UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of September 2024

 

HONGLI GROUP INC.

(Exact name of registrant as specified in its charter)

 

No. 777, Daiyi Road,

Changle County, Weifang City,

Shandong Province, China, 262400.

Tel: +86 0536-2185222

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒ Form 40-F ☐

 

 

 

 

 

 

EXPLANATORY NOTE

 

Hongli Group Inc., a Cayman Islands exempted company (the “Company”) is furnishing this Form 6-K to provide its unaudited condensed consolidated financial statements for the six months ended June 30, 2024 and incorporate such financial statements into the Company’s registration statement referenced below.

 

This report of foreign private issuer on Form 6-K is hereby incorporated by reference into the registration statement on Form S-8 of the Company (File Number 333-278321), as amended, and into the prospectus outstanding under the foregoing registration statement, to the extent not superseded by documents or reports subsequently filed or furnished by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

 

Financial Statements and Exhibits.

 

Exhibits:

 

Exhibit No.   Description
99.1   Unaudited Condensed Consolidated Financial Statements as of June 30, 2024 and for the Six Months Ended June 30, 2024 and 2023.
99.2   Operating and Financial Review and Prospects in Connection with the Unaudited Condensed Consolidated Financial Statements for the Six Months Ended June 30, 2024 and 2023.
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

1

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Hongli Group Inc.
     
Date: September 19, 2024 By: /s/ Jie Liu
    Jie Liu
    Chief Executive Officer

 

  By: /s/ Xiangmei Zeng
    Xiangmei Zeng
    Chief Financial Officer

 

 

2

 

 

Exhibit 99.1

 

HONGLI GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2024   2023 
ASSETS  (Unaudited)     
Current assets:        
Cash and cash equivalents  $930,419   $775,686 
Restricted cash   -    39,983 
Accounts receivable   6,411,049    6,013,536 
Notes receivable   1,882,903    236,654 
Inventories, net   2,318,144    2,349,705 
Due from related parties - officers   -    342,053 
Prepaid expense and other current assets   452,612    1,059,275 
Total current assets   11,995,127    10,816,892 
Non-current assets          
Property, plant and equipment, net   10,771,835    10,752,745 
Prepayment for purchase of Yingxuan Assets   5,362,676    5,207,346 
Intangible assets, net   4,502,141    4,659,569 
Finance lease right-of-use assets, net   57,786    681,845 
Deferred tax assets   8,087    10,273 
TOTAL ASSETS  $32,697,652   $32,128,670 
           
LIABILITIES          
Current liabilities          
Short-term loans  $6,613,276   $5,726,841 
Accounts payable   1,279,390    1,379,161 
Due to related parties   631    - 
Income tax payable   17,961    36,708 
Finance lease obligation, current   1,141    45,300 
Accrued expenses and other payables   420,508    495,032 
Total current liabilities   8,332,907    7,683,042 
           
Long-term loans   3,677,777    3,338,075 
TOTAL LIABILITIES   12,010,684    11,021,117 
           
SHAREHOLDERS’ EQUITY:          
Ordinary shares, $0.0001 par value, 500,000,000 shares authorized, 13,438,750 and 12,238,750 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively   1,344    1,224 
Additional paid-in capital   10,004,556    8,036,676 
Statutory reserve   370,683    370,683 
Retained earnings   11,703,357    13,605,705 
Accumulated other comprehensive loss   (1,392,972)   (906,735)
TOTAL SHAREHOLDERS’ EQUITY   20,686,968    21,107,553 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $32,697,652   $32,128,670 

 

 

 

 

HONGLI GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE SIX MONTHS ENDED JUNE 30,

  

   2024   2023 
Revenues, net  $6,962,241   $8,915,111 
Cost of revenues   4,659,769    5,869,310 
Gross Profit   2,302,472    3,045,801 
           
Operating expenses:          
Selling, general and administrative expenses   3,996,714    2,260,806 
Total operating expenses   3,996,714    2,260,806 
           
(Loss) income from operations   (1,694,242)   784,995 
           
Other income (expense)          
Other income   127,373    445,148 

Interest and financing income and (expenses), net

   (216,131)   (327,128)

Other gain (loss) and (expenses), net

   (107,826)   (41,070)
Total other (expenses) income, net   (196,584)   76,950 
(Loss) income before income taxes   (1,890,826)   861,945 
Income tax expense   11,522    65,591 
Net (loss) income  $(1,902,348)  $796,354 
           
Comprehensive income (loss)          
Net (loss) income  $(1,902,348)  $796,354 
Other comprehensive income (loss)          
Foreign currency translation adjustment   (486,237)   (1,115,176)
Comprehensive loss  $(2,388,585)  $(318,822)
           

(Net loss) earnings per share

          
Basic and diluted
  $(0.15)  $0.07 
           
Weighted average common shares outstanding          
Basic and diluted
   12,607,981    11,150,898 

  

2

 

 

HONGLI GROUP INC.

UNAUDITIED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

 

   Ordinary Shares                     
   Number of shares   Amount   Additional
paid-in
capital		   Statutory
reserve		   Retained
earnings		   Accumulated other
comprehensive
income (loss)		   Total equity 
                             
Balance, December 31, 2023   12,238,750   $1,224   $8,036,676   $370,683   $13,605,705   $(906,735)  $21,107,553 
Share-based compensation   1,200,000    120    1,967,880                   1,968,000 
Net loss for the six months   -    -    -    -    (1,902,348)   -    (1,902,348)
Foreign currency translation adjustment   -    
-
    
-
    
-
    
-
    (486,237)   (486,237)
Balance, June 30, 2024 (Unaudited)   13,438,750   $1,344   $10,004,556   $370,683   $11,703,357   $(1,392,972)  $20,686,968 

 

   Ordinary Shares                     
   Number of
shares		   Amount   Additional
paid-in
capital		   Statutory
reserve		   Retained
earnings		   Accumulated other
comprehensive
income (loss)		   Total equity 
                             
Balance, December 31, 2022   10,000,000   $1,000   $609,601   $370,683   $12,740,983   $(247,574)  $13,474,693 
Initial public offering - March 31, 2023   2,062,500    206    8,249,794    
-
    
-
    
-
    8,250,000 
Initial public offering costs   -    
-
    (1,967,388)   
-
    
-
    
-
    (1,967,388)
Underwriter’s option exercised - May 2, 2023   309,375    31    1,237,469    
-
    
-
    
-
    1,237,500 
Exercise costs   -    
-
    (92,813)   
-
    
-
    
-
    (92,813)
Net income for the six months   -    -    -    -    796,354    -    796,354 
Foreign currency translation adjustment   -    
-
    
-
    
-
    
-
    (1,115,176)   (1,115,176)
Balance, June 30, 2023 (Unaudited)   12,371,875   $1,237   $8,036,663   $370,683   $13,537,337   $(1,362,750)  $20,583,170 

  

3

 

 

HONGLI GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

   For the Six Months Ended
June 30,		 
   2024   2023 
         
Cash flows from operating activities        
Net (loss) income  $(1,902,348)  $796,354 
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Depreciation and amortization   427,005    508,428 
Allowance for current expected credit losses   48,833    66,277 
Write off of construction costs   28,767    
-
 
Amortization of operating lease right-of-use assets   11,583    22,793 
Amortization of intangible assets - land use rights   50,521    
-
 
Loss (gain) on disposals of property and equipment   76,901    (345,519)
Share-based compensation   1,968,000    
-
 
Deferred tax provision   1,964    
-
 
Changes in operating assets and liabilities:          
Accounts receivable   (588,655)   554,182 
Notes receivable   (1,663,623)   (377,266)
Inventories   (22,695)   (330,635)
Prepaid expense and other current assets   502,043    (233,634)
Other non-current assets   
-
    2,166 
Due (from) to related parties   (31,246)   3,210 
Accounts payable   (77,259)   (1,340,227)
Accrued expenses and other payables   (30,113)   (292,690)
Income tax payable   (18,031)   (75,543)
Net cash used in operating activities   (1,218,353)   (1,042,104)
           
Cash flows from investing activities          
Purchase of property and equipment   (109,325)   (173,181)
Prepayments for purchase of Yingxuan Assets   (277,196)   
-
 
Short-term investment   
-
    (274,344)
Proceeds from sale of property and equipment   2,772    750,837 
Net cash (used in) provided by investing activities   (383,749)   303,312 
           
Cash flows from financing activities          
Payments for financing liabilities   (33,264)   (194,002)
Payments for finance leases   (43,949)   (208,115)
Advances from related parties   1,406,772    949,099 
Repayments to related parties   (1,038,298)   (542,906)
Borrowings from short term loans   2,773,281    1,842,440 
Repayments of short term loans   (1,719,935)   (3,674,772)
Borrowings from long term loans   415,795    4,727,388 
Repayments of long term loans   (23,958)   (11,408,398)
Proceeds from initial public offering   
-
    9,487,500 
Disbursements for initial public offering costs   
-
    (1,343,572)
Net cash provided by (used in) financing activities   1,736,444    (365,338)
           
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (19,592)   (143,163)
           
Net change in cash, cash equivalents and restricted cash   114,750    (1,247,293)
Cash, cash equivalents and restricted cash, beginning of the period   815,669    2,114,039 
Cash, cash equivalents and restricted cash, end of the period  $930,419   $866,746 
Reconciliation of cash, cash equivalents and restricted cash, beginning of the period          
Cash, cash equivalents  $775,686   $2,085,033 
Restricted cash   39,983    29,006 
Cash, cash equivalents and restricted cash, beginning of the period  $815,669   $2,114,039 
           
Reconciliation of cash, cash equivalents and restricted cash, end of the period          
Cash, cash equivalents  $930,419   $678,770 
Restricted cash   
-
    187,976 
Cash, cash equivalents and restricted cash, beginning of the period  $930,419   $866,746 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest expense  $304,769   $409,431 
Cash paid for income taxes  $27,589   $330,693 
           
Non-cash investing and financing activities          
Right-of-use assets transferred to property and equipment upon exercise of purchase option  $645,402   $482,062 
Prepayments applied to property and equipment acquired  $83,833    
-
 
Security deposits applied to lease payments  $
-
   $33,583 

 

 

 

4

 

 

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Exhibit 99.2

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

This Report on Form 6-K furnished by Hongli Group Inc. (together with our subsidiaries, unless the context indicates otherwise, “we,” “us,” “our,” or the “Company”), contains forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. The information in this Report on Form 6-K is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company’s expectations are as of the date this Form 6-K is furnished, and the Company does not intend to update any of the forward-looking statements after the date this Report on Form 6-K is furnished to confirm these statements to actual results, unless required by law.

 

Overview

 

Hongli Group Inc. (“Hongli Cayman” or the “Company”), is an offshore holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, we consolidate the financial results of Shandong Hongli Special Section Tube Co., Ltd., (“Hongli Shandong”) which is a variable interest entity (the “VIE”), and its subsidiaries (together with the VIE, collectively, “the PRC operating entities”), through the contractual arrangements (the “Contractual Arrangements”). Neither Hongli Cayman nor its subsidiaries own any equity interests in the PRC operating entities.

 

The PRC operating entities are one of the leading cold roll formed steel profile manufacturers in China with respect to functional innovation, performance improvement, and customized manufacturing of their products, according to China Sub-Association for Cold Formed Steel Industries, a professional industrial association. The PRC operating entities’ main business operation focuses on the design, production, deep processing, and sales of custom-made profile for machinery and equipment in a variety of sectors including but not limited in mining and excavation, construction, agriculture, and transportation industries.

 

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management and financial resources and other factors.

 

Results of Operations

 

The following table summarizes the results of our operations for the six months ended June 30, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

 

 

 

 

   Six Months Ended June 30,   Changes   Changes 
   2024   2023   Increase (Decrease)   in % 
Revenues, net  $6,962,241   $8,915,111   $(1,952,870)   -21.9%
Cost of revenues   4,659,769    5,869,310    (1,209,541)   -20.6%
Gross profit   2,302,472    3,045,801    (743,329)   -24.4%
Gross margin rate   33.1%   34.2%   -1.09%   -3.2%
Operating expenses                    
   Selling, general and administrative   3,996,714    2,260,806    1,735,908    76.8%
Total operating expenses   3,996,714    2,260,806    1,735,908    76.8%
                     
(Loss) income from operations   (1,694,242)   784,995    (2,479,237)   -315.8%
Other (expenses) income, net   (196,584)   76,950    (273,534)   -355.5%
(Loss) income before income taxes   (1,890,826)   861,945    (2,752,771)   -319.4%
Income tax expense   11,522    65,591    (54,069)   -82.4%
Net (loss) income  $(1,902,348)  $796,354   $(2,698,702)   -338.9%

 

Revenues

 

We derive revenues from sales of products in the domestic and overseas markets. The following table presents our revenues by geographical regions.

 

   Six Months Ended June 30,   Changes   Changes 
   2024   2023   Increase (Decrease)   in % 
Revenue from domestic sales  $6,026,009   $6,724,804   $(698,795)   -10.4%
Revenue from export business   936,232    2,190,307    (1,254,075)   -57.3%
Revenues, net  $6,962,241   $8,915,111   $(1,952,870)   -21.9%

 

Our total revenues decreased by approximately $1.95 million, or 22%, to $6.96 million for the six months ended June 30, 2024, compared to $8.92 million for the six months ended June 30, 2023. This decline was primarily due to a significant reduction in sales to foreign customers. Specifically, our export revenue dropped by $1.25 million, or 57%, to $0.94 million for the six months ended June 30, 2024, down from $2.19 million for the six months ended June 30, 2023. This decrease in sales volume was largely driven by the ongoing economic downturn in the construction machinery industry, which began in 2023, leading to a reduction in orders from various customers.

 

Cost of revenues

 

Our cost of revenues primarily consists of expenses related to manufacturing our products, including the cost of raw materials, direct labor, and depreciation of production machinery and equipment. For the six months ended June 30, 2024, our cost of revenues was $4.66 million, a decrease of $1.21 million, or 21%, compared to $5.87 million for the six months ended June 30, 2023. The reduction in cost of revenue was in line with the decrease in revenue.

 

Gross profit

 

Our gross profit decreased by approximately $0.74 million, or 24%, to $2.30 million for the six months ended June 30, 2024, down from $3.05 million for the six months ended June 30, 2023. During this period, our gross margin rate declined to 33%, a decrease of 1% from 34% in the corresponding period of 2023. This reduction was primarily attributed to the increased depreciation and amortization costs allocated to the cost of sales, resulting from the addition of new equipment and land use rights.

 

2

 

 

Selling, general and administrative (“SG&A”) expenses

 

SG&A expenses primarily consisted of sales and marketing expenses, general and administrative expenses and research and development expenses.

 

   Six Months Ended June 30,   Changes   Changes 
   2024   2023   Increase (Decrease)   in % 
Sales and marketing expenses  $258,856   $310,791   $(51,935)   -16.7%
General and administrative expenses   1,335,171    1,306,324    28,847    2.2%
Research and development (“R&D”) expenses   434,687    643,691    (209,004)   -32.5%
Share-based compensation   1,968,000    -    1,968,000    N/A 
Total  $3,996,714   $2,260,806   $1,735,908    76.8%

 

SG&A expenses increased by approximately $1.74 million, or 77%, to approximately $4.00 million for the six months ended June 30, 2024, up from approximately $2.26 million for the six months ended June 30, 2023. This increase was primarily driven by an approximately $1.97 million share-based compensation expense. On May 6, 2024, the Company issued 1,200,000 shares to three members of the management team for services rendered during the current period. The shares were valued at $1.64 each, based on the market closing price on May 6, 2024.

 

Sales and marketing expenses

 

Our sales and marketing expenses primarily consist of salaries and related employee benefits for sales and marketing personnel, as well as costs associated with shipping and handling, port and customs clearance, storage, promotion, and other sales-related activities. For the six months ended June 30, 2024, our sales and marketing expenses decreased by approximately $0.05 million, or 17%, to $0.26 million, down from approximately $0.31 million for the six months ended June 30, 2023. This decrease was mainly due to reduced freight, storage, and transportation costs. Additionally, other sales and marketing expenses were scaled down in line with the reduction in sales during this period.

 

General and administrative expenses

 

Our general and administrative expenses primarily consist of salaries and related employee benefits, repair and maintenance costs, professional service fees, depreciation and amortization, travel and entertainment expenses, office supplies, and other related expenditures. For the six months ended June 30, 2024, general and administrative expenses were approximately $1.34 million, an increase of $0.03 million, or 2.2%, compared to approximately $1.31 million for the six months ended June 30, 2023. This increase was mainly due to: (i) a $0.08 million increase in consulting and professional service expenses, which increased to $0.57 million for the six months ended June 30, 2024 from $0.49 million for the six months ended June 30, 2023, primarily due to costs associated with the Company’s stock being listed on The Nasdaq Stock Market LLC; (ii) a $0.01 million, or 3%, increase in wages and employee benefits, bringing the total to $0.39 million for the six months ended June 30, 2024, up from $0.38 million for the six months ended June 30, 2023; and (iii) a $0.02 million, or 33%, increase in depreciation and amortization expenses, totaling approximately $0.09 million for the six months ended June 30, 2024, up from $0.07 million for the six months ended June 30, 2023, due to the addition of new assets. These increases in general and administrative expenses were partially offset by a $0.06 million decrease in repair and maintenance expenses and a $0.03 million reduction in other general and administrative expenses.

 

Research and development (“R&D”) expenses

 

Substantially all research and development (R&D) costs reflect the Company’s investment in product development activities. For the six months ended June 30, 2024, the Company recorded R&D expenses of approximately $0.43 million, representing a decrease of $0.21 million, or 33%, from approximately $0.64 million for the six months ended June 30, 2023. This reduction in R&D expenses was primarily due to a decrease in production output.

 

3

 

 

Total other income (expenses)

 

   Six Months Ended June 30,   Changes   Changes 
   2024   2023   Increase (Decrease)   in % 
Other income (expenses)  $127,373   $445,148   $(317,775)   -71.4%
Financing expenses   (216,131)   (327,128)   110,997    -33.9%

Other gain (loss) and (expenses)

   (107,826)   (41,070)   (66,756)   162.5%
Total other income (expenses)  $(196,584)  $76,950   $(273,534)   -355.5%

 

Total other income (expenses) primarily consisted of income from the sale of scrapped materials, government subsidies, and other miscellaneous sources. For the six months ended June 30, 2024, total other income (expenses) resulted in an expense of approximately $0.20 million, reflecting a decrease of approximately $0.27 million, or 356%, compared to an income of approximately $0.07 million for the six months ended June 30, 2023.

 

Financial expenses primarily consist of gains or losses from foreign currency transactions, interest incurred on loans, finance leases, financial liabilities, and interest expenses related to discounting notes receivable prior to their maturity. For the six months ended June 30, 2024, financial expenses decreased by approximately $0.11 million, or 34%, to $0.22 million, down from $0.33 million for the six months ended June 30, 2023. This decrease was mainly attributable to a reduction in interest expenses. For the six months ended June 30, 2024, interest expenses amounted to approximately $0.22 million, reflecting a decrease of $0.16 million, or 42%, from $0.38 million for the six months ended June 30, 2023. The reduction in interest expenses was largely due to lower interest rates in China and the Company’s refinancing of its loans at more favorable rates.

 

Other gains, losses, and expenses include gains or losses from the disposal of property and equipment, as well as other non-operating expenses. For the six months ended June 30, 2024, the net loss from these activities was approximately $0.11 million, representing an increase of $0.07 million (163%) compared to a net loss of approximately $0.04 million in the same period of 2023. This increase in loss was primarily due to the disposal of outdated equipment.

 

(Loss) income before income taxes

 

Our loss before income taxes was approximately $1.89 million for the six months ended June 30, 2024, representing a decrease of approximately $2.75 million, or 319%, from an income of approximately $0.86 million for the six months ended June 30, 2023. This loss was primarily attributable to a $1.97 million charge for share-based compensation and a reduction in gross profit of approximately $0.74 million, as previously discussed.

 

Income tax expense

 

Our income tax expense was approximately $12,000 for the six months ended June 30, 2024, a decrease of $54,000, or 82%, compared to approximately $66,000 for the six months ended June 30, 2023.

 

Net (Loss) Income

 

As a result of the factors discussed above, our net loss for the six months ended June 30, 2024, was approximately $1.90 million, representing a negative swing of approximately $2.70 million, or 339%, compared to a net income of approximately $0.80 million for the six months ended June 30, 2023. Loss per basic and diluted share was $0.15 for the six months ended June 30, 2024, a decrease of $0.22, compared to earnings per basic and diluted share of $0.07 for the six months ended June 30, 2023.

 

Foreign Currency Translation

 

Our principal operation is located in the PRC. RMB is the functional currency. The financial position and results of our operations are determined using RMB, the local currency. The unaudited condensed consolidated financial statements are reported using U.S. Dollars. The results of operations and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Foreign exchange rates published by the Federal Reserve Board were used in our unaudited condensed consolidated financial statements for the six months ended June 30, 2024.

 

  June 30,
2024		   June 30,
2023		   December 31,
2023		   December 31,
2022		 
1 US$ = RMB                    
Period-end Spot Rate   7.2672    7.2513    7.0999    6.8983 
Period Average Rate   7.2151    6.9256    7.0809    6.7299 

 

4

 

 

Liquidity and Capital Resources

 

Our principal sources of liquidity have been cash and cash equivalents generated from our operations, external financing, advances from related parties and the recent initial public offering closed on March 31, 2023. As of June 30, 2024, our liquidity position remains sturdy, supported by a combination of cash on hand, cash and cash equivalents, and available credit facilities. We continue to manage our liquidity to meet both our short-term and long-term obligations while maintaining sufficient flexibility to take advantage of growth opportunities.

 

As of June 30, 2024 and December 31, 2023, the Company had cash, cash equivalents, and restricted cash totaling approximately $930,000 and $816,000, respectively. Our total debt as of June 30, 2024, was $10.3 million, representing an increase of $1.2 million, or 13%, compared to $9.1 million as of December 31, 2023. This increase was primarily due to the refinancing of short-term loans, driven by the favorable lower interest rates in the Chinese market, which allowed us to secure additional financing. Our debt-to-equity ratio remains at a manageable level, standing at 0.50 as of June 30, 2024, compared to 0.43 as of December 31, 2023. This reflects our disciplined approach to managing our capital structure.

 

Our working capital on June 30, 2024 was $3.7 million, an increase of $0.5 million, or 17%, compared to $3.1 million as of December 31, 2023. This change was driven primarily by the increase in bank notes receivable. As of June 30, 2024, we had $1.9 million in bank notes receivable, an increase of $1.6 million, compared to $0.2 million on December 31 of 2023.

 

We expect cash and cash equivalents from our operations to continue to be our primary sources of liquidity, with our credit facilities serving as a supplement. We believe that our current cash, cash equivalents, and cash and cash equivalents to be generated from our operations and our ability to access the capital markets will be sufficient to meet our working capital needs for at least the next twelve months. While we anticipate meeting all foreseeable financial obligations, including debt service requirements and planned capital expenditures, we will continue to monitor market conditions closely. In the event of a significant economic downturn or unexpected cash outflows, we are confident in our ability to access additional liquidity through our existing facilities or the capital markets.

 

Cash Flow Summary

 

The following table summarizes our cash flows for the six months ended June 30, 2024, and 2023.

 

   June 30,
2024		   June 30,
2023		   Change   Change
in %		 
Net cash used in operating activities  $(1,218,353)  $(1,042,104)  $(176,249)   17%
Net cash (used in) / provided by investing activities   (383,749)   303,312    (687,061)   -227%
Net cash provided by / (used in) financing activities   1,736,444    (365,338)   2,101,782    -575%
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (19,592)   (143,163)   123,572    -86%
Net increase / (decrease) in cash, cash equivalents and restricted cash   114,750    (1,247,293)   1,362,043    -109%
Cash, cash equivalents and restricted cash, beginning of the period   815,669    2,114,039    (1,298,370)   -61%
Cash, cash equivalents and restricted cash, end of the period  $930,419   $866,746   $63,673    7%

 

Operating Activities

 

Net cash used in operating activities was approximately $1.2 million for the six months ended June 30, 2024. This includes a net loss of approximately $1.9 million, adjusted for non-cash items of approximately $2.6 million, and net negative changes in operating assets and liabilities of approximately $1.9 million. The negative changes in operating assets and liabilities mainly included an increase in notes receivable of $1.7 million, an increase in accounts receivable of $0.6 million, an increase in inventory of $0.02 million, a $0.03 million primarily decrease in due from related parties, and a $0.1 million decrease in accounts payable, accrued expenses, and income tax payable. These negative changes were partially offset by positive changes of $0.5 million, mainly included a decrease in prepaid expenses.

 

Net cash used in operating activities was approximately $1.0 million for the six months ended June 30, 2023. This includes net income of approximately $0.8 million, adjusted for non-cash items of approximately $0.3 million, and net negative changes in operating assets and liabilities of approximately $2.1 million. The negative changes primarily consisted of an increase in notes receivable of approximately $0.4 million, an increase in inventory of $0.3 million, an increase in prepaid expenses of $0.2 million, and a decrease in accounts payable, accrued expenses, and income tax payable totaling approximately $1.7 million. These negative changes were partially offset by a positive change of $0.6 million, mainly included a decrease in accounts receivable.

 

5

 

 

Investing Activities

 

Net cash used in investing activities was approximately $0.4 million for the six months ended June 30, 2024, which was the result of payments made for the acquisition of property and equipment totaling approximately $0.1 million and prepayments of approximately $0.3 million for the purchase of Yingxuan Assets.

 

Net cash provided by investing activities was approximately $0.3 million for the six months ended June 30, 2023, which was the result of a proceeds of $0.8 million from the sale of property and equipment. This was offset by a payment of approximately $0.2 million for the acquisition of property and equipment and a $0.3 million payment for a short-term investment.

 

Financing Activities

 

Net cash provided by financing activities was approximately $1.7 million for the six months ended June 30, 2024. This was to the result of a total borrowings of approximately $2.8 million from short-term loans and $0.4 million from long-term loans. These inflows were partially offset by repayments of short-term and long term loans totaling approximately $1.7 million and payments of approximately $0.1 million for financing liabilities and finance lease liabilities. Additionally, the Company received approximately $1.4 million advances from related parties and repaid approximately $1.0 million during the six months ended June 30, 2024.

 

For the six months ended June 30, 2023, net cash used in financing activities was approximately $0.4 million. This amount includes: (i) net proceeds of $8.1 million from the initial public offering, (ii) proceeds of $6.6 million from long-term and short-term loans, (iii) repayments of $15 million for long-term and short-term loans, (iv) repayments of $0.4 million for financing liabilities and finance leases, and (v) net advances of $0.4 million from related parties.

 

Critical Accounting Estimates

 

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the related disclosures of contingent assets and liabilities. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts, and other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

 

We consider the following accounting estimates to be critical, as they involve significant judgments and assumptions that could materially affect our financial results and financial position:

 

1. Current Estimated Credit Loss (“CECL”): The CECL model requires measurement of the expected credit loss even if that risk of loss is remote. Management believes that historical collection information is a reasonable base on which to determine expected credit losses because the composition of the accounts receivables at the reporting date is consistent with that used in developing the historical credit-loss percentages. That is, the similar risk characteristics of the customers and its payment practices have not changed significantly over time. However, the foreseeable economic conditions will have a significant impact on our collectability of the accounts receivable. The Management believes that the treasury bill rate of the US Treasury is a useful indicator to reflect the future cost of the credit and the trend of economic at the time of reporting. The Company combined treasury bill rate and our historical loss rate to determine the rates of expected estimated credit losses. The accounts receivable sharing similar risk characteristics be pooled when the CECL is calculated.

 

2. Valuation of Inventory: Inventories are stated at the lower of cost or net realizable value. Cost is determined on the weighted average basis. The Company periodically assesses the recoverability of all inventories to determine whether adjustments are required to record inventories at the lower of cost or net realizable value. Inventories that the Company determines to be obsolete or in excess of forecasted usage are reduced to its estimated realizable value based on assumptions about future demand and market conditions. A write down of potentially obsolete or slow-moving inventory is recorded based on management’s analysis of inventory levels.

 

3. Estimated Useful of Long-lived Assets: Plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets with a 5% residual value. The Company reviews the estimated useful lives of property and equipment periodically to ensure that they continue to be appropriate, considering factors such as technological advancements, physical wear and tear, and changes in market conditions. If the Company determines that the useful life of an asset should be revised, the remaining net book value of the asset is depreciated prospectively over its revised remaining useful life.

 

Off-Balance Sheet Arrangements 

 

We did not have any off-balance sheet arrangements as of June 30, 2024.

 

 

6

 

 

 

v3.24.3
Document And Entity Information
 6 Months Ended
Jun. 30, 2024
Document Information Line Items  
Entity Registrant Name HONGLI GROUP INC.
Document Type 6-K
Current Fiscal Year End Date --12-31
Amendment Flag false
Entity Central Index Key 0001855557
Document Period End Date Jun. 30, 2024
Document Fiscal Year Focus 2024
Document Fiscal Period Focus Q2
Entity File Number 000-00000
v3.24.3
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 930,419 $ 775,686
Restricted cash   39,983
Accounts receivable 6,411,049 6,013,536
Notes receivable 1,882,903 236,654
Inventories, net 2,318,144 2,349,705
Prepaid expense and other current assets 452,612 1,059,275
Total current assets 11,995,127 10,816,892
Non-current assets    
Property, plant and equipment, net 10,771,835 10,752,745
Prepayment for purchase of Yingxuan Assets 5,362,676 5,207,346
Intangible assets, net 4,502,141 4,659,569
Finance lease right-of-use assets, net 57,786 681,845
Deferred tax assets 8,087 10,273
TOTAL ASSETS 32,697,652 32,128,670
Current liabilities    
Short-term loans 6,613,276 5,726,841
Accounts payable 1,279,390 1,379,161
Income tax payable 17,961 36,708
Finance lease obligation, current 1,141 45,300
Accrued expenses and other payables 420,508 495,032
Total current liabilities 8,332,907 7,683,042
Long-term loans 3,677,777 3,338,075
TOTAL LIABILITIES 12,010,684 11,021,117
SHAREHOLDERS’ EQUITY:    
Ordinary shares, $0.0001 par value, 500,000,000 shares authorized, 13,438,750 and 12,238,750 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively 1,344 1,224
Additional paid-in capital 10,004,556 8,036,676
Statutory reserve 370,683 370,683
Retained earnings 11,703,357 13,605,705
Accumulated other comprehensive loss (1,392,972) (906,735)
TOTAL SHAREHOLDERS’ EQUITY 20,686,968 21,107,553
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 32,697,652 32,128,670
Related Party    
Current assets:    
Due from related parties - officers   $ 342,053
Current liabilities    
Due to related parties $ 631  
v3.24.3
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares
Jun. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Ordinary shares, par value (in Dollars per share) $ 0.0001 $ 0.0001
Ordinary shares, shares authorized 500,000,000 500,000,000
Ordinary shares, shares issued 13,438,750 12,238,750
Ordinary shares, shares outstanding 13,438,750 12,238,750
v3.24.3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($)
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Income Statement [Abstract]    
Revenues, net $ 6,962,241 $ 8,915,111
Cost of revenues 4,659,769 5,869,310
Gross Profit 2,302,472 3,045,801
Operating expenses:    
Selling, general and administrative expenses 3,996,714 2,260,806
Total operating expenses 3,996,714 2,260,806
(Loss) income from operations (1,694,242) 784,995
Other income (expense)    
Other income 127,373 445,148
Interest and financing income and expenses, net (216,131) (327,128)
Other gain (loss) and (expenses), net (107,826) (41,070)
Total other (expenses) income, net (196,584) 76,950
(Loss) income before income taxes (1,890,826) 861,945
Income tax expense 11,522 65,591
Net (loss) income (1,902,348) 796,354
Comprehensive income (loss)    
Net (loss) income (1,902,348) 796,354
Other comprehensive income (loss)    
Foreign currency translation adjustment (486,237) (1,115,176)
Comprehensive loss $ (2,388,585) $ (318,822)
(Net loss) earnings per share    
Earnings per share, Basic (in Dollars per share) $ (0.15) $ 0.07
Weighted average common shares outstanding    
Weighted average common shares outstanding, Basic (in Shares) 12,607,981 11,150,898
v3.24.3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Parentheticals) - $ / shares
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Income Statement [Abstract]    
Earnings per share, Diluted $ (0.15) $ 0.07
Weighted average common shares outstanding, Diluted 12,607,981 11,150,898
v3.24.3
Unauditied Condensed Consolidated Statements of Changes in Shareholders’ Equity - USD ($)
Ordinary Shares
Additional paid-in capital
Statutory reserve
Retained earnings
Accumulated other comprehensive income (loss)
Total
Balance at Dec. 31, 2022 $ 1,000 $ 609,601 $ 370,683 $ 12,740,983 $ (247,574) $ 13,474,693
Balance (in Shares) at Dec. 31, 2022 10,000,000          
Initial public offering - March 31, 2023 $ 206 8,249,794 8,250,000
Initial public offering - March 31, 2023 (in Shares) 2,062,500          
Initial public offering costs (1,967,388) (1,967,388)
Underwriter’s option exercised - May 2, 2023 $ 31 1,237,469 1,237,500
Underwriter’s option exercised - May 2, 2023 (in Shares) 309,375          
Exercise costs (92,813) (92,813)
Net income (Loss)       796,354   796,354
Foreign currency translation adjustment (1,115,176) (1,115,176)
Balance at Jun. 30, 2023 $ 1,237 8,036,663 370,683 13,537,337 (1,362,750) 20,583,170
Balance (in Shares) at Jun. 30, 2023 12,371,875          
Balance at Dec. 31, 2023 $ 1,224 8,036,676 370,683 13,605,705 (906,735) $ 21,107,553
Balance (in Shares) at Dec. 31, 2023 12,238,750         12,238,750
Share-based compensation $ 120 1,967,880       $ 1,968,000
Share-based compensation (in Shares) 1,200,000          
Net income (Loss)       (1,902,348)   (1,902,348)
Foreign currency translation adjustment (486,237) (486,237)
Balance at Jun. 30, 2024 $ 1,344 $ 10,004,556 $ 370,683 $ 11,703,357 $ (1,392,972) $ 20,686,968
Balance (in Shares) at Jun. 30, 2024 13,438,750         13,438,750
v3.24.3
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)
 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Statement of Cash Flows [Abstract]    
Net (loss) income $ (1,902,348) $ 796,354
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Depreciation and amortization 427,005 508,428
Allowance for current expected credit losses 48,833 66,277
Write off of construction costs 28,767
Amortization of operating lease right-of-use assets 11,583 22,793
Amortization of intangible assets - land use rights 50,521
Loss (gain) on disposals of property and equipment 76,901 (345,519)
Share-based compensation 1,968,000
Deferred tax provision 1,964
Changes in operating assets and liabilities:    
Accounts receivable (588,655) 554,182
Notes receivable (1,663,623) (377,266)
Inventories (22,695) (330,635)
Prepaid expense and other current assets 502,043 (233,634)
Other non-current assets 2,166
Due (from) to related parties (31,246) 3,210
Accounts payable (77,259) (1,340,227)
Accrued expenses and other payables (30,113) (292,690)
Income tax payable (18,031) (75,543)
Net cash used in operating activities (1,218,353) (1,042,104)
Cash flows from investing activities    
Purchase of property and equipment (109,325) (173,181)
Prepayments for purchase of Yingxuan Assets (277,196)
Short-term investment (274,344)
Proceeds from sale of property and equipment 2,772 750,837
Net cash (used in) provided by investing activities (383,749) 303,312
Cash flows from financing activities    
Payments for financing liabilities (33,264) (194,002)
Payments for finance leases (43,949) (208,115)
Advances from related parties 1,406,772 949,099
Repayments to related parties (1,038,298) (542,906)
Borrowings from short term loans 2,773,281 1,842,440
Repayments of short term loans (1,719,935) (3,674,772)
Borrowings from long term loans 415,795 4,727,388
Repayments of long term loans (23,958) (11,408,398)
Proceeds from initial public offering 9,487,500
Disbursements for initial public offering costs (1,343,572)
Net cash provided by (used in) financing activities 1,736,444 (365,338)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (19,592) (143,163)
Net change in cash, cash equivalents and restricted cash 114,750 (1,247,293)
Cash, cash equivalents and restricted cash, beginning of the period 815,669 2,114,039
Cash, cash equivalents and restricted cash, end of the period 930,419 866,746
Reconciliation of cash, cash equivalents and restricted cash, beginning of the period    
Cash, cash equivalents 775,686 2,085,033
Restricted cash 39,983 29,006
Cash, cash equivalents and restricted cash, beginning of the period 815,669 2,114,039
Reconciliation of cash, cash equivalents and restricted cash, end of the period    
Cash, cash equivalents 930,419 678,770
Restricted cash 187,976
Cash, cash equivalents and restricted cash, end of the period 930,419 866,746
Supplemental disclosure of cash flow information:    
Cash paid for interest expense 304,769 409,431
Cash paid for income taxes 27,589 330,693
Non-cash investing and financing activities    
Right-of-use assets transferred to property and equipment upon exercise of purchase option 645,402 482,062
Prepayments applied to property and equipment acquired 83,833
Security deposits applied to lease payments $ 33,583
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