F-1 1 ff12021_hongligroupinc.htm REGISTRATION STATEMENT

As filed with the U.S. Securities and Exchange Commission on December 30, 2021.

Registration No. 333-[•]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

__________________________________________

HONGLI GROUP INC.

(Exact Name of Registrant as Specified in its Charter)

__________________________________________

Cayman Islands

 

3569

 

Not applicable

(State or Other Jurisdiction of
Incorporation or Organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification Number)

Beisanli Street, Economic Development Zone

Changle County, Weifang

Shandong, China 262400

Tel: +86 0536-2185222

(Address, including zip code, and telephone number, including area code, of principal executive offices)

__________________________________________

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, DE 19711

(Name, address including zip code, and telephone number, including area code, of agent for service)

__________________________________________

Copies to:

Arila Zhou, Esq.

Hunter Taubman Fischer & Li LLC

800 Third Avenue, Suite 2800

New York, NY 10022

Tel: 212-530-2232

 

Andrew M. Tucker, Esq.

Erin Reeves McGinnis, Esq.

Nelson Mullins Riley & Scarborough LLP

101 Constitution Ave, NW

Washington, DC 20001

Tel: 202-689-2800

__________________________________________

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act 

 

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CALCULATION OF REGISTRATION FEE

Title of Class of Securities to be Registered

 

Amount to be
Registered(1)

 

Proposed
Maximum
Offering
Price per
Share(2)

 

Proposed
Maximum
Aggregate
Offering
Price(2)(3)

 

Amount of
Registration
Fee

Ordinary Shares par value $[•] per share sold by the Registrant

 

[•]

 

[•]

 

28,750,000

 

2,665.13

Total

 

[•]

 

[•]

 

28,750,000

 

2,665.13

____________

(1)      Includes [•] Ordinary Shares, par value $0.0001 per share (each, a “Share”, collectively, “Shares”) subject to the underwriter’s option to purchase additional shares.

(2)      Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(3)      Includes the offering price of any additional Shares that the underwriter has the option to purchase.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

 

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EXPLANATORY NOTE

On [•], we will effectuate a forward split at a ratio of [•] for 1 to increase our authorized capital shares from 500,000,000 Ordinary Shares, par value $0.0001 per share to [•] Ordinary Shares with a par value of $0.00001 per share (the “2022 Forward Split”). As a result of the 2022 Forward Split, we will have [•] Ordinary Shares issued and outstanding as of [•].

All share numbers, option numbers, derivative security numbers and exercise prices appearing in this registration statement will be adjusted to give effect to the 2022 Forward Split, unless otherwise indicated or unless the context suggests otherwise.

 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 30, 2021

HONGLI GROUP INC.

[•] Ordinary Shares

This is an initial public offering of our ordinary shares. We are offering on a firm commitment basis our ordinary shares, par value $0.0001 per share (“Ordinary Shares”). Prior to this offering, there has been no public market for our Ordinary Shares. We expect the initial public offering price to be in the range of $[•] to $[•] per Ordinary Share. We will apply to have our Ordinary Shares listed on Nasdaq Capital Market under the symbol “HLP”. However, there can be no assurance that the offering will be closed and our Ordinary Shares will be trading on Nasdaq Capital Market.

Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 24 to read about factors you should consider before buying our Ordinary Shares.

We are an “emerging growth company” as defined under the federal securities laws and will be subject to reduced public company reporting requirements. Please read the disclosures beginning on page 18 of this prospectus for more information.

We are an offshore holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, we conduct our operations in China through a series of agreements dated April 12, 2021 (the “Contractual Arrangements”), with a variable interest entity, or “VIE”, Shandong Hongli Special Section Tube Co., Ltd., and its subsidiaries, or collectively, “our PRC operating entities”. Neither we nor our subsidiaries own any equity interests in our PRC operating entities.

This prospectus does not constitute, and there will not be, an offering of securities to the public in the Cayman Islands.

 

Per share

 

Total

Initial public offering price(1)

 

$

[•]

 

$

[•]

Underwriting discounts and commissions(2)

 

$

[•]

 

$

[•]

Proceeds to us, before expenses(3)

 

$

[•]

 

$

[•]

____________

(1)      Initial public offering price per share is assumed as $[•] per share, which is the midpoint of the range set forth on the cover page of this prospectus. The table above assumes that the underwriter does not exercise its over-allotment option. For more information, see “Underwriting” in this prospectus.

(2)      We have agreed to pay the underwriters a discount equal to seven percent (7%) for any amount of Ordinary Shares from investors sourced by underwriters and four percent (4%) for any amount of Ordinary Shares from investors sourced by us. See “Underwriting” in this prospectus for more information regarding our arrangements with the underwriter.

(3)      We expect our total cash expenses for this offering (including cash expenses payable to our underwriter for its out-of-pocket expenses) not to exceed $[•], exclusive of the above discounts. For a detailed description of the compensation to be received by the underwriter, see “Underwriting.”

This offering is being conducted on a firm commitment basis. The underwriter is obligated to take and pay for all of the Ordinary Shares if any such Ordinary Shares are taken. We have granted the underwriter an option for a period of 45 days after the effective date of this registration statement to purchase up to 15% of the total number of the Ordinary Shares to be offered by us pursuant to this offering (excluding Ordinary Shares subject to this option), solely for the purpose of covering over-allotments, at the public offering price less the underwriting discounts. If the underwriter exercises the option in full, and assuming an offering price of $[•] per Ordinary Share, which is the midpoint of the range set forth on the cover page of this prospectus, the total gross proceeds to us, before underwriting discounts and expenses, will be $28,750,000.

The underwriter expects to deliver the Ordinary Shares against payment as set forth under “Underwriting,” on or about [•], 2021.

Neither the Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

EF HUTTON

division of Benchmark Investments, LLC

The date of this prospectus is [•]

(Prospectus cover continued on the following page.)

 

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(Prospectus cover continued from preceding page.)

This is an offering of the Ordinary Shares of the offshore holding company, instead of shares of the VIE or any of our PRC operating entities, therefore, our investors may never directly hold equity interests in our PRC operating entities. You are not investing in our PRC operating entities. Neither we nor our subsidiaries own any share or equity interest in our PRC operating entities. Instead, we consolidate financial results of Hongli Shandong as primary beneficiary through the Contractual Arrangements between our wholly-owned subsidiary entity, Shandong Xiangfeng Heavy Industry Co., Ltd. (“Hongli WFOE”) and Hongli Shandong, the VIE. Though the business of our PRC operating entities is not within any sensitive sector that Chinese law prohibits direct foreign investment in, this VIE structure was selected to avoid the substantial costs and time for regulatory approval to convert our PRC operating entities into wholly foreign owned entities. As a result of Hongli Cayman’s direct ownership in Hongli WFOE and the Contractual Arrangements, we treat the VIE and the VIE’s subsidiaries as our consolidated entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.

As we chose such VIE structure, we are subject to certain risks and uncertainties that may not otherwise exist if we had direct equity ownership in the operating entities. Because we do not directly hold equity interests in the VIE and its subsidiaries, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to limitations on foreign ownership and regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the Contractual Arrangements. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material change in our operations and cause the value of Ordinary Shares to decrease significantly or become worthless. For a description of the VIE contractual arrangements, see “Our Corporate Structure — Contractual Arrangements between Hongli WFOE and Hongli Shandong.

Our Contractual Arrangements may not be effective in providing control over Hongli Shandong. We may also be subject to sanctions imposed by PRC regulatory agencies including Chinese Securities Regulatory Commission, or CSRC, if we fail to comply with their rules and regulations. See “Risk Factors — Risks Related to Our Corporate Structure”, “Risk Factors — Risks Related to Doing Business in China”, and “The Offering” for more details.

Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary course of business. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will rely on payments made from Hongli Shandong to Hongli WFOE, pursuant to the Contractual Arrangements between them, and the distribution of such payments to Hongli HK as dividends from Hongli WFOE. Certain payments from Hongli Shandong to Hongli WFOE are subject to PRC taxes, including business taxes and value added tax, or VAT. The PRC government imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. For more details, see “Summary — Dividend Distributions or Transfers of Cash among the Holding Company, Its Subsidiaries, and the Consolidated VIE” and “Risk Factors — Risks Related to Doing Business in China — There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”

We are subject to certain legal and operational risks associated with the VIE operations in China through the Contractual Arrangements. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in our operations, significant depreciation of the value of our Ordinary Shares, or a complete hindrance of our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless. The Chinese government may intervene or influence the operations of our PRC operating entities at any time and may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in the operations of our PRC operating entities and/or the value of our Ordinary Shares. Further, any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over the use of variable interest entities for overseas listing, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Though we do not believe that we are directly subject to these regulatory actions or statements because our current business operations are not within the specified regulatory scope above, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on a U.S. exchange. See “Risk Factors — Risks Related to Our Corporate Structure,” “Risk Factors — Risks Related to Doing Business in China” and “Risk Factors — Risks Relating to Our Public Offering and Ownership of Our Ordinary Shares” for more information.

Pursuant to the Holding Foreign Companies Accountable Act, the Public Company Accounting Oversight Board (the “PCAOB”) issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC, and (2) Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. Our auditor, RBSM LLP, is headquartered in New York, New York, and has been inspected by the PCAOB on a regular basis. Our auditor is not headquartered in mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB’s determination. Notwithstanding the foregoing, if the PCAOB is not able to fully conduct inspections of our auditor’s work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCA Act. See “Risk Factors — Our Ordinary Shares may be prohibited from being traded on a national exchange under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021. The delisting of our Ordinary Shares, or the threat of their being delisted, may materially and adversely affect the value of your investment” for more information.

Mr. Jie Liu, our Chief Executive Officer and chairman of the board of directors, currently beneficially owns approximately 97% of our Ordinary Shares. Following the completion of this offering, Mr. Jie Liu will beneficially own approximately [•]% of the aggregate voting power of our outstanding Ordinary Shares and continue to own a controlling interest in us. As such, we will be deemed a “controlled company” within the meaning of the Nasdaq listing standards. However, we do not intend to avail ourselves of the corporate governance exemptions afforded to a “controlled company” under the Nasdaq listing standards. SeeRisk FactorsandManagement — Controlled Company.”

 

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TABLE OF CONTENTS

 

Page

COMMONLY USED DEFINED TERMS

 

ii

PROSPECTUS SUMMARY

 

1

SUMMARY CONSOLIDATED FINANCIAL DATA

 

20

RISK FACTORS

 

24

FORWARD-LOOKING STATEMENTS

 

56

ENFORCEABILITY OF CIVIL LIABILITIES

 

57

USE OF PROCEEDS

 

58

DIVIDEND POLICY

 

59

CAPITALIZATION

 

60

DILUTION

 

61

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

63

INDUSTRY

 

87

BUSINESS

 

91

REGULATIONS

 

119

MANAGEMENT

 

129

PRINCIPAL SHAREHOLDERS

 

137

RELATED PARTY TRANSACTIONS

 

138

DESCRIPTION OF SHARE CAPITAL

 

140

SHARES ELIGIBLE FOR FUTURE SALE

 

155

MATERIAL INCOME TAX CONSIDERATION

 

157

UNDERWRITING

 

164

EXPENSES RELATING TO THIS OFFERING

 

170

LEGAL MATTERS

 

171

EXPERTS

 

171

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

171

INDEX TO FINANCIAL STATEMENTS

 

F-1

You should rely only on the information contained in this prospectus or in any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or in any related free writing prospectus. This prospectus is an offer to sell only the Ordinary Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. For the avoidance of doubt, no offer or invitation to subscribe for Ordinary Shares is made to the public in the Cayman Islands. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Ordinary Shares.

Until [•], 2021 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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COMMONLY USED DEFINED TERMS

•        Unless specifically described otherwise, as used in this prospectus and in the context of describing our consolidated financial information, the terms “we,” “us,” “our company,” “our”, and “Hongli” refer to Hongli Group Inc., a Cayman Islands holding company, and its subsidiaries, consolidated affiliated entities and the PRC operating entities, as the context requires;

•        “Controlling Shareholder” refers to Jie Liu;

•        “CRF” refers to cold roll forming.

•        “CNC” refers to computer number control.

•        “Hongli Cayman” refers to Hongli Group Inc., a Cayman Islands holding company.

•        “Hongli Development” refers to Hongli Development Limited, a British Virgin Islands company.

•        “Hongli Technology” refers to Hongli Technology Limited, a British Virgin Islands company.

•        “Hongli HK” refers to Hongli Hong Kong Limited, a Hong Kong company.

•        “Hongli Shandong” and/or “VIE” refer to Shandong Hongli Special Section Tube Company Limited, a PRC company.

•        “Haozhen Beijing” refers to Beijing Haozhen Heavy Industry Technology Company Limited, a PRC company.

•        “Hongli WFOE” refers to Shandong Xiangfeng Heavy Industry Co., Ltd., a PRC company.

•        “Maituo Shandong” refers to Shandong Maituo Heavy Industry Company Limited, a PRC company.

•        “Haozhen Shandong” refers to Shandong Haozhen Heavy Industry Technology Company Limited, a PRC company.

•        “our PRC operating entities” refers to the VIE, Hongli Shandong, and its subsidiaries.

•        “ROP” refers to a rollover protective structure.

•        “China” and “PRC” refer to the People’s Republic of China, excluding, for the purposes of this prospectus only, Macau, Taiwan and Hong Kong.

•        “shares,” “Shares,” or “Ordinary Shares” are to the ordinary shares of Hongli Group, Inc., par value $0.0001 per share;

•        All references to “RMB,” “yuan” and “Renminbi” are to the legal currency of China, all references to “HKD” is to the legal currency of Hong Kong, and all references to “USD,” and “U.S. dollars” are to the legal currency of the United States.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our Ordinary Shares, discussed under “Risk Factors,” before deciding whether to buy our Ordinary Shares.

Overview

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

We are an offshore holding company conducting our operations in China through our PRC operating entities. This is an offering of the Ordinary Shares of the offshore holding company. You are not investing in our PRC operating entities. Instead, we consolidate financial results of Hongli Shandong as primary beneficiary through the Contractual Arrangements. Please see “Prospectus Summary — Corporate Information” for the summary of our corporate structure and the Contractual Arrangements.

Our PRC operating entities are one of the leading cold roll formed steel profile manufacturers in China with respect to function innovation, performance improvement, and customized manufacturing of the products, according to China Sub-Association for Cold Formed Steel Industries, a professional industrial association. A profile is a specific product designed for a specific use. Our PRC operating entities design, customize and manufacture cold roll formed steel profiles for machinery and equipment in a variety of sectors, including but not limited to mining and excavation, construction, agriculture and transportation.

With more than a 20-year operating history, our PRC operating entities have developed customers in more than 30 cities in China and a global network covering South Korea, Japan, the U.S., and Sweden. The customers of our PRC operating entities include large corporations and international enterprises such as Weichai LOVOL Heavy Industry Co. Ltd. (“LOVOL”), SUNGJIN TECH CO., LTD (“South Korean VOLVO”), Shandong Lingong Construction Machinery Co., Ltd. (“SDLG”), and some new customers associated with Katsushiro Machinery Co., Ltd. (“Japan Katsushiro”). Most of the customers have been with our PRC operating entities for an average of 10 years. Most of the main customers of our PRC operating entities increased orders with our PRC operating entities during the fiscal years ended December 31, 2020 and 2019 and for the six months ended June 30, 2021, and based on their new contracts with our PRC operating entities, they will continue to increase their orders in the next 2-3 years.

Our Corporate Structure

The following chart summarizes our corporate legal structure and identifies our subsidiaries, the VIE and its subsidiaries as of the date of this prospectus.

We are an offshore holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, we conduct our operations in China through the Contractual Arrangements, with the VIE, Hongli Shandong, and its subsidiaries, or collectively, “our PRC operating entities”. Neither we nor our subsidiaries own any equity interests in our PRC operating entities.

This is an offering of the Ordinary Shares of the offshore holding company, instead of shares of the VIE or any of our PRC operating entities, therefore, our investors may never directly hold equity interests in our PRC operating entities. You are not investing in our PRC operating entities. Neither we nor our subsidiaries own any share or equity

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interest in our PRC operating entities. Instead, we consolidate financial results of Hongli Shandong as primary beneficiary through the Contractual Arrangements between our wholly-owned subsidiary entity, Shandong Xiangfeng Heavy Industry Co., Ltd. (“Hongli WFOE”) and Hongli Shandong.

____________

*        Mr. Yuangqing Liu is the initial founder of the Company and the father of Mr. Jie Liu and Ms. Ronglan Sun is the spouse of Mr. Yuangqing Liu and the mother of Mr. Jie Liu. Mr. Yuangqing Liu and Ms. Ronglan Sun have granted Mr. Jie Liu to act as their proxy to vote their shares in Hongli Development for all corporate transactions requiring shareholders’ approval and Mr. Jie Liu as such may be deemed to have sole voting and investment discretion with respect to the Ordinary Shares held by Hongli Development.

Contractual Arrangements between Hongli WFOE and Hongli Shandong

Hongli WFOE and Hongli Shandong entered into a series of Contractual Arrangements in April 2021. Such Contractual Arrangements consist of a series of three agreements, along with shareholders’ powers of attorney (“POAs”) and irrevocable spousal consent letters.

The Contractual Arrangements are designed to allow Hongli Cayman to consolidate Hongli Shandong’s operations and financial results in Hongli Cayman’s financial statements in accordance with U.S. GAAP as the primary beneficiary.

Due to PRC legal restrictions on foreign ownership in certain sectors or other matters, such as telecommunications and the internet, many China-based operating companies had to list on a U.S. exchange through Contractual Arrangements, or a VIE structure, without a direct ownership in main operating entities. However, even though the business of some other China-based operating companies, including Hongli Shandong, is not within any sensitive sector that Chinese law prohibits direct foreign investment in, some China-based operating companies, as well as Hongli Shandong, at the discretion of the management, still selected to utilize such VIE structure to list overseas to avoid the substantial costs and time. If Hongli Shandong had selected to directly list on a U.S. exchange without such Contractual Arrangements, Hongli Shandong would be required to obtain certain regulatory approvals in connection with the conversion of our PRC operating entities into wholly foreign owned entities which would take the Company approximately 3-6 months to complete, without certainty when the conversion would be completed successfully. As a

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result, management elected to pursue the VIE structure, at which time that the PRC government did not initiate a series of regulatory actions and statements to regulate business operations in China including enhancing supervision over the use of variable interest entities for overseas listing.

Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over the use of variable interest entities for overseas listing, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. As we chose such VIE structure, we understand that we are subject to certain risks and uncertainties that may not otherwise exist if we had direct equity ownership in the operating entities. The VIE structure has inherent risks that may affect your investment, including less effectiveness and certainties than direct ownership and potential substantial costs to enforce the terms of the Contractual Arrangements. See “Risk Factors — We rely on contractual arrangements with the VIE and the shareholders of the VIE for our business operations, which may not be as effective as direct ownership in providing operational control.” We, as a Cayman Islands holding company, may have difficulty in enforcing any rights we may have under the Contractual Arrangements with Hongli Shandong, its founders and owners, in PRC because all of our Contractual Arrangements are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, where the legal environment is not as developed as in the United States. See “Risk Factors — Any failure by our consolidated VIE or their shareholders to perform their obligations under our Contractual Arrangements with them would have a material adverse effect on our business.” Furthermore, these Contractual Arrangements may not be enforceable in China if PRC government authorities or courts take a view that such Contractual Arrangements contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. See “Risk Factors — The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges nor for the execution of VIE agreements, however, if the VIE or the holding company were required to obtain approval and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange or continue to offer securities to investors, which could materially affect the interest of the investors and decrease the price of our Ordinary Shares.” In the event we are unable to enforce these Contractual Arrangements, we may not be able to exert effective control over Hongli Shandong, and our ability to conduct our business may be materially and adversely affected. For more information, see “Risk Factors — Risks Related to Our Corporate Structure” and “Risk Factors — Risks Related to Doing Business in China.”

The significant terms of the Contractual Arrangements are as follows:

Exclusive Business Cooperation and Management Agreement

Pursuant to the exclusive business cooperation and management agreement between Hongli WFOE and Hongli Shandong, Hongli WFOE has the exclusive right to provide Hongli Shandong with complete business support, operational management, and technical and consulting services, including all services within the business scope of Hongli Shandong as may be determined from time to time by Hongli WFOE, such as but not limited to technical services, business consultations, and marketing consultancy. Additionally, Hongli WFOE has the full and exclusive right to manage and direct all cash flow and assets of Hongli Shandong and to direct and administrate the financial affairs and daily operation of Hongli Shandong. In exchange, Hongli WFOE is entitled to an annual service fee that equals the audited total amount of the net income of such fiscal year of Hongli Shandong. If Hongli Shandong’s annual net income is zero, Hongli Shandong is not required to pay the service fee. If Hongli Shandong sustained losses in any fiscal year, all such losses will be carried over to the next year and deducted from the service fee of the next year.

The exclusive business cooperation agreement remains in effect, unless terminated pursuant to the agreement or upon the mutual consent of the parties thereto. Hongli Shandong may not unilaterally terminate this agreement unless Hongli WFOE commits gross negligence or a fraudulent act against Hongli Shandong. However, Hongli WFOE has the right to terminate this agreement upon giving 30 days’ prior written notice to Hongli Shandong at any time.

Exclusive Option Agreements

Pursuant to the exclusive option agreement among Hongli HK, Hongli Shandong and the shareholders who collectively own all of Hongli Shandong, such shareholders have jointly and severally granted Hongli HK an option to purchase their equity interests in Hongli Shandong. The purchase price shall be equal to the actual capital contributions paid in the registered capital of Hongli Shandong by the shareholders for the portion of equity interests to be purchased

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by Hongli HK or the lowest price allowed by the PRC laws and regulations. Hongli HK or its designated person may exercise such option at any time to purchase all or part of the equity interests in Hongli Shandong until it has acquired all equity interests of Hongli Shandong, which is irrevocable during the term of the agreements.

The exclusive call option agreement remains in effect for 10 years, and Hongli HK has the right to extend it for an additional 10 years.

Equity Interest Pledge Agreement

Pursuant to the equity interest pledge agreement among the shareholders who collectively own all of Hongli Shandong, such shareholders have pledged all of the equity interests in Hongli Shandong to Hongli WFOE as collateral to secure the obligations of Hongli Shandong under the exclusive business cooperation and management agreement and the exclusive option agreement. These shareholders are prohibited or may not transfer the pledged equity interests without prior written consent of Hongli WFOE unless transferring the equity interests in accordance with the performance of the exclusive option agreement.

The equity interest pledge agreement shall be terminated upon the full payment of the consulting and service fees under the business cooperation and management agreement and upon the fulfillment of Hongli Shandong’s obligation under the business cooperation and management agreement. Additionally, Hongli WFOE shall cancel or terminate this equity interest pledge agreement as soon as reasonably practicable.

Shareholders’ POAs

Pursuant to the shareholders’ POAs, the shareholders of Hongli Shandong have given Hongli HK or its subsidiary an irrevocable proxy to act on their behalf on all matters pertaining to Hongli Shandong and to exercise all of their rights as shareholders of Hongli Shandong, including the right to attend shareholders meetings, to exercise voting rights and all of the other rights, and to designate and appoint the legal representative, the executive directors and/or director, supervisor, the chief executive officer and other senior management members of Hongli Shandong, and to sign and execute transfer documents and any other documents pursuant to the exclusive option agreement and the equity interest pledge agreement. The POAs shall remain in effect while the shareholders of Hongli Shandong hold the equity interests in Hongli Shandong.

Irrevocable Spousal Consent Letters

Pursuant to the irrevocable spousal consent letters, the spouses of all the shareholders of Hongli Shandong consent to the execution of the exclusive business cooperation and management agreement, equity interest pledge agreement, exclusive option agreement, and the power of attorneys signed by their spouse. The spouses of the shareholders of Hongli Shandong further undertake not to make any assertions in connection with the equity interests of Hongli Shandong held by the shareholders and confirm no authorization or consent will be required from them for the shareholders’ performance of any transaction documents in connection with these agreements. However, if the spouse of any shareholder obtains any equity interest held by the shareholders for any reason, they commit to be bound by these agreements and comply with the obligation of the shareholders of Hongli Shandong thereunder.

Based on the foregoing contractual arrangements, Hongli Cayman is allowed to consolidate Hongli Shandong’s operations and financial results in Hongli Cayman’s financial statements for the periods presented herein as if the current corporate structure (“restructuring” or “reorganization”) had been in existence throughout the periods presented under common control in accordance with Regulation S-X-3A-02 promulgated by the SEC and Accounting Standards Codification (“ASC”) 810-10, Consolidation.

Because we do not directly hold equity interests in Hongli Shandong, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to regulatory review of overseas listing of PRC companies through a special purpose vehicle and the validity and enforcement of the Contractual Arrangements. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material change in our operations and cause the value of Ordinary Shares to decrease significantly or become worthless.

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Our Contractual Arrangements may not be effective in providing control over Hongli Shandong. We may also be subject to sanctions imposed by PRC regulatory agencies including Chinese Securities Regulatory Commission, or CSRC, if we fail to comply with their rules and regulations. See “Risk Factors” on page 24 and “The Offering” on page 19 for more details.

We are subject to certain legal and operational risks associated with the majority of our operations in China through the Contractual Arrangements. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in our operations, significant depreciation of the value of our Ordinary Shares, or a complete hindrance of our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over the use of variable interest entities for overseas listing, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Though we do not believe that we are directly subject to these regulatory actions or statements because our current business operations are not within the specified regulatory scope above, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on a U.S. exchange.

We cannot assure you that the PRC courts or regulatory authorities may not determine that our corporate structure and Contractual Arrangements violate PRC laws, rules or regulations. If the PRC courts or regulatory authorities determine that our Contractual Arrangements are in violation of applicable PRC laws, rules or regulations, our VIE agreements will become invalid or unenforceable, and Hongli Shandong will not be treated as a VIE and we will not be entitled to treat Hongli Shandong’s assets, liabilities and results of operations as our assets, liabilities and results of operations, which could effectively eliminate the assets, revenue and net income of Hongli Shandong from our balance sheet, which would most likely require us to cease conducting our business and would result in the delisting of our Ordinary Shares from Nasdaq Capital Market after this offering and a significant impairment in the market value of our Ordinary Shares. If the VIE structure is determined to be in violation of any existing or future PRC laws, rules or regulations, or if Hongli WFOE or the VIE fails to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities may deal with such violations according to existing or future PRC laws, rules or regulations, including: imposing fines on Hongli WFOE or the VIE, revoking the business and operating licenses of Hongli WFOE or the VIE, discontinuing or restricting the operations of Hongli WFOE or the VIE; imposing conditions or requirements with which we, Hongli WFOE, or Hongli Shandong may not be able to comply; requiring us, Hongli WFOE, or Hongli Shandong to restructure the relevant ownership structure or operations which may significantly impair the rights of the holders of our Ordinary Shares in the equity of the VIE; and restricting or prohibiting our use of the proceeds from our initial public offering to finance our business and operations in China.

Permission Required from the PRC Authorities for the VIE’s Operation

We are currently not required to obtain permission from any of the PRC authorities to operate and issue our Ordinary Shares to foreign investors. In addition, we, our subsidiaries, or the VIE are not required to obtain permission or approval from the PRC authorities for the VIE’s operation, nor have we, our subsidiaries, or the VIE received any denial for the VIE’s operation. However, recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of interpretation and enforcement of the rules and regulations in the PRC, which can change quickly with little advance notice, and any future actions of the PRC authorities.

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East & Concord, our counsel with respect to PRC law searched on the National Enterprise Credit Information Publicity System, which displayed that Hongli Shandong and Hongli WFOE are both legitimately established and validly existing under the laws of the PRC. East & Concord has reviewed the Contractual Arrangements among Hongli WFOE, Hongli Shandong and the shareholders of Hongli Shandong, and advised us that that the agreements and contracts under the Contractual Arrangements are in compliance with the laws and regulations of the PRC currently in effect.

Dividend Distributions or Transfers of Cash among the Holding Company, Its Subsidiaries, and the Consolidated VIE

As of the date of this prospectus, no cash transfer or transfer of other assets have occurred between Hongli Cayman, its subsidiaries, and consolidated VIEs. As of the date of this prospectus, none of our subsidiaries or consolidated VIEs have made any dividends or distributions to Hongli Cayman. As of the date of this prospectus, we do not have any U.S. investors, so no dividends or distributions have been made to any U.S. investors.

We intend to keep any future earnings to re-invest in and finance the expansion of the business of our PRC operating entities, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary course of business. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, Hongli HK.

Hongli WFOE’s ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our indirect PRC subsidiaries to pay dividends to the Company only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China may also set aside a portion of its after-tax profits to fund an optional employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of shareholders. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations through the current Contractual Arrangements, we may be unable to pay dividends on our Ordinary Shares.

Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%.

In order for us to pay dividends to our shareholders, we will rely on payments made from Hongli Shandong to Hongli WFOE, pursuant to the Contractual Arrangements between them, and the distribution of such payments to Hongli HK as dividends from Hongli WFOE. Certain payments from the VIE, Hongli Shandong, to Hongli WFOE are subject to PRC taxes, including business taxes and VAT.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong project must obtain a

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tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiary to its immediate holding company, Hongli HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Hongli HK intends to apply for the tax resident certificate when Hongli WFOE plans to declare and pay dividends to Hongli HK. See “Risk Factors — Risks Related to Doing Business in China — There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”

Further, the proceeds of this offering may be sent back from the holding company to the PRC, and the process for sending such proceeds back to the PRC may be time-consuming after the closing of this offering. We may be unable to use these proceeds to grow the business of our PRC operating entities until our PRC operating entities receive such proceeds in the PRC. Any transfer of funds by the holding company to our PRC operating entities, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with relevant governmental authorities in China. Any foreign loans procured by our PRC operating entities is required to be registered with China’s State Administration of Foreign Exchange (“SAFE”) or its local branches or satisfy relevant requirements, and our PRC operating entities may not procure loans which exceed the difference between their respective total project investment amount and registered capital or 2 times (which may be varied year by year due to the change of PRC’s national macro-control policy) of the net worth of our PRC subsidiary. According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC operating entities are subject to the approval of or filing with State Administration for Market Regulation in its local branches, the Ministry of Commerce in its local branches and registration with a local bank authorized by SAFE.

We plan to allocate up to 30% of the proceeds of this offering to repay the bank loan to complete Hongli Shandong’s expansion plan, assuming that we successfully consummate this offering, and, further, in the event that we are not able to obtain the bank loan, we will re-allocate up to 30% of the proceeds of this offering to pay for the Yingxuan Assets. For more information and details, see “Business of Our PRC Operating Entities — Expansion Plan.” We may be unable to use these proceeds to complete Hongli Shandong’s expansion plan until Hongli Shandong receives such proceeds in the PRC, which might be time-consuming. Therefore, in the event we could not or do not in a timely manner send back the proceeds of the offering to the PRC, Hongli Shandong may fail to meet its payment and other obligations, including its financial covenants and security coverage requirement, which could lead to defaults under such loan agreements or other agreements in connection with the expansion plan. If Hongli Shandong defaults under its loan agreement, Hongli Shandong may have to cash the deposit of its working capital, which could have material impact on business and results of operation, and Hongli Shandong’s ability to continue in business, and cause Hongli Shandong to liquidate, resulting in the total loss of value to our shareholders. See “Risk Factors — We must remit the offering proceeds to China before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can finish all necessary governmental registration processes in a timely manner,” and “Risk Factors — Our indebtedness to lenders and other creditors is significant and if we encounter demands for payment that we cannot meet, it could have adverse consequences for our business and future prospects.

Innovations of Our PRC Operating Entities

Our PRC operating entities employ a broad array of manufacturing techniques, most importantly cold roll forming (“CRF”) which is the technique used for manufacturing all their products that differentiates our PRC operating entities from other steel pipe manufacturers that employ alternative forming techniques such as extrusion or pull-trusion. CRF is widely used for applications where precise dimension and mechanical tolerances are required.

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CRF reduces the cost of the material and improves the quality of the product in terms of its surface and size, and allows our PRC operating entities to both customize their products in accordance with customers’ request and deliver products with high quality, increased mechanical properties and strength. CRF expands their product applications to a variety of industries that have demands for roll forming profiles with high precision and low processing cost.

In addition to the manufacturing techniques, our PRC operating entities employ deformed flower designing in their product design which enables the visualization of the formation process, and further ensures the high success rate of their research, development, and design. Currently, our PRC operating entities have applied for more than 20 utility patents for this technique, 14 of which have been approved.

Currently, our PRC operating entities are designing and developing a certain type of cross section profile with unequal thickness. Through the changes of thickness of the profile, such cross section profile will be stronger with lighter weight compared to a typical regular cross section profile. Our PRC operating entities are preparing the patent application for such technique, which is expected to be widely used in different applications in five years, including but not limited to, lightweight processing of cabs, high-strength fireproof doors, and window and curtain walls.

The following are pictures of some of the profiles of our PRC operating entities as well as a schematic showing the design and manufacturing process.

Facilities and Products of Our PRC Operating Entities

Supported by the in-house research and development (“R&D”) team and manufacturing facilities, our PRC operating entities can facilitate their customers’ orders as a “custom-made profile shop” including designing, customizing, manufacturing and delivery.

Our PRC operating entities currently have 10 lines of CRF production, 3 units of laser welding coupled with inspection equipment, 3 units for high frequency welding coupled with inspection equipment, 3 units for welding robots, 5 units for 3D laser cutting machines, 3 units for 3D computer number control (“CNC”) bending machines, a hydraulic press, and 2 units of CNC machining and 2D laser cutting machines.

Our PRC operating entities manufacture over 2,000 customized roll forming profile products in a broad range of sizes and shapes. Our PRC operating entities are specialized in high-end profiles, such as anti-roll cab frame profile

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and engineering machinery structural parts profile, the application of which includes excavator cabs, pay-loader and other engineering machinery cabs, agricultural machinery cabs and rollover protective structures (each a “ROP”, collectively, “ROPs”), and forklift cabs.

Sales and Marketing

Domestic and international footprints of our PRC operating entities

Our PRC operating entities’ customers are mainly concentrated in the Chinese market. The customers of our PRC operating entities are in more than 30 cities in China, covering the major heavy industry machinery and agricultural machinery industry enterprises. Our PRC operating entities provide their products directly to, or indirectly to supplier of, some of the world’s leading original equipment manufacturers, such as XCMG, Caterpillar Inc., and Komatsu Ltd. Enterprises like LOVOL and SDLG are the main customers of our PRC operating entities in China. The 3 major customers of our PRC operating entities, LOVOL, South Korean VOLVO and SDLG, in aggregate accounted for approximately $8.8 million, or 79%, and $7.5 million, or 80% of sales for the fiscal years ended December 31, 2020 and 2019, respectively. LOVOL, South Korean VOLVO and SDLG, in aggregate accounted for approximately $7.3 million, or 71%, and $4.0 million, or 83% of sales for the six months ended June 30, 2021 and 2020, respectively. Additionally, our PRC operating entities started to directly and indirectly provide their products to XCMG and Caterpillar Inc. in 2018 and 2017, respectively. For the most recent three years, from 2018 to 2020, the revenues generated from new orders directly to XCMG are approximately $7,963, $27,452, and $29,935, respectively; and the revenues generated from new orders to the supplier of Caterpillar Inc. are approximately $16,233, $49,735 and $40, respectively. For the six months ended June 30, 2021, the revenues generated from new orders directly to XCMG is approximately $112,851. Being a vendor of international customers such as XCMG and Caterpillar Inc. and establishing potential long-term relationships has been one of the focus areas of the marketing and brand building efforts of our PRC operating entities.

As a part of the international expansion and to facilitate the relationship with the existing South Korean customers, Hongli Shandong designated two employees who speak Korean to constantly visit customers in South Korea to assist with logistics, advertisement, collecting or furnishing of information of the services and products of Hongli Shandong. Hongli Shandong also plans to open a new sales office in Wisconsin, U.S. to be supported with two local salesmen to develop local business in the U.S. However, this plan has been delayed or might even be postponed due to the impact of COVID-19, travel restrictions, and the potential market opportunities in the U.S. Management of Hongli Shandong are currently evaluating the feasibility to open a sales office in the U.S. pending the development of COVID-19, travel restrictions, and the potential market opportunities in the U.S. Hongli Shandong currently has one independent contractor who works closely with Hongli Shandong in China to conduct market research and development in the U.S. market and respond to inquiries and

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quotes from potential U.S. customers. In May 2021, Hongli Shandong received an order from a customer in the U.S., for 600 units of D-shaped cold roll formed tubes. Hongli Shandong also explored the market in Japan in collaboration with Japan Katsushiro, who later purchased from our PRC operating entities through its PRC affiliated entities.

During each of the fiscal years ended December 31, 2020 and 2019, approximately 70% of the sales of our PRC operating entities were sourced from the China market where their manufacturing facilities are located, and approximately 30% of the sales of our PRC operating entities were generated by international customers. For the six months ended June 30, 2021, approximately 72% of the sales of our PRC operating entities were sourced from the China market where their manufacturing facilities are located, and approximately 28% of the sales of our PRC operating entities were generated by international customers.

Expansion Plan

Due to the rapid development of our company in the past several years, the existing plants’ capacities of our PRC operating entities have been unable to meet their customers’ demands, especially their long-term development. In order to develop the business, the VIE, Hongli Shandong has been working to expand its manufacturing capability by (i) purchasing a well-equipped industrial park near its current factory with a parcel of land, four workshops and associated infrastructure; and (ii) purchasing new production facilities for four workshops (“Expansion Plan”).

Market Opportunities and Competition

Pursuant to the industry report issued by Beijing Zhong Jing Shi Ye Consulting Co., Ltd. (“ZJSY”) commissioned by us in April, 2021 entitled “Cold Roll Forming Industry in China Market Prospect Analysis and Forecast Report” (the “CRF Industry Report”), the market for cold roll formed steel in China continues to grow. In 2019, the demand scale of the whole industry in China was RMB 182 billion, or approximately $26.33 billion. In 2020, the demand scale of the industry in China increased to RMB 212.4 billion, or approximately $30.78 billion, a year-on-year increase of 16.7%. In the next few years, we expect that the market demand for cold roll formed steel in China will keep growing, and with the expansion of national infrastructure investment, the market demand for cold roll formed steel in downstream buildings, automobiles, bridges, railways, transmission towers, machinery manufacturing and other application fields will gradually expand. Therefore, there is still much room for development of cold roll formed steel in China in the future, and the market is far from saturated.

As demonstrated in the CRF Industry Report, according to the changing trend of China’s cold roll formed steel market scale from 2016 to 2020, it is estimated that the market scale of China’s cold roll formed steel industry will reach about RMB 434.75 billion, or approximately $63.00 billion, in 2025 by forecasting the future growth rate of about 15.5% per annum.

We face competition from international and domestic manufacturers that provide cold roll formed steel profiles to distributors and companies.

Competitive Strengths of Our PRC Operating Entities

Solutions provider to customers, committed to one-stop service

Our PRC operating entities are committed to offering their customers one-stop service with wide product diversity, high quality and reliability. Our PRC operating entities serve as a “custom-made profile shop” for many of their customers. Differentiating from many other suppliers in China who either manufacture very limited profiles, or produce raw material steel, or solely engage in trading profiles, our PRC operating entities have not only an experienced R&D team understanding customers’ needs and specifications but also extensive and diversified manufacturing techniques and facilities to test, design and customize products based on the customers’ demands including bending, cutting, welding, assembling and coating.

Stable customer base

With more than 20 years’ operating history, our PRC operating entities have developed a solid and stable customer base domestically and internationally. Their customers, including large corporations and international enterprises such

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as South Korea VOLVO, LOVOL, and SDLG, and have developed new customers which are four factories set up by Japanese Katsushiro in China. Most of the customers have been with our PRC operating entities for an average of 10 years and most of the main customers have been increasing their orders with our PRC operating entities.

Deep domain knowledge and industry expertise

Our PRC operating entities have gained and developed deep domain knowledge and industry expertise from over 20 years of experience in service and production, which is built into and will continue to contribute to the robust and differentiated capabilities of their products. In addition to the strong support from their in-house R&D, our PRC operating entities collaborate with domestic and foreign universities who provide technique assistance, offer advice and guidance, conduct certain research, and develop innovative techniques based on our PRC operation entities’ demands. Our PRC operating entities established the International Academician Workstation (Russia) with Oleg Fatkulin, the academician of Russian Academy of Engineering and his research team, and the school-enterprise cooperative research and development center with Beijing Institute of Technology. Additionally, our PRC operating entities established good cooperative relations with domestic and foreign molding equipment companies. With such support, our PRC operating entities address the continuous innovation demands of their customers.

Diversified market and territory outreach

We believe our PRC operating entities have a diversified customer portfolio and territory outreach to mitigate impact by economic and industry cycles. Our PRC operating entities’ customers are in more than 8 industries and 4 countries, and our PRC operating entities are still expanding to new areas, and this gives them protection against recession of one industry or one country.

Rigorous quality control

Our PRC operating entities established a comprehensive quality management system, implemented by a quality management system (QMS) in compliance with ISO14001 quality management systems. Our PRC operating entities have applied for the IATF16949, which is an international standard for automotive quality management systems. Our PRC operating entities apply national standards of product quality testing system to ensure that the products manufactured have a pass rate of 95% to provide their customers with high-quality, highly reliable products.

Experienced and proven management team

Our senior management team, as well as the senior management team of the VIE, Hongli Shandong, has decades of leadership experience in the industrial custom-made profile industry, transportation and logistics and other relevant industrial sectors. Our management team and senior management intend to remain with us in the capacity of officers and/or directors, which will provide helpful continuity in advancing our strategic and growth goals.

Business Strategies of Our PRC Operating Entities

The primary objective of our PRC operating entities is to expand their production capacity and customer base. In addition, our PRC operating entities will remain flexible in their product portfolio and intend to increase sale volume in newly developed markets or less competitive markets. At the same time, our PRC operating entities consider their relationship with their existing customers important in sustaining growth in earnings and cash flows from operating activities over various economic cycles. To achieve this objective, our PRC operating entities strive to expand their capacity, improve their cost structure, provide high quality service and products, expand their product offerings and increase their market share.

Expand production capacity of our PRC operating entities

In order to cope with the increase of the orders and expected continuous increase in demand in the future, Hongli Shandong, the VIE, is undertaking an expansion plan to purchase a new manufacturing factory with additional production facilities to expand its production capacity. This will allow our PRC operating entities to produce more products, increase their cost efficiency and profit margin overall, and give them more control and better oversight over their production timeline. For more details about Hongli Shandong’s expansion plan, see “Business of Our PRC Operating Entities — Expansion Plan.”

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Expand customer base of our PRC operating entities

Our management team, as well as the management team of our PRC operating entities, is focused on expanding market share, which we believe will generate operating leverage and improved financial performance. As a part of the international expansion of our PRC operating entities and to facilitate the relationship with the existing South Korean customers, Hongli Shandong designated two employees who speak Korean to constantly visit customers in South Korea to assist with logistics, advertisement, collecting or furnishing of information of the services and products of Hongli Shandong. Hongli Shandong also plans to open a new sales office in Wisconsin, U.S. to be supported with two local salesmen to develop local business in the U.S. However, this plan has been delayed or might even be postponed due to the impact of COVID-19, travel restrictions, and the potential market opportunities in the U.S. Management of Hongli Shandong are currently evaluating the feasibility to open a sales office in the U.S. pending the development of COVID-19, travel restrictions and the potential market opportunities in the U.S. Hongli Shandong currently has one independent contractor who works closely with Hongli Shandong in China to conduct market research and development in the U.S. market and respond to inquiry and quotes from potential U.S. customers. In May 2021, Hongli Shandong received an order from a customer in the U.S., for 600 units of D-shaped cold roll formed tubes.

Expand the product portfolio our PRC operating entities to be responsive to market conditions

Our PRC operating entities seek to maintain flexibility to adjust their product mix and rapidly respond to changing market conditions. While prioritizing their high margin products, our PRC operating entities regularly evaluate their product portfolio to ensure that their offerings are responsive to prevailing market conditions. Our PRC operating entities expect to see an increase in the sales volume of their construction machinery parts in the construction industry in the face of the domestic market trends to replace aluminum profiles for fire protection by steel structure curtain walls. However, the Chinese market for steel structure curtain walls is currently dominated by imports. In the near future, it is a part of their business plan to cooperate with architectural design institutes to promote domestic steel structure curtain walls. Our PRC operating entities have been keeping interested customers in contact and expect to see an increase in their related annual sales in connection with the construction machinery parts. Our PRC operating entities will continue to assess and pursue opportunities to utilize, optimize and grow production capacity to capitalize on market opportunities.

Focus on efficient manufacturing and cost management

Our PRC operating entities strive for continued operational excellence with the goal of providing high-quality products at competitive prices. Our PRC operating entities plan to introduce single minute exchange of dies (“SMED”) to replace or supplement their laser welding at the beginning of 2022. SMED is a tool used in the roll forming manufacture to equip the machines and enable rapid and efficient adjustment of the machines to different manufacture process, or changeover, which can substantially reduce the raw material waste and reduce the adjustment frequency. Our PRC operating entities also plan to purchase automation equipment to automate the assembly and installation of certain products. The operating personnel of our PRC operating entities continually examine costs and profitability by product, plant and region. Their goal is to maximize operational benchmarks by leveraging skilled manufacturing and supply chain management processes.

Focus on key customer relationships

Our PRC operating entities believe that their relationships with key customers provide them with a competitive advantage. Based on each customer’s demands, our PRC operating entities actively engage in the design and development of new profile of each project. They always ensure the quality and delivery of their product provided for their customers. In addition, they maintain close correspondence with their customers to update any new and cost-efficient techniques and adjust the price accordingly, and timely collect customers’ feedback through their sales, quality, and technique staff. It is their mission to continuously improve their equipment, techniques, and production to satisfy their customers’ wide variety of product demands.

Coronavirus (COVID-19) Update

Since early 2020, the epidemic of the novel strain of coronavirus (COVID-19) (the “COVID-19 pandemic”) has spread across China and other countries and has adversely affected businesses and economic activities in the first quarter of 2020 and beyond. Our PRC operating entities followed the restrictive measures implemented in China,

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by suspending onsite operation and having employees work remotely until February 2020, when our PRC operating entities started to gradually resume normal operations. The operation especially international orders of our PRC operating entities were negatively impacted by COVID-19 pandemic, but our total revenues increased by approximately $1.9 million, or 20.07%, to approximately $11.2 million for the year ended December 31, 2020 from approximately $9.3 million for the year ended December 31, 2019. The increase was attributed by the facts that (i) during fiscal year 2020, our PRC operating entities completed the research phase for certain orders placed in 2019 and recognized the revenue when control of the products was transferred to the customers, (ii) the domestic cold roll formed steel market was very active during 2020 despite the COVID-19 pandemic which drove increased domestic orders; and (iii) some of the existing customers of our PRC operating entities increased their orders with our PRC operating entities. As the spread of COVID-19 slows domestically and internationally, our PRC operating entities expect their business be less impacted by COVID-19 as their orders have been growing since December 31, 2020. Our total revenues increased by approximately $5.4 million, or 111.47%, to approximately $10.3 million for the six months ended June 30, 2021 from approximately $4.9 million for the six months ended June 30, 2020. The increase was attributed by the facts that (i) during the six months ended June 30, 2021, our PRC operating entities completed the research phase for certain orders placed in 2020 and recognized revenue when control of the products was transferred to the customers, (ii) the domestic cold roll formed steel market was very active during 2021 despite the COVID-19 pandemic which drove increased domestic orders; and (iii) some of the existing customers increased their orders with our PRC operating entities. Our PRC operating entities have resumed their efforts on developing offshore markets including planning to open a sales office in the U.S. However, this plan has been delayed or might even be postponed due to the impact of COVID-19, travel restrictions, and the potential market opportunities in the U.S. Management of Hongli Shandong are currently evaluating the feasibility to open a sales office in the U.S. pending the development of COVID-19, travel restrictions, and the potential market opportunities in the U.S.

Even though the COVID-19 pandemic is currently under control in China, due to the high uncertainty of the evolving situation, we have limited visibility on the full impact brought upon by the COVID-19 pandemic and the related financial impact cannot be estimated at this time. We are monitoring the global outbreak and spread of COVID-19 and taking steps in an effort to identify and mitigate the adverse impacts on, and risks to, our business (including but not limited to our employees, customers, and other business partners) posed by its spread and the governmental and community reactions thereto. We continue to assess and update our business continuity plans in the context of this pandemic, including taking steps in an effort to help keep our workforces healthy and safe. The spread of COVID-19 has caused our PRC operating entities to modify our business practices (including employee travel, employee work locations in certain cases, and cancellation of physical participation in certain meetings, events and conferences), and our PRC operating entities expect to take further actions as may be required or recommended by government authorities or as they determine are in the best interests of their employees, customers and other business partners. Our PRC operating entities are also working with their suppliers to understand the existing and future negative impacts, and to take actions in an effort to mitigate such impacts. Due to the speed with which the COVID-19 pandemic is developing, the global breadth of its spread and the range of governmental and community reactions thereto, there is uncertainty around its duration and ultimate impact; therefore, any negative impact on our overall financial and operating results (including without limitation our liquidity) cannot be reasonably estimated at this time, but the pandemic could lead to extended disruption of economic activity and a related impact on our financial and operating results.

Research and Development

Our PRC operating entities maintain an internal dedicated engineering and technology team, consisting of design engineers who are responsible for die forming, process engineers who are responsible for production processes, university professors who are responsible for material properties, quality engineers who are responsible for production quality control, technical administrators who are responsible for projection development, and others who are responsible for process technology. As of the date of this prospectus, the team of our PRC operating entities consists of 20 full-time R&D personnel, which accounts for 13% of their employees. Our PRC operating entities incurred R&D expenses of $643,958 and $374,086, which is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income for the fiscal years ended December 31, 2020 and 2019, respectively. Our PRC operating entities incurred R&D expenses of $589,323 and $300,701, which is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income for the six months ended June 30, 2021.

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In June 2018, our PRC operating entities established a laboratory center, focusing on the research and development of roll forming profiles. Our PRC operating entities strive to further develop and improve their forming process by 1) developing more collaborative application products and services to improve the customer’s service experience; 2) updating their processing equipment to meet the personalized needs of enterprise customers; and 3) strengthening the latest theory and technology research of roll forming profile, to promote the technology development of roll forming profile to a higher level.

Intellectual Property

Our PRC operating entities regard their trademarks, copyrights, patents, domain names, know-how, proprietary technologies, and similar intellectual property as critical to their success, and they rely on copyright, trademark and patent law in the PRC, as well as confidentiality procedures and contractual provisions with their employees, contractors and others to protect their proprietary rights.

Our PRC operating entities currently own 14 registered utility patents, which are valuable assets to the operation of our business.

The intellectual property of our PRC operating entities is subject to risks of theft and other unauthorized use, and their ability to protect their intellectual property from unauthorized use is limited. In addition, our PRC operating entities may be subject to claims that they have infringed the intellectual property rights of others. See “Risk Factors — Risks Relating to the Business of Our PRC Operating Entities — Our PRC operating entities may not be able to prevent others from unauthorized use of their intellectual property, which could cause a loss of customers, reduce our revenues and harm their competitive position.

Summary of Risk Factors

Investing in our Ordinary Shares involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our Ordinary Shares. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed more fully in the section titled “Risk Factors.”

Risks Related to Our Business and Industry.    See “Risk Factors — Related to Our Business and Industry” on page 24 of the prospectus.

Risks and uncertainties related to our business and industry include, but are not limited to, the following:

•        Our business of our PRC operating entities involves occupational hazards to their workforce.

•        The loss of any of the key customers of our PRC operating entities could reduce our revenues and our profitability.

•        Our PRC operating entities will require substantial additional funding in the future. There is no assurance that additional financing will be available to our PRC operating entities.

•        Our PRC operating entities may encounter working capital shortage, as they may need additional funds to finance the purchase of materials and supplies, development of new products, and hiring of additional employees.

•        The business of our PRC operating entities is substantially dependent upon their key R&D personnel who possess skills that are valuable in this industry, and our PRC operating entities may have to actively compete for their services.

•        Environmental regulations impose substantial costs and limitations on our PRC operating entities’ operations.

Risks Related to Our Corporate Structure.    See “Risk Factors — Risks Related to Our Corporate Structure” on page 33 of the prospectus.

We are also subject to risks and uncertainties related to our corporate structure, including, but not limited to, the following:

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•        We rely on Contractual Arrangements with the VIE and the shareholders of the VIE for our business operations, which may not be as effective as direct ownership in providing operational control.

•        Any failure by our consolidated VIE or their shareholders to perform their obligations under our Contractual Arrangements with them would have a material adverse effect on our business.

•        Contractual arrangements in relation to our consolidated VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC consolidated VIE owe additional taxes, which could negatively affect our financial condition and the value of your investment.

•        We may lose the ability to use and enjoy assets held by our consolidated VIE that are material to the operation of our business if the entities go bankrupt or become subject to a dissolution or liquidation proceeding.

Risks Related to Doing Business in China.    See “Risk Factors — Risks Related to Doing Business in China” on page 36 of the prospectus.

Our WFOE and PRC operating entities are based in China, and our PRC operating entities have all of their operations in China, and therefore, we face risks and uncertainties related to doing business in China in general, including, but not limited to, the following:

•        China’s economic, political and social conditions, as well as changes in any government policies, laws and regulations may be quick with little advance notice and could have a material adverse effect on our PRC operating entities’ business and the value of our Ordinary Shares.

•        Uncertainties with respect to the PRC legal system could have a material adverse effect on us.

•        Our Ordinary Shares may be prohibited to trade on a national exchange under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021.

•        The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

•        PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.

•        Because we are a Cayman Islands corporation and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain. It may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China.

•        The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.

•        In light of recent events indicating greater oversight by the Cyberspace Administration of China over data security, particularly for companies seeking to list on a foreign exchange, though such oversight is not applicable to us, we may be subject to a variety of PRC laws and other obligations regarding data protection and any other rules, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on the Nasdaq Capital Market, financial condition, results of operations, and the offering.

•        PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute profits to us, or otherwise materially and adversely affect us.

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•        You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China against us or our management named in the prospectus based on Hong Kong or other foreign laws, and the ability of U.S. authorities to bring actions in China may also be limited.

Risks Related to Our Public Offering and Ownership of Our Ordinary Shares.    See “Risk Factors — Risks Related to Our Public Offering and Ownership of Our Ordinary Shares” on page 51 of the prospectus.

In addition to the risks described above, we are subject to general risks and uncertainties related to our Ordinary Shares and this offering, including, but not limited to, the following:

•        We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

•        We have broad discretion in the use of the net proceeds from our public offering and may not use them effectively.

•        We do not intend to pay dividends for the foreseeable future.

•        You will experience immediate and substantial dilution.

Corporate Information

Our principal executive office is located at Beisanli Street, Economic Development Zone, Changle County, Weifang, Shandong, China 262400. Our telephone number is +86 0536-2185222. Our website is https://www.hlyxgg.com. The information on our website is not part of this prospectus.

Our Corporate History

We are a holding company incorporated on February 9, 2021, under the laws of the Cayman Islands, or Hongli Cayman. We have no substantive operations other than holding all of the issued and outstanding shares of Hongli Hong Kong Limited, or Hongli HK, which was established in Hong Kong on March 5, 2021. Hongli HK is also a holding company holding all of the outstanding equity of Shandong Xiangfeng Heavy Industry Co., Ltd., or Hongli WFOE, which was established on April 8, 2021 under the laws of the PRC.

We conduct our business through the VIE, Shandong Hongli Special Section Tube Co., Ltd., or Hongli Shandong, a PRC company, and through its wholly owned subsidiaries, Beijing Haozhen Heavy Industry Technology Co., Ltd., or Beijing Haozhen, a PRC company and Shandong Maituo Heavy Industry Co., Ltd., or Maitou Shandong, a PRC company; and its 70% owned subsidiary Shandong Haozhen Heavy Industry Technology Co., Ltd., or Haozhen Shandong, a PRC company. The VIE commenced our operations under the name Shandong Changle Hongli Steel Tube Co., Ltd. to provide industrial pipes and tubes products. Hongli Shandong was incorporated on September 13, 1999 by Ronglan Sun and Li Liu, who originally held 40% and 60% equity interests in Hongli Shandong, respectively.

On June 20, 2001, Hongli Shandong changed its name to Changle Hongli Steel Tube Co., Ltd.

On March 28, 2005, Hongli Shandong increased its registered capital to RMB 4.8 million, or approximately $0.58 million. Yuanqing Liu, Ronglan Sun, and Li Liu contributed a 40%, 30%, 30% equity interest, respectively. Hongli Shandong changed its name to Shandong Changle Hongli Steel Tube Co., Ltd.

On November 3, 2010, Hongli Shandong increased its registered capital to RMB 5 million, or approximately $0.61 million. Yuanqing Liu, Ronglan Sun, and Jie Liu contributed a 40%, 30%, 30% equity interest, respectively.

On October 28, 2010, Hongli Shandong changed its name to Shandong Hongli Special Section Tube Co., Ltd.

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On May 23, 2019, Hongli Shandong established its wholly subsidiary Maituo Shandong. Maituo Shandong engages in production of special-shaped steel pipe, construction machinery processing; mining machinery and agricultural machinery steel, stainless steel and corrosion-resistant alloy, automotive parts steel production, sales; CRF technology research and development and technical services; goods import and export (for projects subject to approval according to law, business activities may be carried out only after approval by relevant departments).

On September 18, 2020, Hongli Shandong and Shengda Technology Co. Ltd, a South Korean company, established Haozhen Shandong. Hongli Shandong owns a 70% equity interest in Haozhen Shandong. Haozhen Shandong engages in metal chain and other metal products manufacturing; metal chain and other metal products sales; metal structure manufacturing; metal structure dales; general parts manufacturing; high-quality special steel materials sales; steel calendering processing (except for items subject to approval according to law, and operating activities independently according to law with business license) permitted items: goods import and export (for items subject to approval according to law, business activities may be carried out only after approval by relevant departments, and the specific business items shall be subject to the approval result).

On February 9, 2021, Hongli Cayman was incorporated in the Cayman Islands. Hongli Cayman issued Ordinary Shares at $0.0001 par value to Hongli Development Limited, or Hongli Development, a British Virgin Islands company, owned by Yuanqing Liu, Jie Liu, and Ronglan Sun, three founders of the Company, and issued Ordinary Shares at $0.0001 par value to Hongli Technology Limited, or Hongli Technology, a British Virgin Islands company, 100% owned by Haining Wang. Hongli Cayman and Hongli HK were established as the holding companies of Hongli WFOE.

We were advised by our PRC counsel that our holding company, its subsidiaries, and the VIE, Hongli Shandong and its subsidiaries, are not required to obtain permission from PRC authorities to list on the U.S. exchange markets, because our PRC operating entities fall outside the sectors subject to key restrictions by the PRC government.

Controlled Company

Prior to the completion of this Offering, and as long as our officers and directors, either individually or in the aggregate, own at least 50% of the voting power of our Company, we are a “controlled company” as defined under Nasdaq Marketplace Rules.

For so as we are a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including:

•        an exemption from the rule that a majority of our board of directors must be independent directors;

•        an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and

•        an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.

As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

Although we do not intend to rely on the “controlled company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. If we elect to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. (See “Risk Factors — Risks Related to Our Corporate Structure — As a “controlled company” under the rules of the Nasdaq Capital Market, we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders.”)

Emerging Growth Company Status

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

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•        being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Securities and Exchange Commission (“SEC”) filings;

•        not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

•        reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements; and

•        exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended. However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.00 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards.

Foreign Private Issuer Status

We are incorporated in the Cayman Islands, and more than 50 percent of our outstanding voting securities are not directly or indirectly held by residents of the United States. Therefore, we are a “foreign private issuer,” as defined in Rule 405 under the Securities Act and Rule 3b-4(c) under the Exchange Act. As a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.

In addition, as a holding company with no material operations, our operations are conducted in China by our subsidiaries and through the Contractual Arrangements, with Hongli Shandong and its subsidiaries. Furthermore, our Ordinary Shares may be prohibited to trade on a national exchange under the Holding Foreign Companies Accountable Act (“HFCA Act”) if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021. Our auditor is currently subject to PCAOB inspections and PCAOB is able to inspect our auditor. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if signed into law, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years. On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China, and (2) Hong Kong. Our auditor, RBSM LLP, headquartered in New York, NY, is an independent registered public accounting firm with the PCAOB and has been inspected by the PCAOB on a regular basis. The PCAOB currently has access to inspect the working papers of our auditor. Notwithstanding the foregoing, if the PCAOB is not able to fully conduct inspections of our auditor’s work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCA Act. See “Risk Factors — Our Ordinary Shares may be prohibited from being traded on a national exchange under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021. The delisting of our ordinary shares, or the threat of their being delisted, may materially and adversely affect the value of your investment” for more information.

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THE OFFERING

The Issuer

 

Hongli Group Inc., a Cayman Islands holding company

Ordinary Shares offered by us

 

[•] Ordinary Shares

Price per Ordinary Share

 

We currently estimate that the initial public offering price will be in the range of $[•] to $[•] per Ordinary Share.

Ordinary Shares outstanding prior to completion of this offering

 


[•] Ordinary Shares

Ordinary Shares outstanding immediately after this offering

 


[•] Ordinary Shares assuming no exercise of the Underwriter’s over-allotment option [•] Ordinary Shares assuming full exercise of the Underwriter’s over-allotment option

Listing

 

We will apply to have our Ordinary Shares listed on the Nasdaq Capital Market.

Ticker symbol

 

“HLP”

Transfer Agent

 

TranShare Corporation

Use of proceeds

 

We intend to use the proceeds from this offering to [repay the bank loan] in connection with our Expansion Plan or other usage as determined by our board, purchase new production facilities under the Expansion Plan, conduct product research and development, and for working capital. See “Use of Proceeds” on page 58 for more information.

Lock-up

 

We and all of our directors and officers and certain shareholders have agreed with the Underwriter, subject to certain exceptions, not to sell, transfer, or dispose of, directly or indirectly, any of our Ordinary Shares or securities convertible into or exercisable or exchangeable for our Ordinary Shares for a period of 180 days after the effective date of this registration statement. See “Shares Eligible for Future Sale” and “Underwriting” for more information.

Risk factors

 

The Ordinary Shares offered hereby involve a high degree of risk. You should read “Risk Factors,” beginning on page 24 for a discussion of factors to consider before deciding to invest in our Ordinary Shares.

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Summary Consolidated Financial Data

The following selected historical statements of operations for the years ended December 31, 2020 and 2019, and balance sheet data as of December 31, 2020 and 2019, have been derived from our audited consolidated financial statements for those periods included elsewhere in this prospectus. The selected historical statements of operations for the six months ended June 30, 2021 and 2020, and the balance sheet data as of June 30, 2021, have been derived from the unaudited consolidated condensed financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read this data together with our consolidated financial statements and related notes appearing elsewhere in this prospectus as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in the prospectus.

Selected Statements of Operations Information:

 

For the
Fiscal Year
Ended December 31,
2020

 

For the
Fiscal Year
Ended
December 31,
2019

Revenue

 

$

11,158,820

 

$

9,293,364

Gross profit

 

$

4,452,517

 

$

3,991,919

Operating expenses

 

$

1,983,013

 

$

1,111,197

Income from operations

 

$

2,469,504

 

$

2,880,722

Provision for Income taxes

 

$

239,496

 

$

588,555

Net income

 

$

2,423,941

 

$

2,079,406

 

For the
Six Months
Ended
June 30,
2021

 

For the
Six Months
Ended
June 30,
2020

Revenue

 

$

10,261,131

 

$

4,852,337

Gross profit

 

$

3,497,154

 

$

1,943,890

Operating expenses

 

$

1,508,182

 

$

764,609

Income from operations

 

$

1,988,972

 

$

1,179,281

Provision for Income taxes

 

$

305,381

 

$

158,448

Net income

 

$

1,458,543

 

$

850,895

Selected Balance Sheet Information:

 

As of
December 31,
2020

 

As of
December 31,
2019

Current assets

 

$

8,623,020

 

$

5,196,194

Total assets

 

$

13,568,456

 

$

9,911,443

Current liabilities

 

$

5,529,076

 

$

4,651,876

Total liabilities

 

$

5,529,076

 

$

4,763,998

Total shareholders’ equity

 

$

8,039,380

 

$

5,147,445

 

As of
June 30,
2021

 

As of
December 31,
2020

Current assets

 

$

12,023,116

 

$

8,623,020

Total assets

 

$

17,588,492

 

$

13,568,456

Current liabilities

 

$

7,644,414

 

$

5,529,076

Total liabilities

 

$

7,988,333

 

$

5,529,076

Total shareholders’ equity

 

$

9,600,159

 

$

8,039,380

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The following tables present selected condensed consolidated statements of income and comprehensive income, and cash flows for the six months ended June 30, 2021, for the years ended December 31, 2020 and 2019, and the selected condensed consolidated balance sheets as of June 30, 2021, December 31, 2020 and 2019, which showing financial information for parent company, Hongli Cayman, its subsidiaries (Hongli HK and Hongli WFOE), VIE and its subsidiaries (Hongli Shandong, Haozhen Beijing, Maituo Shandong and Haozhen Shandong), eliminating entries and consolidated information.

Selected Condensed Consolidated Statements of Income and Comprehensive Income

 

For the Six Months Ended June 30, 2021

   

Hongli
Cayman

 

Subsidiaries

 

VIE and Its
Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

 

$

 

$

10,261,131

 

$

 

 

$

10,261,131

Income from operations

 

$

 

$

 

$

1,988,972

 

$

 

 

$

1,988,972

Share of income from subsidiaries

 

$

1,458,543

 

$

 

$

 

$

(1,458,543

)

 

$

Share of income from VIE and its subsidiaries

 

$

 

$

1,458,543

 

$

 

$

(1,458,543

)

 

$

Net income

 

$

1,458,543

 

$

1,458,543

 

$

1,458,543

 

$

(2,917,086

)

 

$

1,458,543

Comprehensive income

 

$

1,560,779

 

$

1,560,779

 

$

1,560,779

 

$

(3,121,558

)

 

$

1,560,779

 

For the Year Ended December 31, 2020

   

Hongli
Cayman

 

Subsidiaries

 

VIE and Its
Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

 

$

 

$

11,158,820

 

$

 

 

$

11,158,820

Income from operations

 

$

 

$

 

$

2,469,504

 

$

 

 

$

2,469,504

Share of income from subsidiaries

 

$

2,423,941

 

$

 

$

 

$

(2,423,941

)

 

$

Share of income from VIE and its subsidiaries

 

$

 

$

2,423,941

 

$

 

$

(2,423,941

)

 

$

Net income

 

$

2,423,941

 

$

2,423,941

 

$

2,423,941

 

$

(4,847,882

)

 

$

2,423,941

Comprehensive income

 

$

2,891,935

 

$

2,891,935

 

$

2,891,935

 

$

(5,783,870

)

 

$

2,891,935

 

For the Year Ended December 31, 2019

   

Hongli
Cayman

 

Subsidiaries

 

VIE and Its
Subsidiaries

 

Eliminations

 

Consolidated

Revenues

 

$

 

$

 

$

9,293,364

 

$

 

 

$

9,293,364

Income from operations

 

$

 

$

 

$

2,880,722

 

$

 

 

$

2,880,722

Share of income from subsidiaries

 

$

2,079,406

 

$

 

$

 

$

(2,079,406

)

 

$

Share of income from VIE and its subsidiaries

 

$

 

$

2,079,406

 

$

 

$

(2,079,406

)

 

$

Net income

 

$

2,079,406

 

$

2,079,406

 

$

2,079,406

 

$

(4,158,812

)

 

$

2,079,406

Comprehensive income

 

$

2,026,923

 

$

2,026,923

 

$

2,026,923

 

$

(4,053,846

)

 

$

2,026,923

21

Table of Contents

Selected Condensed Consolidated Balance Sheets

 

As of June 30, 2021

   

Hongli Cayman

 

Subsidiaries

 

VIE and Its Subsidiaries

 

Eliminations

 

Consolidated

Cash and cash equivalent

 

$

 

$

 

$

436,718

 

 

 

 

$

436,718

Total current assets

 

$

 

$

 

$

12,023,116

 

$

 

 

$

12,023,116

Investment in subsidiaries

 

$

9,600,159

 

$

 

$

 

$

(9,600,159

)

 

$

Equity in the VIE and its subsidiaries through the VIE Agreements

 

$

 

$

9,600,159

 

$

 

$

(9,600,159

)

 

$

Total non-current assets

 

$

9,600,159

 

$

9,600,159

 

$

5,565,376

 

$

(19,200,318

)

 

$

5,565,376

Total assets

 

$

9,600,159

 

$

9,600,159

 

$

17,588,492

 

$

(19,200,318

)

 

$

17,588,492

Total liabilities

 

$

 

$

 

$

7,988,333

 

$

 

 

$

7,988,333

Total shareholders’ equity

 

$

9,600,159

 

$

9,600,159

 

$

9,600,159

 

$

(19,200,318

)

 

$

9,600,159

Total liabilities and
shareholders’ equity

 

$

9,600,159

 

$

9,600,159

 

$

17,588,492

 

$

(19,200,318

)

 

$

17,588,492

 

As of December 31, 2020

   

Hongli Cayman

 

Subsidiaries

 

VIE and Its Subsidiaries

 

Eliminations

 

Consolidated

Cash and cash equivalent

 

$

 

 

 

$

1,434,109

 

 

 

 

$

1,434,109

Total current assets

 

$

 

$

 

$

8,623,020

 

$

 

 

$

8,623,020

Investment in subsidiaries

 

$

8,039,380

 

$

 

$

 

$

(8,039,380

)

 

$

Equity in the VIE and its subsidiaries through the VIE Agreements

 

$

 

$

8,039,380

 

$

 

$

(8,039,380

)

 

$

Total non-current assets

 

$

8,039,380

 

$

8,039,380

 

$

4,945,436

 

$

(16,078,760

)

 

$

4,945,436

Total assets

 

$

8,039,380

 

$

8,039,380

 

$

13,568,456

 

$

(16,078,760

)

 

$

13,568,456

Total liabilities

 

$

 

$

 

$

5,529,076

 

$

 

 

$

5,529,076

Total shareholders’ equity

 

$

8,039,380

 

$

8,039,380

 

$

8,039,380

 

$

(16,078,760

)

 

$

8,039,380

Total liabilities and
shareholders’ equity

 

$

8,039,380

 

$

8,039,380

 

$

13,568,456

 

$

(16,078,760

)

 

$

13,568,456

 

As of December 31, 2019

   

Hongli Cayman

 

Subsidiaries

 

VIE and Its Subsidiaries

 

Eliminations

 

Consolidated

Cash and cash equivalent

 

$

 

$

 

$

280,844

 

$

 

 

$

280,844

Total current assets

 

$

 

$

 

$

5,196,194

 

$

 

 

$

5,196,194

Investment in subsidiaries

 

$

5,147,445

 

$

 

$

 

$

(5,147,445

)

 

$

Equity in the VIE and its subsidiaries through the VIE Agreements

 

$

 

$

5,147,445

 

$

 

$

(5,147,445

)

 

$

Total non-current assets

 

$

5,147,445

 

$

5,147,445

 

$

4,715,249

 

$

(10,294,890

)

 

$

4,715,249

Total assets

 

$

5,147,445

 

$

5,147,445

 

$

9,911,443

 

$

(10,294,890

)

 

$

9,911,443

Total liabilities

 

$

 

$

 

$

4,763,998

 

$

 

 

$

4,763,998

Total shareholders’ equity

 

$

5,147,445