盘中上涨7.87%，截至22:13，报0.682美元/股，成交4932.0美元，总市值 5005.59万美元。 公司高质量的产品主要用于工程机械驾驶室,汽车车身部件,建筑产品,幕墙隔断,发电厂设备以及传送装 置,太阳能设备,通信设备,家具等领域。 财务数据显示，截至2024年12月31日，宏力型钢收入总额1410.56万美元，同比减少11.83%；归母净利 润-188.16万美元，同比减少317.6%。 本文源自：金融界 作者：行情君 ...

Core Viewpoint - Hongli Group Inc. has received a deficiency letter from Nasdaq regarding non-compliance with the minimum bid price requirement for its ordinary shares, which must be at least $1.00 per share for continued listing on The Nasdaq Capital Market [1][2]. Compliance Status - The deficiency notice does not immediately affect the listing status of the ordinary shares, and the company has a compliance period of 180 calendar days, until January 6, 2026, to regain compliance [2][3]. - If the closing bid price reaches or exceeds $1.00 for at least 10 consecutive business days before the deadline, the company will be notified of compliance [2]. - The company may consider a reverse stock split to regain compliance, which must be completed no later than ten business days prior to January 6, 2026 [2][3]. Company Overview - Hongli Group Inc. is a Cayman Islands holding company that consolidates the financial results of Shandong Hongli Special Section Tube Co., Ltd. and its subsidiaries, which are leading manufacturers of cold roll formed steel profiles in China [4]. - The company has over 20 years of operating history and serves customers in more than 30 major cities in China, as well as internationally in South Korea, Japan, the U.S., and Sweden [4]. - Hongli Operating Group operates 11 cold roll forming production lines and produces a variety of profile products across different materials, sizes, and shapes [4].

[Introduction](index=7&type=section&id=INTRODUCTION) This annual report on Form 20-F presents audited consolidated financial statements for fiscal years ended December 31, 2024, and 2023 - The company's reporting currency is the U.S. dollar, with Renminbi as its functional currency, and translations are based on specified year-end and average rates[24](index=24&type=chunk) - Key terms are defined, including "Hongli" for Hongli Group Inc. and its subsidiaries, and "PRC operating entities" for the VIE and its subsidiaries[22](index=22&type=chunk)[26](index=26&type=chunk) [PART I](index=9&type=section&id=PART%20I) [Key Information](index=9&type=section&id=Item%203.%20KEY%20INFORMATION) This section details the company's VIE structure, regulatory compliance, financial consolidation, and comprehensive risk factors [VIE Structure and Regulatory Disclosures](index=9&type=section&id=VIE%20Structure%20and%20Regulatory%20Disclosures) The company consolidates its PRC operating entity through a VIE structure, navigating regulatory filings, cybersecurity assessments, and restrictions on fund transfers - Hongli Group Inc. consolidates its PRC operating entity, Hongli Shandong, via a Variable Interest Entity (VIE) structure established through contractual arrangements in April 2021, without direct equity ownership[30](index=30&type=chunk)[31](index=31&type=chunk) - A formal filing was submitted to the China Securities Regulatory Commission (CSRC) on January 2, 2025, following a private placement on December 5, 2024, and remains under review[37](index=37&type=chunk)[190](index=190&type=chunk) - The company believes it is not subject to cybersecurity review by the Cyberspace Administration of China (CAC) as its operations do not involve collecting personal data of at least **1,000,000** users or other sensitive data[40](index=40&type=chunk)[220](index=220&type=chunk) - Hongli Cayman relies on subsidiary dividends, with fund transfers from PRC entities subject to foreign exchange controls and a **10%** statutory reserve requirement until it reaches **50%** of registered capital[42](index=42&type=chunk)[44](index=44&type=chunk)[47](index=47&type=chunk) [Financial Information Related to the VIE](index=16&type=section&id=Financial%20Information%20Related%20to%20the%20VIE) This section presents condensed consolidating financial statements for 2022-2024, detailing operations, balance sheets, and cash flows across the parent, subsidiaries, and VIE Condensed Consolidating Statement of Operations (2024) | | Hongli Cayman | Subsidiary (Hong Kong) | Hongli WFOE (Mainland China) | VIE and Its Subsidiaries | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues (USD)** | - | - | - | $(14,105,620) | $(14,105,620) | | **Net Income (Loss) (USD)** | $(1,761,351) | $146,528 | $26,244 | - | $(1,881,635) | | **Comprehensive Income (Loss) (USD)** | $(1,761,351) | $146,528 | $299,572 | $(381,527) | $(2,582,258) | Condensed Consolidating Balance Sheet (As of Dec 31, 2024) | | Hongli Cayman | Subsidiary (Hong Kong) | Hongli WFOE (Mainland China) | VIE and Its Subsidiaries | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Assets (USD)** | $53,493,295 | $22,027,418 | $54,473,563 | $32,947,379 | $65,010,421 | | **Total Liabilities (USD)** | $1 | $22,027,418 | $54,473,563 | $32,947,379 | $11,517,126 | | **Total Shareholders' Equity (USD)** | $53,493,294 | - | - | - | $53,493,295 | Condensed Consolidating Statement of Cash Flows (2024) | | Hongli Cayman | Subsidiary (Hong Kong) | Hongli WFOE (Mainland China) | VIE and Its Subsidiaries | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Cash from Operating Activities (USD)** | $(33,000,022) | $1 | $33,317,754 | $(381,391) | $(414,034) | | **Net Cash Used in Investing Activities (USD)** | - | - | $(33,350,376) | $38,567 | $(33,311,809) | | **Net Cash Provided by Financing Activities (USD)** | $33,000,000 | - | $5,559 | $503,018 | $33,508,577 | [Risk Factors](index=20&type=section&id=D.%20Risk%20Factors) The company faces diverse risks, including geopolitical tensions, customer concentration, VIE enforceability, China's regulatory environment, and share price volatility - **Business Risks:** The company faces risks from geopolitical tensions, potential tariffs, substantial customer concentration, with **3** major customers accounting for **67%** of sales in FY2024, and reliance on key raw material suppliers[63](index=63&type=chunk)[81](index=81&type=chunk) - **Corporate Structure Risks:** Reliance on contractual arrangements with its VIE may be less effective than direct ownership and costly to enforce under PRC law, with potential conflicts of interest with VIE shareholders[65](index=65&type=chunk)[123](index=123&type=chunk)[128](index=128&type=chunk) - **China-Related Risks:** The company is subject to uncertainties in the PRC legal system, substantial government influence, currency exchange controls, and potential delisting risks under the Holding Foreign Companies Accountable Act (HFCA Act)[65](index=65&type=chunk)[149](index=149&type=chunk)[159](index=159&type=chunk) - **Share-Related Risks:** As a foreign private issuer, the company has different and potentially less frequent disclosure obligations, and investors may face difficulties enforcing legal judgments against the company due to its Cayman Islands incorporation and PRC operations[67](index=67&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - The company identified material weaknesses in internal control over financial reporting, including a lack of key monitoring mechanisms and insufficient accounting personnel with U.S. GAAP and SEC reporting knowledge[139](index=139&type=chunk)[142](index=142&type=chunk) [Information on the Company](index=68&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of Hongli Group, detailing its history, VIE structure, core business operations, and strategic expansion plans [History and Development of the Company](index=68&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Hongli Cayman, incorporated in February 2021, operates through a VIE structure with Hongli Shandong, completed its Nasdaq IPO in March 2023, and a **$33 million** private placement in December 2024 - The company operates through a VIE structure, consolidating the financial results of Shandong Hongli Special Section Tube Co., Ltd. (Hongli Shandong), incorporated in **1999**[254](index=254&type=chunk)[270](index=270&type=chunk) - The company consummated its Initial Public Offering (IPO) on March 31, 2023, selling **2,062,500** Ordinary Shares at **$4.00** per share[264](index=264&type=chunk) - On December 5, 2024, the company closed a private placement, issuing **60,000,000** Ordinary Shares at **$0.55** per share for aggregate gross proceeds of **$33,000,000**[266](index=266&type=chunk) - As of May 5, 2025, the company had **73,438,750** Ordinary Shares issued and outstanding[267](index=267&type=chunk) [Business Overview](index=77&type=section&id=B.%20Business%20Overview) The company's PRC operating entities specialize in custom cold roll formed (CRF) steel profiles, holding **62** patents, and are executing an Expansion Plan, with **86.5%** of 2024 sales concentrated in the PRC market - The company's main business is the design and production of custom-made cold roll formed (CRF) steel profiles for machinery in sectors like mining, construction, and agriculture[295](index=295&type=chunk) Revenue by Geography (FY 2024 vs. FY 2023) | Region | 2024 Revenue (USD) | % of Total | 2023 Revenue (USD) | % of Total | | :--- | :--- | :--- | :--- | :--- | | PRC | $12,196,548 | 86.5% | $12,117,240 | 75.7% | | International | $1,909,072 | 13.5% | $3,880,714 | 24.3% | | **Total** | **$14,105,620** | **100%** | **$15,997,954** | **100%** | Top Customer Sales Concentration | Customer | 2024 Sales (USD) | % of Total | 2023 Sales (USD) | % of Total | | :--- | :--- | :--- | :--- | :--- | | LOVOL | $6,056,622 | 43% | $7,707,045 | 48% | | South Korean VOLVO | $1,654,578 | 12% | $3,441,899 | 22% | | XCMG Group | $1,750,970 | 12% | N/A | N/A | | **Total (Top 3)** | **$9,462,170** | **67%** | **$11,148,944** | **70%** | - The company is executing an Expansion Plan, including purchasing an industrial park and new production facilities for approximately **$21.9 million** (RMB **151.4 million**)[339](index=339&type=chunk)[340](index=340&type=chunk) - As of the report date, the company owns **62** patents, including **55** utility patents and **7** invention patents, critical to its operations[367](index=367&type=chunk) [Regulations](index=102&type=section&id=Regulations) This section outlines key PRC regulations impacting the company, including foreign investment, intellectual property, foreign exchange controls, dividend distribution, CSRC overseas listing rules, and taxation - The company's operations are subject to China's Foreign Investment Law, utilizing a pre-entry national treatment and negative list management system, with its business not in a restricted or prohibited industry[393](index=393&type=chunk)[394](index=394&type=chunk)[397](index=397&type=chunk) - New CSRC regulations effective March 31, 2023, require domestic companies seeking overseas listings to file with the CSRC, which Hongli did after its December 2024 offering[420](index=420&type=chunk)[422](index=422&type=chunk) - Foreign exchange is strictly regulated in China, with current account payments permissible with compliance, while capital account transactions require SAFE approval or registration[402](index=402&type=chunk) - Dividend distributions from PRC subsidiaries are restricted, payable only from after-tax profits, with at least **10%** allocated to a statutory reserve fund until it reaches **50%** of registered capital[410](index=410&type=chunk) [Operating and Financial Review and Prospects](index=114&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial performance, detailing revenue and profitability declines in FY2024, liquidity management, and key accounting policies [Operating Results](index=114&type=section&id=A.%20Operating%20results) Total revenues decreased by **11.8%** to **$14.1 million** in FY2024, resulting in a **$1.9 million** net loss, primarily due to a **50.8%** decline in international sales and a **$2.0 million** share-based compensation expense Key Financial Results (FY 2024 vs. FY 2023) | Metric | FY 2024 | FY 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Revenues, Net (USD)** | $14,105,620 | $15,997,954 | $(1,892,334) | -11.8% | | **Gross Profit (USD)** | $4,519,747 | $5,245,840 | $(726,093) | -13.8% | | **(Loss) Income from Operation (USD)** | $(1,583,296) | $1,020,435 | $(2,603,731) | -255.2% | | **Net (Loss) Income (USD)** | $(1,881,635) | $864,722 | $(2,746,357) | -317.6% | | **Gross Margin** | 32.0% | 32.8% | -0.8pp | -2.4% | - The revenue decline in FY2024 was primarily due to a **$2.0 million** (**50.8%**) decrease in international sales, while domestic sales remained stable[473](index=473&type=chunk)[474](index=474&type=chunk) - SG&A expenses increased by **44%** in FY2024, mainly due to a **$2.0 million** share-based compensation expense from issuing **1,200,000** Ordinary Shares to employees[478](index=478&type=chunk) Key Financial Results (FY 2023 vs. FY 2022) | Metric | FY 2023 | FY 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Revenues, Net (USD)** | $15,997,954 | $20,283,245 | $(4,285,291) | -21.1% | | **Gross Profit (USD)** | $5,245,840 | $7,008,493 | $(1,762,653) | -25.2% | | **Net Income (USD)** | $864,722 | $2,932,363 | $(2,067,641) | -70.5% | [Liquidity and Capital Resources](index=129&type=section&id=B.%20Liquidity%20and%20capital%20resources) As of December 31, 2024, the company had **$0.9 million** in cash, with liquidity supported by its **$8.3 million** IPO proceeds and **$33.0 million** private placement, primarily for expansion and debt repayment Summary of Cash Flows | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Net Cash (Used in) Provided by Operating Activities (USD)** | $(414,034) | $884,917 | $2,493,024 | | **Net Cash Used in Investing Activities (USD)** | $(33,311,809) | $(2,253,634) | $(11,670,592) | | **Net Cash Provided by Financing Activities (USD)** | $33,508,577 | $382,094 | $10,841,222 | - Net cash used in investing activities in 2024 was **$33.3 million**, primarily due to a **$33.4 million** deposit for a joint venture investment[550](index=550&type=chunk) - Net cash provided by financing activities in 2024 was **$33.5 million**, mainly from **$33.0 million** in proceeds from a private placement[553](index=553&type=chunk) - As of December 31, 2024, total short-term and long-term loans were approximately **$9.4 million**, with substantially all guaranteed by the CEO and his family members[556](index=556&type=chunk)[557](index=557&type=chunk) [Critical Accounting Policies](index=126&type=section&id=Critical%20Accounting%20Policies) The company's financial statements adhere to U.S. GAAP, with key policies including VIE consolidation, ASC 606 revenue recognition, and ASC 842 lease accounting - The company consolidates its VIE, Hongli Shandong, as it is deemed the primary beneficiary under U.S. GAAP[514](index=514&type=chunk) - Revenue is recognized when control of products is transferred to customers, typically upon shipment for overseas sales and acceptance for domestic sales[515](index=515&type=chunk)[516](index=516&type=chunk) - The company adopted ASC 842 for leases and accounts for failed sale and leaseback transactions as financing when a bargain purchase option is reasonably certain to be exercised[521](index=521&type=chunk)[523](index=523&type=chunk) [Directors, Senior Management and Employees](index=139&type=section&id=Item%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, including CEO Jie Liu and CFO Xiangmei Zeng, executive compensation, board structure with three independent directors, and its **167** full-time employees as of May 2025 - The company's leadership includes **Jie Liu** as CEO and Chairman, and **Xiangmei Zeng** as CFO[572](index=572&type=chunk)[573](index=573&type=chunk)[574](index=574&type=chunk) Executive Compensation Summary | Name and Principal Position | Year | Salary (USD) | Total (USD) | | :--- | :--- | :--- | :--- | | **Jie Liu** | 2024 | $50,030 | $50,030 | | CEO and Chairman | 2023 | $27,115 | $27,115 | | **Xiangmei Zeng** | 2024 | $16,677 | $16,677 | | CFO | 2023 | $12,498 | $12,498 | - The Board of Directors consists of **four** members, with **three** independent directors (Chenlong Yang, Qian (Hebe) Xu, Yizhao Zhang), and Yizhao Zhang serving as the audit committee financial expert[597](index=597&type=chunk)[600](index=600&type=chunk)[603](index=603&type=chunk) - As of May 5, 2025, the company had **167** full-time employees, with **99** in manufacturing, **29** in R&D, and **39** in administration[612](index=612&type=chunk) [Major Shareholders and Related Party Transactions](index=147&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the company's ownership structure, with CEO Jie Liu holding **9.242%**, and outlines related party transactions including monetary advances and personal guarantees for loans Major Shareholders (as of May 5, 2025) | Shareholder | Ordinary Shares Beneficially Owned | Percentage | | :--- | :--- | :--- | | Hongli Development Limited (Jie Liu) | 6,787,517 | 9.242% | | BETTY CHEN LIMITED | 7,200,000 | 9.804% | | WELL FANCY DEVELOPMENT LTD. | 6,050,000 | 8.238% | - Balances with related parties primarily consist of monetary advances and repayments; in 2023, the company advanced **$351,924** to CEO Jie Liu, fully repaid in 2024[625](index=625&type=chunk)[880](index=880&type=chunk) - Substantially all outstanding short-term and long-term loans as of December 31, 2024, were guaranteed by the CEO, his family members, and their owned companies[556](index=556&type=chunk)[626](index=626&type=chunk) [Financial Information](index=151&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) This section confirms the inclusion of audited consolidated financial statements, details a settled lawsuit from November 2023, and states the company's policy to retain earnings for expansion without anticipating future dividends - In November 2023, the company filed a lawsuit regarding a share ownership dispute with entities controlled by a former financial advisor, which was settled and dismissed with prejudice in December 2023[631](index=631&type=chunk) - The company does not anticipate paying any cash dividends in the foreseeable future, intending to retain earnings for business expansion[634](index=634&type=chunk) [Additional Information](index=153&type=section&id=Item%2010.%20ADDITIONAL%20INFORMATION) This section provides supplementary details on governance, material contracts, Cayman Islands exchange controls, and a comprehensive taxation summary, including the significant risk of PFIC classification for U.S. holders - The company's PRC subsidiaries are subject to a standard Enterprise Income Tax (EIT) rate of **25%**, though Hongli Shandong, as an HNTE, is eligible for a reduced rate of **15%**[650](index=650&type=chunk)[651](index=651&type=chunk)[865](index=865&type=chunk) - The Cayman Islands and the British Virgin Islands do not levy taxes on profits, income, or gains, and there are no withholding taxes on dividend payments[653](index=653&type=chunk)[656](index=656&type=chunk)[657](index=657&type=chunk) - There is a significant risk that the company could be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, potentially resulting in adverse tax consequences for U.S. shareholders[672](index=672&type=chunk)[673](index=673&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=163&type=section&id=Item%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to liquidity, inflation, and primarily interest rate risk, with a sensitivity analysis illustrating the potential impact of rate hikes on annual interest expense - The company is exposed to liquidity risk, inflation risk, and interest rate risk[691](index=691&type=chunk)[692](index=692&type=chunk)[693](index=693&type=chunk) Interest Rate Risk Sensitivity (as of Dec 31, 2024) | Total Loans Outstanding | Impact of 1% Rate Increase (USD) | Impact of 3% Rate Increase (USD) | Impact of 5% Rate Increase (USD) | | :--- | :--- | :--- | :--- | | $9,384,461 | $93,845 | $281,534 | $469,225 | [PART II](index=164&type=section&id=PART%20II) [Controls and Procedures](index=164&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were ineffective as of December 31, 2024, due to material weaknesses in internal control over financial reporting, with remediation efforts underway - Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2024[701](index=701&type=chunk) - Material weaknesses in internal control over financial reporting were identified, including a lack of key monitoring mechanisms, inadequately designed management review controls, and insufficient accounting personnel with U.S. GAAP and SEC reporting knowledge[703](index=703&type=chunk)[705](index=705&type=chunk) - Remediation efforts include hiring an experienced outside consultant, providing ongoing U.S. GAAP training to personnel, and establishing an internal audit department[705](index=705&type=chunk) [Corporate Governance and Other Disclosures](index=166&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Disclosures) This section details corporate governance, including the audit committee financial expert, principal accountant fees totaling **$488,000** in 2024, foreign private issuer practices, insider trading policies, and cybersecurity risk management - The Board of Directors has determined that **Yizhao Zhang** qualifies as an audit committee financial expert[709](index=709&type=chunk) Principal Accountant Fees (RBSM LLP) | | 2024 | 2023 | | :--- | :--- | :--- | | **Audit Fees (USD)** | $488,000 | $355,000 | | **Total Fees (USD)** | **$488,000** | **$355,000** | - As a foreign private issuer, the company follows certain Cayman Islands corporate governance practices instead of Nasdaq rules, such as not being required to hold annual shareholder meetings or obtain shareholder approval for certain security issuances[719](index=719&type=chunk)[721](index=721&type=chunk) - The company has adopted insider trading policies and processes for managing cybersecurity risks, with oversight from executive officers and the Board of Directors, and no material cybersecurity incidents have been reported[723](index=723&type=chunk)[724](index=724&type=chunk)[725](index=725&type=chunk) [PART III](index=170&type=section&id=PART%20III) [Financial Statements](index=170&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements for FY2022-2024, prepared under U.S. GAAP, including balance sheets, income statements, cash flows, and detailed notes on accounting policies and commitments Consolidated Balance Sheet Highlights | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Total Assets (USD)** | $65,010,421 | $32,128,670 | | **Total Liabilities (USD)** | $11,517,126 | $11,021,117 | | **Total Shareholders' Equity (USD)** | $53,493,295 | $21,107,553 | Consolidated Statement of Operations Highlights | | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | | **Revenues, Net (USD)** | $14,105,620 | $15,997,954 | $20,283,245 | | **Net Income (Loss) (USD)** | $(1,881,635) | $864,722 | $2,932,363 | | **Comprehensive Income (Loss) (USD)** | $(2,582,258) | $205,561 | $1,986,097 | - The notes to the financial statements confirm the company operates as a single reportable segment and provide detailed breakdowns of revenue by geographic region (PRC vs Overseas)[804](index=804&type=chunk)[819](index=819&type=chunk) - Subsequent events include the execution of a joint venture agreement with Zhongke Hongyuan on March 10, 2025, for which the company deposited its **$32.9 million** capital contribution in December 2024[905](index=905&type=chunk)

[Financial Statements](index=1&type=section&id=Financial%20Statements) This section presents the company's consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows, for the periods ended June 30, 2024 [Condensed Consolidated Balance Sheets](index=1&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2024, Hongli Group's total assets increased slightly to $32.70 million from $32.13 million at year-end 2023, driven by a rise in total liabilities to $12.01 million, primarily from increased short-term and long-term loans, consequently decreasing total shareholders' equity to $20.69 million from $21.11 million due to retained earnings reduction Balance Sheet Highlights (as of June 30, 2024 vs. Dec 31, 2023) | Balance Sheet Item | June 30, 2024 (Unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$32,697,652** | **$32,128,670** | | Cash and cash equivalents | $930,419 | $775,686 | | Accounts receivable | $6,411,049 | $6,013,536 | | Property, plant and equipment, net | $10,771,835 | $10,752,745 | | **Total Liabilities** | **$12,010,684** | **$11,021,117** | | Short-term loans | $6,613,276 | $5,726,841 | | Long-term loans | $3,677,777 | $3,338,075 | | **Total Shareholders' Equity** | **$20,686,968** | **$21,107,553** | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=2&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%28LOSS%29) For the six months ended June 30, 2024, the company reported a significant net loss of $1.90 million, a stark reversal from a net income of $0.80 million in the same period of 2023, primarily due to a 21.9% decrease in revenues and a 76.8% surge in selling, general, and administrative expenses, leading to an operating loss of $1.69 million Statement of Operations Summary (For the Six Months Ended June 30) | Financial Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues, net | $6,962,241 | $8,915,111 | -21.9% | | Gross Profit | $2,302,472 | $3,045,801 | -24.4% | | (Loss) income from operations | ($1,694,242) | $784,995 | Negative Swing | | Net (loss) income | ($1,902,348) | $796,354 | Negative Swing | | Basic and diluted (loss) earnings per share | ($0.15) | $0.07 | Negative Swing | - Selling, general and administrative expenses increased significantly to **$3,996,714** in H1 2024 from **$2,260,806** in H1 2023, contributing heavily to the operating loss[2](index=2&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=3&type=section&id=UNAUDITIED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS%27%20EQUITY) Shareholders' equity decreased from $21.11 million at the end of 2023 to $20.69 million as of June 30, 2024, primarily driven by a net loss of $1.90 million and a negative foreign currency translation adjustment of $0.49 million, partially offset by $1.97 million in share-based compensation Reconciliation of Shareholders' Equity (For the Six Months Ended June 30, 2024) | Item | Amount | | :--- | :--- | | Balance, December 31, 2023 | $21,107,553 | | Share-based compensation | $1,968,000 | | Net loss for the six months | ($1,902,348) | | Foreign currency translation adjustment | ($486,237) | | **Balance, June 30, 2024** | **$20,686,968** | [Condensed Consolidated Statements of Cash Flows](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the first six months of 2024, the company's net cash used in operating activities increased to $1.22 million, investing activities used $0.38 million, a reversal from providing cash in the prior year, while financing activities provided a significant inflow of $1.74 million, mainly from new borrowings and advances from related parties, resulting in a net increase in cash and cash equivalents of $0.11 million, ending the period with $0.93 million Cash Flow Summary (For the Six Months Ended June 30) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,218,353) | ($1,042,104) | | Net cash (used in) provided by investing activities | ($383,749) | $303,312 | | Net cash provided by (used in) financing activities | $1,736,444 | ($365,338) | | **Net change in cash, cash equivalents and restricted cash** | **$114,750** | **($1,247,293)** | | **Cash, cash equivalents and restricted cash, end of period** | **$930,419** | **$866,746** | - The positive cash flow from financing activities in H1 2024 was primarily driven by advances from related parties (**$1.41M**) and net new borrowings, contrasting with H1 2023 which included proceeds from the IPO (**$9.49M**) but also significant loan repayments[4](index=4&type=chunk)

PART I [Item 3. Key Information](index=9&type=section&id=Item%203.%20KEY%20INFORMATION) This section details the company's Variable Interest Entity (VIE) structure, associated risks, and condensed consolidating financial statements - Hongli Group operates through a VIE structure with Hongli Shandong to avoid substantial costs and time for regulatory approvals, rather than due to foreign ownership restrictions[18](index=18&type=chunk)[297](index=297&type=chunk) - The company is deemed an "Existing Issuer" under CSRC's Trial Measures, requiring filing for subsequent offerings but not immediate procedures[22](index=22&type=chunk)[214](index=214&type=chunk) - The company does not anticipate paying cash dividends, intending to retain future earnings for business expansion of its PRC operating entities[27](index=27&type=chunk)[67](index=67&type=chunk) Condensed Consolidating Statement of Operations (Year Ended Dec 31, 2023) | | Hongli (Cayman) | Subsidiary (Hong Kong) | Hongli WFOE (Mainland China) | VIE and Its Subsidiaries | Eliminations | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | - | - | - | $15,997,954 | - | $15,997,954 | | **Net income** | $864,722 | $800,491 | $800,491 | - | $(1,600,982) | $864,722 | | **Comprehensive income (loss)** | $590,315 | $526,084 | $526,084 | $(384,754) | $(1,052,168) | $205,561 | Condensed Consolidating Balance Sheet (As of Dec 31, 2023) | | Hongli (Cayman) | Subsidiary (Hong Kong) | Hongli WFOE (Mainland China) | VIE and Its Subsidiaries | Eliminations | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | $21,107,554 | $22,323,637 | $22,087,619 | $33,013,956 | $(66,404,096) | $32,128,670 | | **Total Liabilities** | $1 | $13,954,672 | $13,954,797 | $13,890,430 | $(41,799,899) | $11,021,117 | | **Total Shareholders' Equity** | $21,107,553 | - | - | - | - | $21,107,553 | [Risk Factors](index=19&type=section&id=D.%20Risk%20Factors) This sub-section details risks related to customer concentration, VIE structure, PRC regulations, potential delisting under the HFCA Act, and internal control weaknesses - The company has substantial customer concentration, with three major customers accounting for approximately **75% of sales in fiscal year 2023**[81](index=81&type=chunk)[82](index=82&type=chunk) - The VIE structure presents inherent risks due to reliance on contractual arrangements, with enforcement uncertainties and potential conflicts of interest with VIE shareholders[55](index=55&type=chunk)[134](index=134&type=chunk)[141](index=141&type=chunk) - The company faces risks from PRC regulations, including potential government intervention, unpredictable legal changes, and CSRC oversight uncertainties impacting securities offerings[59](index=59&type=chunk)[178](index=178&type=chunk)[183](index=183&type=chunk) - Despite its U.S.-based auditor, the company's shares face delisting risk under the HFCA Act if the PCAOB is unable to inspect auditors of China-based operations in the future[168](index=168&type=chunk)[171](index=171&type=chunk)[238](index=238&type=chunk) - Material weaknesses in internal control over financial reporting include a lack of key monitoring mechanisms, inadequate management review controls, and insufficient U.S. GAAP/SEC reporting expertise[158](index=158&type=chunk)[159](index=159&type=chunk) [Item 4. Information on the Company](index=65&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details the company's corporate history, structure, business operations, competitive strengths, and strategic expansion plans [History and Development of the Company](index=65&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This sub-section outlines the company's corporate history, including the establishment of its VIE structure and its IPO on Nasdaq in March 2023 - The operating entity, Shandong Hongli, was founded in 1999, with the current holding structure established in 2021 to facilitate an overseas listing via a VIE[286](index=286&type=chunk)[287](index=287&type=chunk) - The company consummated its IPO on **March 31, 2023**, listing Ordinary Shares on Nasdaq under 'HLP', with the over-allotment option fully exercised on May 2, 2023[293](index=293&type=chunk)[319](index=319&type=chunk) - The company operates through contractual arrangements (Exclusive Business Cooperation, Exclusive Option, Equity Pledge, and Powers of Attorney) to consolidate VIE financial results without direct equity ownership[295](index=295&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) [Business Overview](index=73&type=section&id=B.%20Business%20Overview) This sub-section describes the company as a leading CRF steel profile manufacturer, detailing its innovative techniques, key customers, strategic expansion plans, and competitive strengths including its patent portfolio - The company is a leading manufacturer of custom-made cold roll formed (CRF) steel profiles, serving major international and domestic clients across various industries[321](index=321&type=chunk)[322](index=322&type=chunk) - A key strategic focus is the 'Expansion Plan,' involving a new industrial park and facilities for an estimated **$24.9 million** to meet demand and increase capacity[84](index=84&type=chunk)[359](index=359&type=chunk) - The company holds **49 approved patents** (42 utility, 7 invention), critical to its 'custom-made profile shop' business model and competitive advantage[325](index=325&type=chunk)[391](index=391&type=chunk) Revenue by Top Customers (FY 2021-2023) | Customer | 2023 Sales ($) | 2023 % | 2022 Sales ($) | 2022 % | 2021 Sales ($) | 2021 % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Weichai LOVOL Heavy Industry Co. Ltd | 7,707,045 | 48% | 9,716,430 | 48% | 9,942,527 | 46% | | SUNGJIN TECH CO., LTD (South Korean VOLVO) | 3,441,899 | 22% | 4,586,277 | 23% | 4,157,991 | 19% | | Shandong Lingong Construction Machinery Co., Ltd. | 839,058 | 5% | 696,516 | 3% | 1,491,644 | 7% | | **Total Top 3** | **11,988,002** | **75%** | **14,999,223** | **74%** | **15,592,162** | **72%** | Revenue by Geography (FY 2022 vs 2023) | Region | 2023 Revenue ($) | % of Total | 2022 Revenue ($) | % of Total | Variance ($) | Variance % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | PRC | 12,117,240 | 75.74% | 15,285,549 | 75.4% | (3,168,309) | (20.7)% | | International | 3,880,714 | 24.26% | 4,997,696 | 24.6% | (1,116,982) | (22.4)% | | **Total** | **15,997,954** | **100%** | **20,283,245** | **100%** | **(4,285,291)** | **(21.1)%** | [Item 5. Operating and Financial Review and Prospects](index=112&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's discussion and analysis of the company's financial performance, including revenue trends, gross margin, liquidity, capital resources, and critical accounting policies [Operating Results](index=112&type=section&id=A.%20Operating%20results) This sub-section analyzes the company's operational performance, highlighting a **21.1% revenue decrease** and a **70.5% net income drop** in 2023 due to market slowdowns and increased IPO-related expenses Financial Performance Comparison (FY 2023 vs. FY 2022) | Metric | FY 2023 | FY 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Revenues, net** | $15,997,954 | $20,283,245 | $(4,285,291) | (21.13)% | | **Gross profit** | $5,245,840 | $7,008,493 | $(1,762,653) | (25.15)% | | **Income from operations** | $1,020,435 | $2,921,322 | $(1,900,887) | (65.07)% | | **Net income** | $864,722 | $2,932,363 | $(2,067,641) | (70.51)% | - The **21% decrease in 2023 revenue** was driven by a **$3.2 million drop in domestic sales** and a **$1.1 million decrease in overseas sales**[497](index=497&type=chunk) - Gross margin decreased from **34.6% in 2022 to 32.8% in 2023**, primarily due to a decrease in product selling prices[499](index=499&type=chunk) - SG&A expenses increased by **3% in 2023**, mainly due to a **$575,000 surge** in professional fees related to the IPO[500](index=500&type=chunk)[503](index=503&type=chunk) [Liquidity and Capital Resources](index=135&type=section&id=B.%20Liquidity%20and%20capital%20resources) This sub-section details the company's liquidity, capital resources, and cash flow management, highlighting IPO proceeds utilization, outstanding loans, and significant commitments related to its Expansion Plan - The company raised approximately **$8.3 million** net proceeds from its IPO in 2023, with **$8.1 million** loaned to Hongli Shandong to repay an expansion-related bank loan[586](index=586&type=chunk)[587](index=587&type=chunk) Cash Flow Summary (FY 2021-2023) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $884,917 | $2,493,024 | $1,139,648 | | **Net cash used in investing activities** | $(2,253,634) | $(11,670,592) | $(3,051,348) | | **Net cash provided by financing activities** | $382,094 | $10,841,222 | $983,364 | - As of December 31, 2023, outstanding loans totaled **$5.7 million in short-term** and **$3.3 million in long-term**, substantially guaranteed by the CEO and his family[600](index=600&type=chunk)[601](index=601&type=chunk)[602](index=602&type=chunk) - The company has significant commitments for its 'Expansion Plan,' including a remaining payable balance of approximately **$3.8 million** for Yingxuan Assets[603](index=603&type=chunk)[932](index=932&type=chunk) [Item 6. Directors, Senior Management and Employees](index=144&type=section&id=Item%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section provides information on the company's leadership, including directors, senior management, executive compensation, board committee structure, and employee demographics - The Board of Directors consists of four members, with three determined to be independent under NASDAQ rules[624](index=624&type=chunk)[648](index=648&type=chunk) - The company has established Audit, Compensation, and Nominating and Corporate Governance committees, each composed of the three independent directors[651](index=651&type=chunk) - As of **April 10, 2024**, the company employed **163 full-time staff**, with **87 in manufacturing**, **31 in R&D**, and **45 in administration**[659](index=659&type=chunk) Executive Compensation (FY 2023) | Name and Principal Position | Year | Salary (US$) | Total (US$) | | :--- | :--- | :--- | :--- | | Jie Liu, CEO and Chairman | 2023 | 27,115 | 27,115 | | Xiangmei Zeng, CFO | 2023 | 12,498 | 12,498 | | Yachun (Daisy) Wang, Former CFO | 2023 | 37,622 | 37,622 | [Item 7. Major Shareholders and Related Party Transactions](index=151&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the company's ownership structure, including the controlling shareholder, and significant related party transactions such as loan guarantees and intercompany advancements - CEO Jie Liu is the controlling shareholder, beneficially owning **61.42%** of the company's Ordinary Shares through Hongli Development Limited[663](index=663&type=chunk) - Substantially all outstanding short-term and long-term loans as of December 31, 2023, were guaranteed by the CEO, his family, and related companies[672](index=672&type=chunk)[673](index=673&type=chunk) - As of December 31, 2023, a net amount of **$342,053** was due from related parties, primarily an advance to the CEO, which has since been repaid[669](index=669&type=chunk)[670](index=670&type=chunk)[921](index=921&type=chunk) [Item 8. Financial Information](index=154&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) This section confirms the inclusion of audited financial statements, details a settled share dispute lawsuit, and outlines the company's dividend policy and challenges in cash distribution from PRC entities - The company filed a lawsuit in November 2023 regarding a share dispute with a former financial advisor's entities, which was settled and dismissed in December 2023[675](index=675&type=chunk) - The company's dividend policy is to retain all future earnings for business expansion, with no cash dividends expected in the foreseeable future[677](index=677&type=chunk) [Item 11. Quantitative and Qualitative Disclosures About Market Risk](index=164&type=section&id=Item%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, including liquidity, inflation, and interest rate risks, providing a sensitivity analysis for its outstanding variable-rate borrowings - The company is exposed to interest rate risk on its outstanding loans, totaling approximately **$9.1 million** as of December 31, 2023[724](index=724&type=chunk)[725](index=725&type=chunk) Interest Rate Risk Sensitivity (as of Dec 31, 2023) | Loan Type | Outstanding Balance ($) | Impact of +1% Rate | Impact of +3% Rate | Impact of +5% Rate | | :--- | :--- | :--- | :--- | :--- | | Short term loans | 5,690,221 | $56,902 | $170,706 | $284,513 | | Long term loans | 3,374,695 | $33,746 | $101,240 | $168,734 | | **Total** | **9,064,916** | **$90,648** | **$271,946** | **$453,247** | PART II [Item 15. Controls and Procedures](index=166&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) This section reports on the company's internal controls, noting ineffective disclosure controls and material weaknesses, along with ongoing remediation efforts - Management concluded that as of **December 31, 2023**, the company's disclosure controls and procedures were not effective[732](index=732&type=chunk) - Material weaknesses in internal control over financial reporting include a lack of key monitoring mechanisms, inadequately designed management review controls, and insufficient U.S. GAAP/SEC reporting expertise[735](index=735&type=chunk)[736](index=736&type=chunk) - The company has initiated remediation efforts, including hiring an experienced consultant, providing U.S. GAAP training, and establishing an internal audit department[737](index=737&type=chunk) [Item 16: Corporate Governance and Other Disclosures](index=167&type=section&id=Item%2016A-K) This section covers corporate governance, including the audit committee financial expert, code of conduct, accountant fees, insider trading policies, and cybersecurity risk management - The Board of Directors has determined that Yizhao Zhang qualifies as an audit committee financial expert[740](index=740&type=chunk) Principal Accountant Fees (RBSM LLP) | Fee Type | 2023 (USD '000) | 2022 (USD '000) | | :--- | :--- | :--- | | Audit Fees | 355 | 275 | | Audit Related Fees | - | - | | Tax Fees | - | - | | All Other Fees | - | - | | **Total Fees** | **355** | **275** | - The company has adopted insider trading policies and processes for cybersecurity risk oversight, with no material incidents identified[747](index=747&type=chunk)[748](index=748&type=chunk)[749](index=749&type=chunk) PART III [Item 18. Financial Statements](index=171&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements for fiscal years 2021-2023, prepared under U.S. GAAP, along with detailed notes and an unqualified audit opinion from RBSM LLP - The independent registered public accounting firm, RBSM LLP, issued an unqualified audit opinion on the consolidated financial statements for the three years ended **December 31, 2023**[762](index=762&type=chunk) Consolidated Balance Sheet Highlights | Metric | As of Dec 31, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | $32,128,670 | $36,164,139 | | **Total Liabilities** | $11,021,117 | $22,689,446 | | **Total Shareholders' Equity** | $21,107,553 | $13,474,693 | Consolidated Statement of Operations Highlights | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | | **Revenues, net** | $15,997,954 | $20,283,245 | $21,713,138 | | **Net income** | $864,722 | $2,932,363 | $3,202,212 | | **Earnings per share (Basic and diluted)** | $0.07 | $0.29 | $0.32 | - The financial statement notes confirm the company consolidates its VIE, Hongli Shandong, as the primary beneficiary with power to direct activities and absorb benefits or losses[782](index=782&type=chunk)[789](index=789&type=chunk)

[Financial Statements](index=1&type=section&id=Financial%20Statements) This section presents the company's unaudited condensed consolidated financial position, operational results, equity changes, and cash flows for the period [Condensed Consolidated Balance Sheets](index=1&type=section&id=HONGLI%20GROUP%20INC.%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The company's balance sheet shows decreased assets and liabilities, with a significant increase in shareholders' equity due to IPO proceeds Balance Sheet Summary (as of June 30, 2023 vs. Dec 31, 2022) | Financial Metric | June 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | $12,142,999 | $14,064,401 | -13.7% | | **Total Assets** | **$31,156,424** | **$36,164,139** | **-13.8%** | | Total Current Liabilities | $7,273,928 | $12,437,954 | -41.5% | | **Total Liabilities** | **$10,573,254** | **$22,689,446** | **-53.4%** | | **Total Shareholders' Equity** | **$20,583,170** | **$13,474,693** | **+52.8%** | - **Cash and cash equivalents decreased significantly** from $2,085,033 to $678,770[2](index=2&type=chunk) - **Substantial reductions were seen in both short-term loans** (from $6.0M to $4.0M) and long-term loans (from $10.1M to $3.3M)[2](index=2&type=chunk) - **Capital structure changed significantly post-IPO**, with an increase in outstanding shares to 12,371,875 and additional paid-in capital growing to $8,036,663[2](index=2&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=2&type=section&id=HONGLI%20GROUP%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) The company experienced a year-over-year decline in revenue and net income, resulting in a comprehensive loss due to currency translation Statement of Operations Summary (For the Six Months Ended June 30) | Metric | 2023 | 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues, net | $8,915,111 | $10,485,582 | -15.0% | | Gross Profit | $3,045,801 | $3,499,528 | -13.0% | | Income from operations | $784,995 | $1,511,963 | -48.1% | | **Net Income** | **$796,354** | **$1,866,862** | **-57.3%** | | **Comprehensive (Loss) Income** | **($318,822)** | **$1,249,032** | **-125.5%** | | Basic and diluted EPS | $0.07 | $0.19 | -63.2% | - A **significant foreign currency translation loss of $1,115,176** drove the comprehensive loss, widening from the prior year's loss of $617,830[4](index=4&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=3&type=section&id=HONGLI%20GROUP%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS%27%20EQUITY) Shareholders' equity grew substantially, primarily driven by net proceeds from the company's Initial Public Offering in early 2023 - The company raised **$9,487,500 in gross proceeds** from its Initial Public Offering (IPO) completed in two tranches[6](index=6&type=chunk) - Total IPO-related costs amounted to **$2,060,201**[6](index=6&type=chunk) Changes in Shareholders' Equity (For the Six Months Ended June 30, 2023) | Description | Amount | | :--- | :--- | | Balance, December 31, 2022 | $13,474,693 | | Net proceeds from IPO | $7,427,299 | | Net Income | $796,354 | | Foreign currency translation adjustment | ($1,115,176) | | **Balance, June 30, 2023** | **$20,583,170** | [Condensed Consolidated Statements of Cash Flows](index=4&type=section&id=HONGLI%20GROUP%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The company's cash flow turned negative due to operating outflows and significant debt repayments, despite receiving IPO proceeds Cash Flow Summary (For the Six Months Ended June 30) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($1,042,104) | $1,602,691 | | Net cash provided by (used in) investing activities | $303,312 | ($1,687,794) | | Net cash (used in) provided by financing activities | ($365,338) | $171,704 | | **Net change in cash, cash equivalents and restricted cash** | **($1,247,293)** | **$58,011** | - **Negative operating cash flow** was driven by an increase in accounts receivable and inventories and a decrease in accounts payable[8](index=8&type=chunk) - Financing activities were dominated by **$9.49 million in IPO proceeds used for significant debt repayments** of short-term ($3.67 million) and long-term ($11.41 million) loans[8](index=8&type=chunk) - **Cash paid for interest nearly doubled** to $409,431, and cash paid for income taxes increased dramatically to $330,693[9](index=9&type=chunk)

Part I [Item 3. Key Information](index=9&type=section&id=Item%203.%20KEY%20INFORMATION) This section details the company's VIE structure, PRC regulatory landscape, cash transfer policies, and key operational risks - Hongli Group Inc. (Hongli Cayman) is a holding company that controls its PRC operating entity, Hongli Shandong, through a **Variable Interest Entity (VIE) structure**[15](index=15&type=chunk)[317](index=317&type=chunk) - The company chose a VIE structure to avoid the substantial costs and uncertain timeline of PRC regulatory approvals for foreign ownership[16](index=16&type=chunk)[318](index=318&type=chunk) - The company believes no PRC approval is currently required for its operations or share issuance, but acknowledges **significant uncertainty from evolving regulations**[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - Cash transfers and dividends from PRC entities to the offshore holding company are permissible but subject to PRC laws, including **statutory reserves and withholding taxes**[28](index=28&type=chunk)[30](index=30&type=chunk)[34](index=34&type=chunk) Condensed Consolidating Statement of Operations (FY 2022) | Account | Hongli Cayman | Subsidiary (HK) | Hongli WFOE (PRC) | VIE & Subsidiaries | Eliminations | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $ - | $ - | $ - | $ 20,283,245 | $ - | **$ 20,283,245** | | **Net Income** | $ 2,932,363 | $ 2,932,363 | $ 2,932,363 | $ - | $ (5,864,726) | **$ 2,932,363** | Condensed Consolidating Balance Sheet (As of Dec 31, 2022) | Account | Hongli Cayman | Subsidiary (HK) | Hongli WFOE (PRC) | VIE & Subsidiaries | Eliminations | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | $ 4,981,757 | $ 4,981,757 | $ 4,981,757 | $ 36,164,139 | $ (14,945,271) | **$ 36,164,139** | | **Total Liabilities** | $ - | $ - | $ - | $ 27,671,203 | $ (4,981,757) | **$ 22,689,446** | | **Total Shareholders' Equity** | $ 4,981,757 | $ 4,981,757 | $ 4,981,757 | $ 8,492,936 | $ (9,963,514) | **$ 13,474,693** | [Risk Factors](index=19&type=section&id=D.%20Risk%20Factors) Enumerates key business, corporate structure, China-specific, and share-related risks facing the company - **Business Risks**: The company is exposed to operational hazards, depends on a few major customers, and requires bank loans for capital needs[50](index=50&type=chunk)[51](index=51&type=chunk) - **Corporate Structure Risks**: The company's VIE structure has **enforceability risks under PRC law** and potential conflicts of interest[55](index=55&type=chunk)[141](index=141&type=chunk) - **China-Related Risks**: The company faces risks from the PRC's evolving legal system, government influence, and potential **delisting under the HFCA Act**[58](index=58&type=chunk)[60](index=60&type=chunk)[63](index=63&type=chunk) - **Share-Related Risks**: Investors face stock price volatility, **immediate and substantial dilution**, and reduced disclosure requirements[66](index=66&type=chunk)[67](index=67&type=chunk) [Item 4. Information on the Company](index=66&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details the company's history, business operations, products, sales strategies, and expansion plans [History and Development of the Company](index=66&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Outlines the corporate timeline, the establishment of the VIE holding structure, and its status as a foreign private issuer - Hongli Group Inc. was incorporated in the Cayman Islands in 2021 and controls its PRC operating entities via a **VIE structure**[307](index=307&type=chunk)[317](index=317&type=chunk) - The company consummated its **IPO on March 31, 2023**, selling 2,062,500 Ordinary Shares at $4.00 per share[315](index=315&type=chunk)[341](index=341&type=chunk) - The company qualifies as a "controlled company," an "emerging growth company," and a "foreign private issuer," allowing for **certain reporting exemptions**[333](index=333&type=chunk)[334](index=334&type=chunk)[337](index=337&type=chunk) [Business Overview](index=75&type=section&id=B.%20Business%20Overview) Describes the company's business as a leading Chinese manufacturer of custom cold roll formed (CRF) steel profiles - The company's main business is designing and producing **custom-made cold roll formed (CRF) steel profiles** for various industries[343](index=343&type=chunk) - The company has a **high customer concentration**, with its top 3 customers accounting for 74% of sales in FY2022[82](index=82&type=chunk)[361](index=361&type=chunk)[369](index=369&type=chunk) - The company is undertaking a significant **"Expansion Plan"** to purchase an industrial park and new facilities for approximately RMB 151.4 million[380](index=380&type=chunk)[381](index=381&type=chunk) - Competitive strengths include providing **one-stop customized solutions**, a stable customer base, and rigorous quality control[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) Revenue by Application (LTM) | Application | Percent of Sales | | :--- | :--- | | Mining/Excavation | 62% | | Agricultural | 35% | | Construction | 2% | | Transportation | 1% | Revenue by Geography (FY2022 vs FY2021) | Region | FY2022 Revenue | % of Total | FY2021 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | PRC | $15,285,549 | 75% | $16,844,113 | 77.6% | | South Korea | $4,997,696 | 25% | $4,808,060 | 22.1% | | **Total** | **$20,283,245** | **100%** | **$21,652,173** | **99.7%** | [Regulations](index=100&type=section&id=REGULATIONS) Details the PRC regulatory framework governing the company's foreign investment, operations, and financial activities - The company's business is not on the Negative List, but the **VIE structure's classification under the Foreign Investment Law is uncertain**[439](index=439&type=chunk)[442](index=442&type=chunk) - PRC regulations impose controls on currency conversion, and dividends can only be paid from after-tax profits after **allocating to a statutory reserve**[448](index=448&type=chunk)[456](index=456&type=chunk) - The company is subject to PRC regulations on overseas listings, including the **new CSRC Trial Measures effective March 31, 2023**[464](index=464&type=chunk)[467](index=467&type=chunk) - The main operating entity, Hongli Shandong, qualifies as a High and New Technology Enterprise (HNTE) and enjoys a **reduced EIT rate of 15%**[472](index=472&type=chunk)[909](index=909&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=111&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) Analyzes the company's financial performance, liquidity, capital resources, and critical accounting policies [Operating Results](index=111&type=section&id=A.%20Operating%20results) Compares operational results for fiscal years 2022 vs 2021 and 2021 vs 2020, detailing revenue and profit drivers - The **7% revenue decrease in FY2022** was mainly due to a $1.5 million drop in domestic sales from COVID-19 disruptions[517](index=517&type=chunk) - The **95% revenue increase in FY2021** was driven by market recovery and increased orders from existing customers[538](index=538&type=chunk) - Gross margin decreased from 39.9% in 2020 to 34.6% in 2022, primarily due to **increased steel prices and labor costs**[519](index=519&type=chunk)[540](index=540&type=chunk) - R&D expenses were approximately **$1.41 million in 2022**, reflecting significant investment in product prototype development[524](index=524&type=chunk)[545](index=545&type=chunk) Financial Performance Summary (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Revenues, net** | $20,283,245 | $21,713,138 | $11,158,820 | | YoY Change | (7)% | 95% | N/A | | **Gross Profit** | $7,008,493 | $7,654,308 | $4,452,517 | | Gross Margin | 34.6% | 35.3% | 39.9% | | **Net Income** | $2,932,363 | $3,202,212 | $2,423,941 | | YoY Change | (8)% | 32% | N/A | [Liquidity and Capital Resources](index=127&type=section&id=B.%20Liquidity%20and%20capital%20resources) Details the company's liquidity position, cash flows, capital commitments, and reliance on bank borrowings - The company's IPO raised **net proceeds of approximately $8.3 million**, a portion of which was used to repay a bank loan[586](index=586&type=chunk)[587](index=587&type=chunk) - As of December 31, 2022, the company had outstanding loans of approximately **$16.1 million**, substantially all guaranteed by the CEO and his family[599](index=599&type=chunk)[601](index=601&type=chunk) - The company has remaining payment commitments of approximately **$6.0 million for its Expansion Plan** due by December 31, 2023[940](index=940&type=chunk) Cash and Liquidity Summary (As of Dec 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,085,033 | $484,389 | | Current Assets | $14,064,401 | $11,398,013 | | Current Liabilities | $12,437,954 | $9,686,221 | | Total Shareholders' Equity | $13,474,693 | $11,488,596 | Summary of Cash Flows (FY 2022) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $2,493,024 | | Net cash used in investing activities | $(11,670,592) | | Net cash provided by financing activities | $10,841,222 | [Item 6. Directors, Senior Management and Employees](index=135&type=section&id=Item%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) Provides information on the company's leadership team, executive compensation, board structure, and employee base - The board consists of four directors, including **CEO Jie Liu and three independent directors**[621](index=621&type=chunk)[651](index=651&type=chunk) - The company has established an Audit, a Compensation, and a Nominating and Corporate Governance Committee, **each composed of three independent directors**[658](index=658&type=chunk) - As of the report date, the company employed **207 full-time employees**, with the majority in the manufacturing department[666](index=666&type=chunk) Executive Compensation (FY 2022) | Name/Position | Salary | | :--- | :--- | | Jie Liu (CEO) | $28,529 | | Yachun (Daisy) Wang (CFO) | $37,459 | [Item 7. Major Shareholders and Related Party Transactions](index=146&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) Details the company's ownership structure and material transactions with related parties, including loan guarantees - CEO Jie Liu, through Hongli Development Limited, beneficially owns **76.83% of outstanding shares**, making the company a controlled entity[316](index=316&type=chunk)[670](index=670&type=chunk) - **Substantially all outstanding loans** as of December 31, 2022, were guaranteed by the CEO, his family, and their companies[678](index=678&type=chunk)[679](index=679&type=chunk) - The amount due to related parties for business advancements was **$607,236** as of December 31, 2022, which has since been fully repaid[676](index=676&type=chunk) Major Shareholders | Shareholder | Number of Shares | Percentage Ownership | | :--- | :--- | :--- | | Hongli Development Limited | 9,505,000 | 76.83% | [Item 8. Financial Information](index=149&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) Covers legal proceedings, dividend policy, and regulatory hurdles for dividend distribution from PRC subsidiaries - The company is **not currently party to any material legal proceedings**[687](index=687&type=chunk) - The company **does not anticipate paying cash dividends** in the foreseeable future, intending to retain earnings for expansion[688](index=688&type=chunk) - Dividend payments from the PRC WFOE are subject to a **10% withholding tax**, potentially reducible to 5%[689](index=689&type=chunk) [Item 10. Additional Information](index=151&type=section&id=Item%2010.%20ADDITIONAL%20INFORMATION) Provides supplementary details on taxation in various jurisdictions and potential U.S. tax implications for shareholders - The company is **not subject to corporate income tax** in the Cayman Islands or the British Virgin Islands[699](index=699&type=chunk)[703](index=703&type=chunk) - The main PRC operating entity, Hongli Shandong, qualifies as an HNTE and enjoys a **reduced 15% EIT rate** versus the standard 25%[697](index=697&type=chunk)[909](index=909&type=chunk) - The company **does not expect to be a Passive Foreign Investment Company (PFIC)** for the current taxable year, but this is subject to annual review[303](index=303&type=chunk)[718](index=718&type=chunk) [Item 11. Quantitative and Qualitative Disclosures About Market Risk](index=159&type=section&id=Item%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Addresses the company's exposure to liquidity, inflation, and interest rate risks, including a sensitivity analysis - The company is exposed to **liquidity risk**, managed through financial monitoring and access to institutional funding[734](index=734&type=chunk) - **Inflationary factors** could adversely affect operating results, although the impact to date has not been material[735](index=735&type=chunk) Interest Rate Risk Sensitivity (as of Dec 31, 2022) | Rate Increase | Impact on Annual Interest Expense | | :--- | :--- | | +1% | $161,333 | | +3% | $484,902 | | +5% | $808,170 | Part II [Item 14. Use of Proceeds](index=161&type=section&id=Item%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) Details the allocation of the approximately $8.3 million in net proceeds from the company's initial public offering - The company's IPO and over-allotment option generated **net proceeds of approximately $8.3 million**[743](index=743&type=chunk) - Use of proceeds is allocated to repaying a **$5 million loan**, acquiring assets for the Expansion Plan, R&D, and recruitment[744](index=744&type=chunk) [Item 15. Controls and Procedures](index=161&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) Reports on the effectiveness of internal controls, identifying two material weaknesses and outlining remediation plans - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2022[745](index=745&type=chunk) - **Two material weaknesses** were identified in internal control over financial reporting related to monitoring and expertise in U.S. GAAP[746](index=746&type=chunk)[748](index=748&type=chunk) - Remediation efforts include **hiring an outside consultant**, providing ongoing training, and establishing an internal audit function[749](index=749&type=chunk) Part III [Financial Statements](index=165&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) Presents the company's audited consolidated financial statements for fiscal years 2020, 2021, and 2022 Consolidated Balance Sheet Highlights (As of Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | **Total Assets** | **$36,164,139** | **$21,845,746** | | Total Current Assets | $14,064,401 | $11,398,013 | | Property, plant and equipment, net | $12,300,491 | $4,623,153 | | **Total Liabilities** | **$22,689,446** | **$10,357,150** | | Total Current Liabilities | $12,437,954 | $9,686,221 | | Long-term loans | $10,147,428 | $ - | | **Total Shareholders' Equity** | **$13,474,693** | **$11,488,596** | Consolidated Statement of Operations Highlights (For the Year Ended Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | **Revenues, net** | **$20,283,245** | **$21,713,138** | | Gross Profit | $7,008,493 | $7,654,308 | | Income from operations | $2,921,322 | $3,935,411 | | **Net income** | **$2,932,363** | **$3,202,212** | | Earnings per share (Basic and diluted) | $0.29 | $0.32 | Consolidated Statement of Cash Flows Highlights (For the Year Ended Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,493,024 | $1,139,648 | | Net cash used in investing activities | $(11,670,592) | $(3,051,348) | | Net cash provided by financing activities | $10,841,222 | $983,364 | | **Net change in cash** | **$1,582,577** | **$(902,647)** |

[Report on Form 6-K](index=1&type=section&id=Report%20on%20Form%206-K) This report provides details on the company's initial public offering and related exhibits [Initial Public Offering (IPO) Details](index=2&type=section&id=Initial%20Public%20Offering%20%28IPO%29%20Details) Hongli Group Inc. completed its initial public offering on Nasdaq, issuing 2,062,500 ordinary shares at $4.00 per share IPO Key Details | IPO Detail | Information | | :--- | :--- | | **Company** | Hongli Group Inc. | | **Shares Offered** | 2,062,500 ordinary shares | | **Price per Share** | $4.00 | | **IPO Closing Date** | March 31, 2023 | | **Exchange** | Nasdaq Capital Market | | **Ticker Symbol** | HLP | - The IPO was conducted pursuant to the company's registration statement on Form F-1 (File No. 333-261945), which was declared effective by the SEC on March 28, 2023 Trading of the shares commenced on March 29, 2023[2](index=2&type=chunk) [Exhibits](index=2&type=section&id=Exhibits) The report includes two exhibits, which are press releases announcing the pricing and subsequent closing of the company's IPO - The following exhibits were filed with the report: * **Exhibit 99.1:** Press Release dated March 29, 2023, announcing the pricing of the Company's IPO * **Exhibit 99.2:** Press Release dated March 31, 2023, announcing the closing of the Company's IPO[3](index=3&type=chunk)[4](index=4&type=chunk)