{"url_path":"/sec/hlp/10-k/2026/item-19","section_key":"item-19","section_title":"Item 19 EXHIBITS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1855557/0001213900-26-055737-index.html","accession_number":"0001213900-26-055737","cik":"0001855557","ticker":"HLP","issuer_name":"Hongli Group Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1855557/0001213900-26-055737-index.html","primary_entity_key":"0001855557","primary_entity_name":"Hongli Group Inc."},"word_count":18794,"has_tables":true,"body_markdown":"**Item 19. EXHIBITS**\n\n \n\nEXHIBIT INDEX\n\n \n\n**Exhibit No.**\n \n**Description**\n\n1.1\n \n[First\nAmended and Restated Memorandum and Articles of Association (Previously filed; incorporated by reference to Exhibit 4.1 filed with\nthe Registration Statement on Form S-8 (File No. 333-278321), filed with the Securities and Exchange Commission on March 28, 2024)](http://www.sec.gov/Archives/edgar/data/1855557/000121390024027221/ea190549ex4-1_hongli.htm)\n\n2.1*\n \n[Description of Securities](ea028980001ex2-1.htm)\n\n2.2\n \n[Specimen\nCertificate for Ordinary Shares (Previously filed; incorporated by reference to Exhibit 4.1 filed with the Registration Statement\non Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex4-1_hongli.htm)\n\n3.1\n \n[Voting\nagreement between Yuanqing Liu and Jie Liu dated July 7, 2022 (Previously filed; incorporated by reference to Exhibit 3.1 filed with\nthe Annual Report on Form 20-F (File No. 001-41671), filed with the Securities and Exchange Commission on April 30, 2024)](http://www.sec.gov/Archives/edgar/data/1855557/000121390024037946/ea020471001ex3-1_hongli.htm)\n\n3.2\n \n[Voting\nagreement between Ronglan Sun and Jie Liu dated July 7, 2022 (Previously filed; incorporated by reference to Exhibit 3.2 filed with\nthe Annual Report on Form 20-F (File No. 001-41671), filed with the Securities and Exchange Commission on April 30, 2024)](http://www.sec.gov/Archives/edgar/data/1855557/000121390024037946/ea020471001ex3-2_hongli.htm)\n\n4.1\n \n[Form\nof Employment Agreement by and between executive officers and the Registrant (Previously filed; incorporated by reference to Exhibit\n10.1 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and\nExchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-1_hongli.htm)\n\n4.2\n \n[Form\nof Indemnification Agreement with the Registrant’s directors and officers (Previously filed; incorporated by reference to Exhibit\n10.2 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and\nExchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-2_hongli.htm)\n\n4.3\n \n[Exclusive\nBusiness and Cooperation and Management Agreement between Hongli WFOE and Hongli Shandong, dated as of April 12, 2021 (Previously\nfiled; incorporated by reference to Exhibit 10.3 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended,\ninitially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-3_hongli.htm)\n\n4.4\n \n[Exclusive Option Agreement among Hongli HK, Hongli Shandong, and the\nshareholders of Hongli Shandong, dated as of April 12, 2021 (Previously filed; incorporated by reference to Exhibit 10.4 filed with the\nRegistration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission on December\n30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-4_hongli.htm)\n\n4.5\n \n[Equity\nInterest Pledge Agreement among Hongli WFOE, Hongli Shandong, and the shareholders of Hongli Shandong, dated as of April 12, 2021\n(Previously filed; incorporated by reference to Exhibit 10.5 filed with the Registration Statement on Form F-1 (File No. 333-261945),\nas amended, initially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-5_hongli.htm)\n\n4.6\n \n[Power\nof Attorneys of the shareholders of Hongli Shandong, dated as of April 12, 2021 (Previously filed; incorporated by reference to Exhibit\n10.6 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and\nExchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-6_hongli.htm)\n\n4.7\n \n[Spousal\nConsent Letters granted by the spouse of each shareholder of Hongli Shandong, dated as of April 12, 2021 (Previously filed; incorporated\nby reference to Exhibit 10.7 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed\nwith the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-7_hongli.htm)\n\n4.8\n \n[Form\nof Director Offer Letter between Hongli Group Inc. the directors (Previously filed; incorporated by reference to Exhibit 10.8 filed\nwith the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission\non December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-8_hongli.htm)\n\n4.9\n \n[English\nTranslation of Sales Agreement between Hongli Shandong and Weichai LOVOL Heavy Industry Co. Ltd., dated as of January 1, 2020 (Previously\nfiled; incorporated by reference to Exhibit 10.11 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended,\ninitially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-11_hongli.htm)\n\n \n\n120\n\n \n\n4.10\n \n[Supply Agreement between Hongli Shandong and SUNGJIN TECH CO., LTD, dated as of July 23, 2014 (Previously filed; incorporated by reference to Exhibit 10.12 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-12_hongli.htm)\n\n4.11\n \n[2022 Share Compensation Plan (Previously filed; incorporated by reference to Exhibit 10.14 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex10-14_hongli.htm)\n\n4.12\n \n[English Translation of Assets Transfer Agreements between Hongli Shandong and Yingxuan, dated as of January 1, 2021 (Previously filed; incorporated by reference to Exhibit 10.15 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390022039647/ff12022a5ex10-15_hongligroup.htm)\n\n4.13\n \n[English Translation of Supplementary Agreement between Hongli Shandong and Yingxuan, dated as of May 5, 2023 (Previously filed; incorporated by reference to Exhibit 4.17 filed with the Registration Statement on Form 20-F (File No. 001-41671), filed with the Securities and Exchange Commission on May 16, 2023)](http://www.sec.gov/Archives/edgar/data/1855557/000121390023040060/f20f2022ex4-17_hongli.htm)\n\n4.14\n \n[Hongli 2024 Equity Incentive Plan (Previously filed; incorporated by reference to Exhibit 10.1 filed with the Registration Statement on Form S-8 (File No. 333-278321), as amended, initially filed with the Securities and Exchange Commission on March 28, 2024)](http://www.sec.gov/Archives/edgar/data/1855557/000121390024027221/ea190549ex10-1_hongli.htm)\n\n4.15\n \n[Form of Securities Purchase Agreement by and between the Company and the Investor (Previously filed; incorporated by reference to Exhibit 10.1 filed with the current report on Form 6-K, filed with the Securities and Exchange Commission on April 16, 2026)](https://www.sec.gov/Archives/edgar/data/1855557/000121390026044691/ea028654201ex10-1.htm)\n\n4.16*\n \n[Agreement for the Transfer of Entrusted Investment Funds and Change of Entrustment Relationship by and among Shanghai Zhuofan Industrial\nCo., Ltd., Jinan Langchi Heavy Industry Co., Ltd, and Shandong Xiangfeng Heavy Industry Co., Ltd., dated as of December 31, 2025](ea028980001ex4-16.htm)\n\n4.17*\n \n[Project Investment Entrustment Service Agreement by and among Shanghai\nZhuofan Industrial Co., Ltd., SBI China Mega Asset Management Limited, and Shandong Xiangfeng Heavy Industry Co., Ltd., dated as of December\n31, 2025](ea028980001ex4-17.htm)\n\n8.1\n \n[List of Subsidiaries of the Registrant (Previously filed; incorporated by reference to Exhibit 21.1 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex21-1_hongli.htm)\n\n11.1\n \n[Code of Business Conduct and Ethics of the Registrant (Previously filed; incorporated by reference to Exhibit 99.1 filed with the Registration Statement on Form F-1 (File No. 333-261945), as amended, initially filed with the Securities and Exchange Commission on December 30, 2021)](http://www.sec.gov/Archives/edgar/data/1855557/000121390021068083/ff12021ex99-1_hongli.htm)\n\n11.2\n \n[Insider Trading Policy (Previously filed; incorporated by reference to Exhibit 11.2 filed with the Registration Statement on Form 20-F (File No. 001-41671), filed with the Securities and Exchange Commission on May 16, 2023)](http://www.sec.gov/Archives/edgar/data/1855557/000121390023040060/f20f2022ex11-2_hongli.htm)\n\n12.1*\n \n[Certification of Chief Executive Officer, pursuant to Rule 13a-14(a)\nunder the Securities Exchange Act of 1934](ea028980001ex12-1.htm)\n\n12.2*\n \n[Certification of Chief Financial Officer, pursuant to Rule 13a-14(a)\nunder the Securities Exchange Act of 1934](ea028980001ex12-2.htm)\n\n13.1**\n \n[Certifications of Chief Executive Officer, pursuant to 18 U.S.C. Section\n1350](ea028980001ex13-1.htm)\n\n13.2**\n \n[Certifications of Chief Financial Officer, pursuant to 18 U.S.C. Section\n1350](ea028980001ex13-2.htm)\n\n15.1*\n \n[Consent of Ogier (Cayman) LLP](ea028980001ex15-1.htm)\n\n15.2*\n \n[Consent of Beijing Dacheng Law Offices, LLP (Shanghai)](ea028980001ex15-2.htm)\n\n15.3*\n \n[Consent of HTL International, LLC, an independent registered public accounting firm](ea028980001ex15-3.htm)\n\n16.1\n \n[Letter, dated January 9, 2026, from RBSM LLP addressed to the U.S. Securities and Exchange Commission (Previously filed; incorporated by reference to Exhibit 16.1 filed with the current report on Form 6-K (File No. 001-41671), filed with the Securities and Exchange Commission on January 12, 2026)](https://www.sec.gov/Archives/edgar/data/1855557/000121390026003486/ea027244601ex16-1_hongli.htm)\n\n97.1\n \n[Compensation Recovery Policy of the Company (Previously filed; incorporated by reference to Exhibit 97.1 filed with the Annual Report on Form 20-F (File No. 001-41671), filed with the Securities and Exchange Commission on April 30, 2024)](http://www.sec.gov/Archives/edgar/data/1855557/000121390024037946/ea020471001ex97-1_hongli.htm)\n\n101.INS**\n \nInline XBRL Instance Document-this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document\n\n101.SCH**\n \nInline XBRL Taxonomy Extension Scheme Document\n\n101.CAL**\n \nInline XBRL Taxonomy Extension Calculation Linkbase Document\n\n101.DEF**\n \nInline XBRL Taxonomy Extension Definition Linkbase Document\n\n101.LAB**\n \nInline XBRL Taxonomy Extension Label Linkbase Document\n\n101.PRE**\n \nInline XBRL Taxonomy Extension Presentation Linkbase Document\n\n104\n \nCover Page Interactive Data File (embedded within the Inline XBRL document)\n\n \n\n*\n \nFiled herewith.\n\n \n\n**\n \nFurnished herewith.\n\n \n\n121\n\n \n\nSIGNATURES\n\n \n\nThe registrant hereby certifies that it meets\nall of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report\non its behalf.\n\n \n\n \n**Hongli Group Inc.**\n\n \n \n \n\n \nBy:\n*/s/ Jie Liu*\n\n \nName:\nJie Liu\n\n \nTitle:\n**Chief Executive Officer**\n\n \n \n**(Principal Executive Officer)**\n\n \n \n \n\n \nBy:\n*/s/ Xiangmei Zeng*\n\n \nName:\nXiangmei Zeng\n\n \nTitle:\n**Chief Financial Officer**\n\n \n \n \n\n \nDated:\nMay 13, 2026\n\n \n\n122\n\n \n\n**HONGLI GROUP INC.**\n\n**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**\n\n  \n\n    **Page**\n\n     \n\n[Report of Independent Registered Public Accounting Firm (PCAOB ID: 7000)](#f_001)   F-2\n\n     \n\n[Consolidated Balance Sheets as of December 31, 2025 and 2024](#f_003)   F-3\n\n     \n\n[Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2025, 2024 and 2023](#f_004)   F-4\n\n     \n\n[Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2025, 2024 and 2023](#f_005)   F-5\n\n     \n\n[Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023](#f_006)   F-6\n\n     \n\n[Notes to Consolidated Financial Statements](#f_007)   F-7 – F-34\n\n \n\nF-1\n\n \n\n \n\n**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING\nFIRM**\n\n** **\n\nTo the Board of Directors and\n\nShareholders of Hongli Group Inc.\n\n \n\n**Opinion on the Consolidated Financial Statements**\n\n** **\n\nWe have audited the accompanying consolidated balance sheets of Hongli\nGroup Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements\nof operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the\nthree-year period ended December 31, 2025 and the related notes (collectively referred to as the “consolidated financial\nstatements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position\nof the Company as of December 31, 2025 and 2024 and the results of its operations and its cash flows for each of the years in\nthe three-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States\nof America (“U.S. GAAP”).\n\n \n\n**Basis for Opinion**\n\n** **\n\nThese consolidated financial statements are the responsibility of the\nCompany’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based\non our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)\nand are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable\nrules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audits in accordance with the\nstandards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether\nthe consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to\nhave, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required\nto obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness\nof the Company’s internal control over financial reporting. Accordingly, we express no such opinion.\n\n \n\nOur audits included performing procedures to\nassess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures\nthat respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the\nconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made\nby management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide\na reasonable basis for our opinion.\n\n \n\n/s/ HTL International, LLC\n\n \n\nWe have served as the Company’s auditor since 2026.\n\n \n\nHouston, Texas\n\nMay 13, 2026\n\n \n\nF-2\n\n \n\n \n\n**HONGLI GROUP INC.**\n\n**CONSOLIDATED BALANCE SHEETS**\n\n**(Amounts in U.S. Dollars (“US$”),\nexcept for number of shares and per share data)**\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nASSETS \n   \n  \n\nCurrent assets \n   \n  \n\nCash and cash equivalent \n 1,811,149  \n 909,716 \n\nRestricted cash \n 74,018  \n 15,070 \n\nAccounts receivable, net \n 9,273,016  \n 5,809,374 \n\nNotes receivable \n 1,041,185  \n 522,331 \n\nInventories, net \n 2,463,460  \n 2,674,001 \n\nDue from related parties – officers \n 356,576  \n \n-\n \n\nPrepayments and other current assets \n **1,064,656**  \n **2,004,889** \n\n**Total current assets**** **\n** ****16,084,060**** **** **\n** ****11,935,381**** **\n\n  \n    \n   \n\nNon-current assets \n    \n   \n\nProperty, plant and equipment, net \n 12,292,214  \n 10,385,742 \n\nPrepayments for purchase of Yingxuan Assets \n 4,951,021  \n 5,339,093 \n\nIntangible assets, net \n 4,498,986  \n 4,432,403 \n\nDeposit for investment \n 34,316,583  \n 32,877,029 \n\nDeferred tax assets, net \n 47,781  \n 40,773 \n\nTotal non-current assets \n **56,106,585**  \n **53,075,040** \n\nTOTAL ASSETS \n **72,190,645**  \n **65,010,421** \n\n  \n    \n   \n\nLIABILITIES AND SHAREHOLDERS’ EQUITY \n    \n   \n\nCurrent liabilities \n    \n   \n\nShort-term loans \n 11,515,024  \n 6,079,252 \n\nAccounts payable \n 1,876,141  \n 1,380,201 \n\nDue to related parties - officers \n 4,207  \n 21,247 \n\nIncome tax payable \n 185,562  \n 36,505 \n\nAccrued expenses and other payables \n 777,588  \n 694,712 \n\nTotal current liabilities \n **14,358,522**  \n **8,211,917** \n\n  \n    \n   \n\nNon-current liabilities \n    \n   \n\nLong-term loans \n \n-\n  \n 3,305,209 \n\nTotal non-current liabilities \n \n-\n  \n 3,305,209 \n\nTotal liabilities \n **14,358,522**  \n **11,517,126** \n\n  \n    \n   \n\nCOMMITMENTS AND CONTINGENCIES \n \n \n  \n \n \n \n\n  \n    \n   \n\nSHAREHOLDERS’ EQUITY: \n    \n   \n\nOrdinary shares, $0.0001 par value, 500,000,000 shares authorized, 73,438,750 and 73,438,750 shares issued and outstanding as of December 31, 2025 and 2024, respectively \n 7,344  \n 7,344 \n\nAdditional paid-in capital \n 42,998,556  \n 42,998,556 \n\nStatutory reserve \n 370,683  \n 370,683 \n\nRetained earnings \n 13,666,910  \n 11,724,070 \n\nAccumulated other comprehensive income (loss)\n \n 788,630  \n (1,607,358)\n\nTOTAL SHAREHOLDERS’ EQUITY \n **57,832,123**  \n **53,493,295** \n\nTOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY \n **72,190,645**  \n **65,010,421** \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-3\n\n \n\n \n\n**HONGLI GROUP INC.**\n\n**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE\nINCOME (LOSS)**\n\n**(Amounts in US$, except for number of shares\nand per share data)**\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nRevenues, net \n 19,600,691  \n 14,105,620  \n 15,997,954 \n\nCost of revenues \n (13,221,811) \n (9,585,873) \n (10,752,114)\n\n**Gross profit**** **\n** ****6,378,880**** **** **\n** ****4,519,747**** **** **\n** ****5,245,840**** **\n\n  \n    \n    \n   \n\nOperating expenses: \n    \n    \n   \n\nSales and marketing expenses \n (935,432) \n (669,542) \n (631,359)\n\nGeneral and administrative expenses \n (2,015,663) \n (4,615,189) \n (2,631,085)\n\nResearch and development expenses \n (994,500) \n (818,312) \n (962,961)\n\n**Total operating expenses**** **\n** ****(3,945,595****)**** **\n** ****(6,103,043****)**** **\n** ****(4,225,405****)**\n\n**Income from operations**** **\n** ****2,433,285**** **** **\n** ****(1,583,296****)**** **\n** ****1,020,435**** **\n\n  \n    \n    \n   \n\nOther income and (expense): \n    \n    \n   \n\nInterest and financing expenses, net \n (469,710) \n (466,386) \n (631,558)\n\nOther income \n 215,881  \n 185,299  \n 591,440 \n\nOther expenses \n (7,932) \n (8,860) \n (47,855)\n\n**Total other expenses, net**** **\n** ****(261,761****)**** **\n** ****(289,947****)**** **\n** ****(87,973****)**\n\n**Income (loss) before income taxes**** **\n** ****2,171,524**** **** **\n** ****(1,873,243****)**** **\n** ****932,462**** **\n\n  \n    \n    \n   \n\nIncome tax expenses \n (228,684) \n (8,392) \n (67,740)\n\n**Net income (loss)**** **\n** ****1,942,840**** **** **\n** ****(1,881,635****)**** **\n** ****864,722**** **\n\n  \n    \n    \n   \n\nOther comprehensive income (loss): \n    \n    \n   \n\nForeign currency translation gain (loss) \n 2,395,988  \n (700,623) \n (659,161)\n\n**Total comprehensive income (loss)**** **\n** ****4,338,828**** **** **\n** ****(2,582,258****)**** **\n** ****205,561**** **\n\n  \n    \n    \n   \n\nWeighted average common shares outstanding: \n    \n    \n   \n\nBasic and diluted \n 73,438,750  \n 17,451,865  \n 11,752,180 \n\n  \n    \n    \n   \n\nEarnings (loss) per share: \n    \n    \n   \n\nBasic and diluted \n 0.03  \n (0.11) \n 0.07 \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-4\n\n \n\n \n\n**HONGLI GROUP INC.**\n\n**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’\nEQUITY**\n\n**(Amounts in US$, except for number of shares and per share data)**\n\n \n\n  \nOrdinary Shares  \nAdditional  \n   \n   \nAccumulated other  \nTotal \n\n  \nNumbers of  \n   \npaid-in  \nStatutory  \nRetained  \ncomprehensive  \nshareholders’ \n\n  \nShares  \nAmount  \ncapital  \nreserve  \nearnings  \nincome (loss)  \nequity \n\n  \n   \nUS$  \nUS$  \nUS$  \nUS$  \nUS$  \nUS$ \n\n**Balance as of January 1, 2023**** **\n** ****10,000,000**** **** **\n** ****1,000**** **** **\n** ****609,601**** **** **\n** ****370,683**** **** **\n** ****12,740,983**** **** **\n** ****(247,574****)**** **\n** ****13,474,693**** **\n\n  \n    \n    \n    \n    \n    \n    \n   \n\nNet income \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n 864,722  \n \n-\n  \n 864,722 \n\nInitial public offering \n 2,062,500  \n 206  \n 8,249,794  \n \n-\n  \n \n-\n  \n \n-\n  \n 8,250,000 \n\nInitial public offering costs \n -  \n \n-\n  \n (1,967,388) \n \n-\n  \n \n-\n  \n \n-\n  \n (1,967,388)\n\nUnderwriter’s option exercised \n 309,375  \n 31  \n 1,237,469  \n \n-\n  \n \n-\n  \n \n-\n  \n 1,237,500 \n\nExercise costs \n -  \n \n-\n  \n (92,813) \n \n-\n  \n \n-\n  \n \n-\n  \n (92,813)\n\nSurrender of shares \n (133,125) \n (13) \n 13  \n \n-\n  \n \n-\n  \n \n-\n  \n \n-\n \n\nForeign currency translation loss \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n \n-\n  \n (659,161) \n (659,161)\n\n**Balance as of December 31,\n2023**** **\n** ****12,238,750**** **** **\n** ****1,224**** **** **\n** ****8,036,676**** **** **\n** ****370,683**** **** **\n** ****13,605,705**** **** **\n** ****(906,735****)**** **\n** ****21,107,553**** **\n\n  \n    \n    \n    \n    \n    \n    \n   \n\nNet loss \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n (1,881,635) \n \n-\n  \n (1,881,635)\n\nShare-based compensation \n 1,200,000  \n 120  \n 1,967,880  \n \n-\n  \n \n-\n  \n \n-\n  \n 1,968,000 \n\nPrivate placement \n 60,000,000  \n 6,000  \n 32,994,000  \n \n-\n  \n \n-\n  \n \n-\n  \n 33,000,000 \n\nForeign currency translation loss \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n \n-\n  \n (700,623) \n (700,623)\n\n**Balance as of December 31,\n2024**** **\n** ****73,438,750**** **** **\n** ****7,344**** **** **\n** ****42,998,556**** **** **\n** ****370,683**** **** **\n** ****11,724,070**** **** **\n** ****(1,607,358****)**** **\n** ****53,493,295**** **\n\n  \n    \n    \n    \n    \n    \n    \n   \n\nNet income \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n 1,942,840  \n \n-\n  \n 1,942,840 \n\nForeign currency translation income \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n \n-\n  \n 2,395,988  \n 2,395,988 \n\n**Balance as of December 31,\n2025**** **\n** ****73,438,750**** **** **\n** ****7,344**** **** **\n** ****42,998,556**** **** **\n** ****370,683**** **** **\n** ****13,666,910**** **** **\n** ****788,630**** **** **\n** ****57,832,123**** **\n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-5\n\n \n\n  \n\n**HONGLI GROUP INC.**\n\n**CONSOLIDATED STATEMENTS OF CASH FLOWS**\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nCASH FLOWS FROM OPERATING ACTIVITIES \n   \n   \n  \n\nNet income (loss) \n 1,942,840  \n (1,881,635) \n 864,722 \n\n  \n    \n    \n   \n\nAdjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: \n    \n    \n   \n\nDepreciation \n 687,159  \n 804,395  \n 871,445 \n\nAmortization of right-of-use assets \n \n-\n  \n 37,335  \n 73,422 \n\nAmortization of intangible assets \n 124,047  \n 101,315  \n 100,689 \n\nAllowance for current expected credit losses \n 124,517  \n 38,616  \n 52,914 \n\n(Gain) loss on disposals of property and equipment and intangible assets \n (16,835) \n 105,954  \n (339,117)\n\nShare-based compensation \n \n-\n  \n 1,968,000  \n \n-\n \n\nChange in inventory reserve \n 125,614  \n 488  \n 32,412 \n\nDeferred tax benefit \n (18,120) \n (31,223) \n (25,129)\n\nChanges in operating assets and liabilities: \n    \n    \n   \n\nAccounts receivable \n (3,246,989) \n 1,845  \n 1,155,718 \n\nNotes receivable \n (701,686) \n (385,084) \n 57,678 \n\nInventories \n 193,149  \n (394,565) \n 157,729 \n\nPrepayments and other current assets \n 978,924  \n (1,070,397) \n (134,308)\n\nOther non-current assets \n \n-\n  \n \n-\n  \n 2,118 \n\nDue from related parties \n \n-\n  \n \n-\n  \n 117,210 \n\nDue to related parties \n 53,307  \n (10,417) \n (138,951)\n\nAccounts payable \n 444,917  \n 39,274  \n (1,557,271)\n\nAccrued expenses and other payables \n 43,951  \n 261,255  \n (310,147)\n\nIncome tax payable \n 143,472  \n 810  \n (96,217)\n\nNet cash provided by (used in) operating activities \n 878,267  \n (414,034) \n 884,917 \n\n  \n    \n    \n   \n\nCASH FLOWS FROM INVESTING ACTIVITIES \n    \n    \n   \n\nPurchase of property and equipment \n (217,443) \n (32,506) \n (302,393)\n\nPurchase of intangible assets \n \n-\n  \n \n-\n  \n (561,395)\n\nPrepayments for purchase of Yingxuan Assets \n (1,099,783) \n (277,944) \n (1,776,529)\n\nProceeds from sale of property and equipment \n 41,740  \n 2,779  \n 738,607 \n\nDeposit for investment \n \n-\n  \n (33,350,376) \n \n-\n \n\nAdvance to related parties \n (410,017) \n \n-\n  \n (351,924)\n\nRepayment from related parties \n 423,930  \n 346,238  \n \n-\n \n\nNet cash used in investing activities \n (1,261,573) \n (33,311,809) \n (2,253,634)\n\n  \n    \n    \n   \n\nCASH FLOWS FROM FINANCING ACTIVITIES \n    \n    \n   \n\nPayments for financing liabilities \n \n-\n  \n (44,763) \n (235,969)\n\nPayments for finance leases \n \n-\n  \n (45,235) \n (307,637)\n\nAdvances from related parties \n \n-\n  \n 1,064,327  \n 4,566,368 \n\nRepayments to related parties \n \n-\n  \n (1,041,097) \n (5,127,251)\n\nPayments of offering costs \n \n-\n  \n \n-\n  \n (229,723)\n\nBorrowings from short-term loans \n 8,932,174  \n 7,172,270  \n 1,765,312 \n\nRepayments of short-term loans \n (7,387,826) \n (6,866,531) \n (1,883,941)\n\nBorrowings from long-term loans \n \n-\n  \n 416,916  \n 4,660,425 \n\nRepayments of long-term loans \n (288,596) \n (147,310) \n (11,199,141)\n\nProceeds from initial public offering, net of costs \n \n-\n  \n \n-\n  \n 7,228,964 \n\nProceeds from exercise of option, net of costs \n \n-\n  \n \n-\n  \n 1,144,687 \n\nProceeds from private placement \n \n-\n  \n 33,000,000  \n \n-\n \n\nNet cash provided by financing activities \n 1,255,752  \n 33,508,577  \n 382,094 \n\nEffect of exchange rate changes \n 87,935  \n 326,383  \n (311,747)\n\n  \n    \n    \n   \n\nNet increase (decrease) in cash and cash equivalents and restricted cash \n 960,381  \n 109,117  \n (1,298,370)\n\nCash and cash equivalents and restricted cash, beginning of year \n 924,786  \n 815,669  \n 2,114,039 \n\nCash and cash equivalents and restricted cash, end of year \n 1,885,167  \n 924,786  \n 815,669 \n\n  \n    \n    \n   \n\nCash and cash equivalents \n 1,811,149  \n 909,716  \n 775,686 \n\nRestricted cash \n 74,018  \n 15,070  \n 39,983 \n\nCash and cash equivalents and restricted cash, end of year \n 1,885,167  \n 924,786  \n 815,669 \n\n  \n    \n    \n   \n\nSUPPLEMENTAL CASH FLOW INFORMATION \n    \n    \n   \n\nCash paid during the year for: \n    \n    \n   \n\nIncome taxes \n 90,294  \n 38,805  \n 374,487 \n\nInterest paid \n 354,567  \n 599,524  \n 650,803 \n\n  \n    \n    \n   \n\nSUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES \n    \n    \n   \n\nProperty, plant and equipment acquired in exchange of notes receivable \n 219,117  \n 87,477  \n \n-\n \n\nProperty, plant and equipment acquired and applied from prepayments \n 17,116  \n 80,654  \n \n-\n \n\nRight-of-use assets transferred to property and equipment upon exercise of purchase option \n \n-\n  \n 626,414  \n 508,617 \n\n \n\nThe accompanying notes are an integral part of\nthese consolidated financial statements.\n\n \n\nF-6\n\n \n\n \n\n**HONGLI GROUP INC.**\n\n**NOTES TO CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n \n\n**NOTE 1 — ORGANIZATION AND NATURE OF\nOPERATIONS**\n\n \n\nHongli Group Inc. (the “Company”) was incorporated in\nCayman Islands as an exempted company with limited liability on February 9, 2021. The Company, its subsidiaries, its consolidated Variable\nInterest Entity (the “VIE”) and its subsidiaries (collectively referred to as the “Group”) are principally engaged\nin manufacturing and selling of customized steel profiles in the People’s Republic of China (“PRC” or “China”)\nand overseas market.\n\n \n\nAs of December 31, 2025, details of the Company’s subsidiaries,\nVIE and its subsidiaries are as follows:\n\n \n\nName  Date of\n\nIncorporation \n**Place\nof**\n\n**incorporation**\n \n**Equity interest**\n\n**attributed\nto the**\n\n**Group**\n \n**Principal**\n\n**activities**\n\nSubsidiaries            \n\nHongli Hong Kong Limited (“Hongli HK”)  March 5, 2021  Hong Kong  100%  Investment holding\n\nShandong Xiangfeng Heavy Industry Co., Ltd. (“WFOE”)  April 8, 2021  PRC  100%  Consulting service\n\nVIE and its Subsidiaries            \n\nShandong Hongli Special Section Tube Co., Ltd., (“Hongli Shandong”)  September 13, 1999  PRC  100% \nManufacturing and selling of customized steel profiles\n\nShandong Maituo Heavy Industry Co., Ltd. (“Maituo”) (1)  May 23, 2019  PRC  100%  No operations\n\nShandong Haozhen Heavy Industry Co., Ltd. (“Haozhen Shandong”) (2)  September 18, 2020  PRC  97%  No operations\n\nBeijing Haozhen Heavy Industry Technology Company Limited (“Haozhen Beijing”) (3)  February 4, 2021  PRC  70%  No operations\n\n \n\n(1)Wholly owned subsidiary of Hongli Shandong.\n\n \n\n(2) Haozhen Shandong was jointly established by Hongli Shandong and Shengda\nTechnology Co. Ltd, with Shengda Technology Co. Ltd holding a 30 % ownership interest in Haozhen Shandong. As of December 31,\n2025, Haozhen Shandong has not commenced operations, and no portion of income or loss was attributable to the noncontrolling interest\nin the subsidiary. Therefore, no noncontrolling interest was reported in the consolidated financial statements for the years ended December\n31, 2025, 2024 and 2023.\n\n \n\n(3)Haozhen Beijing was jointly established by Hongli Shandong and an individual, who holding a 3 % ownership interest in Haozhen Beijing. As of December 31, 2025, Haozhen Beijing had not commenced operations, and no portion of income or loss was attributable to the noncontrolling interest in the subsidiary. Therefore, no noncontrolling interest was reported in the consolidated financial statements for the years ended December 31, 2025, 2024 and 2023.\n\n \n\n**The VIE Arrangements**\n\n \n\nThe Company consolidates VIE and its subsidiaries as variable interest\nentities and referred to them as “the VIEs” in the Company’s consolidated financial statements. Under PRC laws and regulations,\nforeign individuals and entities face restrictions on direct investment in certain industries within China. Although the business operations\nof the VIEs do not fall into any categories that are expressly prohibited from foreign investment, the Company conducts the operation\nthrough the VIE to circumvent the substantial costs and time associated with obtaining regulatory approvals for the foreign investment.\n\n \n\nThe Company, through its wholly owned subsidiary in China, WFOE has\nentered into the following contractual arrangement with the VIEs that enable the Company to (1) have power to direct the activities that\nmost significantly affects the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant\nto the VIEs. Accordingly, the Company is considered the primary beneficiary of the VIEs and has consolidated the VIEs’ financial\nresults of operations, assets and liabilities and cash flows in the Company’s consolidated financial statements.\n\n  \n\nF-7\n\n \n\n \n\nAgreements that provide the Company with effective\ncontrol over the VIEs include:\n\n \n\n**Exclusive Option Agreement:** Pursuant to\nthe exclusive option agreement among Hongli HK, Hongli Shandong and the shareholders of Hongli Shandong (“VIE shareholders”),\nthe VIE shareholders unconditionally and irrevocably granted the WFOE or its designee an exclusive option to purchase, to the extent permitted\nunder PRC laws and regulations, all or part of the equity interests in the VIEs at nominal consideration which decided by the WFOE or\nthe lowest consideration permitted by PRC laws and regulations under the circumstances where the WFOE or its designee is permitted under\nPRC laws and regulations to own all or part of the equity interests of VIEs. The WFOE has the sole discretion to decide when to exercise\nthe option, and whether to exercise the option in part or in full. Without the WFOE’s written consent, the VIE shareholders may\nnot sell, transfer, pledge or otherwise dispose of or create any encumbrance on any of VIEs’ assets or equity interests.\n\n \n\n**Voting Rights Proxy Agreement & Irrevocable\nPower of Attorney:**The VIE shareholders executed voting rights proxy agreement, appointing the WFOE, or any person designated by the\nWFOE, as their attorney-in-fact to (i) call and attend shareholders meeting of VIEs and execute relevant shareholders resolutions; (ii)\nexercise on his behalf all his rights as a shareholder of VIEs, including those rights under PRC laws and regulations and the articles\nof association of VIEs, such as voting, appointing, replacing or removing directors, (iii) submit all documents as required by governmental\nauthorities on behalf of VIEs, (iv) assign the shareholding rights to VIEs, including receiving dividends, disposing of equity interest\nand enjoying the rights and interests during and after liquidation. The agreement will remain in effect unless the WFOE terminates the\nagreement by giving a written notice.\n\n \n\n**Spousal Consent Letter:** Pursuant to the\nspousal consent letter executed by the spouse of certain shareholders of VIEs, each of such spouse unconditionally and irrevocably agreed\nto the execution of exclusive service agreement, exclusive option agreement, voting rights proxy agreement and irrevocable power of attorney\nand equity pledge agreement described above by the applicable shareholder. They further undertake not to make any assertions in connection\nwith the equity interests of the VIEs held by the applicable shareholder, and confirm that the shareholder can perform the relevant transaction\ndocuments described above and further amend or terminate such transaction documents without the authorization or consent from such spouse.\nThe spouse of each applicable shareholder agrees and undertakes that if he/she obtains any equity interests of the VIEs held by the applicable\nshareholder for any reasons, he/she would be bound by the transaction documents described above and the amended and restated exclusive\nservice agreement between WFOE and our VIEs. The valid term of spousal consent letter is same as the term of the exclusive option agreement.\n\n \n\n**Equity Pledge Agreement:**The VIE shareholders\nagreed to pledge their equity interest in VIEs to the WFOE to secure the performance of the VIEs’ obligations under the series of\ncontractual agreements and any such agreements to be entered into in the future. Without prior written consent of the WFOE, the VIE shareholders\nshall not transfer or dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests. If any\neconomic interests were received by means of their equity interests in the VIEs, such interests belong to the WFOE.\n\n \n\nAgreements that transfer economic benefits of\nVIEs to the Group include:\n\n \n\n**Exclusive Services Agreement:**Under the\nexclusive services agreement, the Company and the WFOE have the exclusive right to provide comprehensive technical and business support\nservices to the VIEs. In exchange, the VIEs pay annual service fees to the WFOE in the amount equivalent to all of their net income as\nconfirmed by the WFOE. The WFOE has the right to adjust the service fee rates at its sole discretion based on the services provided and\nthe operation conditions of VIEs.\n\n \n\nF-8\n\n \n\n \n\nThe Voting Rights Proxy Agreement and Irrevocable\nPower of Attorney have conveyed all shareholder rights held by the VIE shareholders to the WFOE or any person designated by the WFOE,\nincluding the right to appoint executive directors of the VIEs to conduct day to day management of the VIEs’ businesses, and to\napprove significant transactions of the VIEs. In addition, the Exclusive Option Agreement provides the WFOE with a substantive kick-out\nright of the VIE shareholders through an exclusive option to purchase all or any part of the shareholders’ equity interest in the VIEs.\nThe Equity Pledge Agreements further secure the obligations of the shareholders of the VIEs under the above agreements.\n\n \n\nBecause the Company, through the WFOE, has (i)\nthe power to direct the activities of the VIEs that most significantly affect the entity’s economic performance and (ii) the right to\nreceive substantially all of the benefits from the VIEs, the Company is deemed the primary beneficiary of the VIEs. Accordingly, the Company\nhas consolidated the VIEs’ financial results of operations, assets and liabilities in the Group’s consolidated financial statements.\nThe aforementioned agreements are effective agreements between a parent and consolidated subsidiaries, neither of which is accounted for\nin the consolidated financial statements or are ultimately eliminated upon consolidation (i.e. service fees under the Exclusive Services\nAgreement Agreement).\n\n \n\nThe Company believes that the contractual arrangements\nwith the VIEs are in compliance with PRC law and are legally enforceable. However, uncertainties in the PRC legal system could limit the\nCompany’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be\nin violation of PRC laws and regulations, the PRC government could:\n\n \n\n \n●\nrevoke the business and operating licenses of the Company’s PRC subsidiaries and VIEs;\n\n \n\n \n●\ndiscontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiaries and VIEs;\n\n \n\n \n●\nlimit the Group’s business expansion in China by way of entering into contractual arrangements;\n\n \n\n \n●\nimpose fines or other requirements with which the Company’s PRC subsidiaries and VIEs may not be able to comply;\n\n \n\n \n●\nrequire the Company or the Company’s PRC subsidiaries or VIEs to restructure the relevant ownership structure or operations; or\n\n \n\n \n●\nrestrict or prohibit the Company’s use of the proceeds of the additional public offering to finance the Group’s business\nand operations in China.\n\n \n\nF-9\n\n \n\n \n\nThe following information of the VIE and VIE’s\nsubsidiaries as a whole as of December 31, 2025 and 2024 were included in the accompanying consolidated financial statements of the Company.\nTransactions between VIE and VIE’s subsidiaries are eliminated in the financial information presented below:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nAssets \n   \n  \n\nCurrent assets: \n   \n  \n\nCash and cash equivalents \n 1,762,954  \n 857,212 \n\nRestricted cash \n 74,018  \n 15,070 \n\nAccounts receivable, net \n 9,273,016  \n 5,809,374 \n\nNotes receivable \n 1,041,185  \n 522,331 \n\nInventories \n 2,463,460  \n 2,674,001 \n\nDue from parent company \n 981,294  \n 940,130 \n\nDue from related parties \n 356,556   \n \n-\n \n\nPrepayments and other current assets \n 1,064,084  \n 2,004,889 \n\nTotal current assets \n 17,016,567  \n 12,823,007 \n\n  \n    \n   \n\nNon-current assets \n    \n   \n\nProperty, plant and equipment, net \n 12,292,214  \n 10,385,742 \n\nPrepayments for purchase of Yingxuan Assets \n 4,951,021  \n 5,339,093 \n\nIntangible assets, net \n 4,498,986  \n 4,432,403 \n\nDeferred tax assets, net \n 47,781  \n 40,773 \n\nTotal Assets \n 38,806,569  \n 33,021,018 \n\n  \n    \n   \n\nLiabilities \n    \n   \n\nCurrent liabilities \n    \n   \n\nShort-term loans \n 11,515,024  \n 6,079,252 \n\nAccounts payable \n 1,876,141  \n 1,380,201 \n\nDue to related parties \n 4,207  \n 21,246 \n\nIncome tax payable \n 174,598  \n 34,427 \n\nAccrued expenses and other payables \n 739,532  \n 638,610 \n\nTotal current liabilities \n 14,309,502  \n 8,153,736 \n\n  \n    \n   \n\nNon-current liabilities \n    \n   \n\nLong-term bank loans \n \n-\n  \n 3,305,209 \n\nDue to related parties \n 8,237,172  \n 7,906,642 \n\nTotal Liabilities \n 22,546,674  \n 19,365,587 \n\nNet Assets \n 16,259,895  \n 13,655,431 \n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nRevenue, net \n 19,600,691  \n 14,105,620  \n 15,997,954 \n\nGross profit \n  6,378,880   \n 4,519,747  \n 5,245,840 \n\nIncome from operations \n 2,597,220  \n 606,308  \n 1,101,095 \n\nNet income \n 1,952,276  \n 146,528  \n 780,491 \n\n \n\nF-10\n\n \n\n \n\nThe revenue-producing assets held by the VIE and its subsidiaries comprise 100%\nof the Company’s long-lived assets, which mainly consisted of property, plant, equipment, and intangible assets, including land\nuse rights. The VIE and its subsidiaries contributed 100% of the Company’s consolidated revenues for the years ended December\n31, 2025, 2024 and 2023.\n\n \n\nInitial Public Offering\n\n \n\nOn March 31, 2023, the Company closed its initial public offering of 2,062,500 ordinary\nshares (the “Ordinary Shares”) at a public offering price of $4.00 per share for total gross proceeds of $8.25 million\nbefore deducting underwriting discounts and offering expenses. In addition, the Company granted the underwriters a 45-day option to purchase\nup to an additional 309,375 Ordinary Shares at the public offering price. On May 2, 2023, the underwriter exercised the over-allotment\noption in full for total gross proceeds of $1,237,500 before deducting underwriting discounts and commissions. The Company’s\nOrdinary Shares began trading on the Nasdaq Capital Market under the symbol “HLP” since March 29, 2023.\n\n \n\n**NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES**\n\n \n\n**Basis of Presentation**\n\n \n\nThe accompanying consolidated financial statements\nhave been prepared in accordance with accounting principles generally accepted in the U.S. GAAP and with the rules and regulations of\nthe U.S. Securities Exchange Commission (“SEC”).\n\n \n\n**Principles of Consolidation**\n\n** **\n\nThe consolidated financial statements include\nthe financial statements of the Company, its subsidiaries and VIE. All significant inter- company transactions and balances between the\nCompany, its subsidiaries and VIE have been eliminated upon consolidation.\n\n \n\n**Emerging Growth Company**\n\n \n\nAs an emerging growth company, the Company may\ntake advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging\ngrowth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404\nof the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements,\nand exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any\ngolden parachute payments not previously approved.\n\n \n\nSection 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts\nemerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that\nis, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered\nunder the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised\nfinancial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition\nperiod and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The\nCompany has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has\ndifferent application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised\nstandard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements\nwith another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the\nextended transition period difficult or impossible because of the potential differences in accounting standards used.\n\n** **\n\n**Use of Estimates**\n\n \n\nIn preparing the consolidated financial statements in conformity with\nU.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent\nassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting\nperiod. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required\nto be made by management include, but are not limited to, the allowance for credit losses, inventory write-down and reserves, useful lives\nof property, plant and equipment, intangible assets, valuation allowance of deferred tax assets and share-based compensations. Actual\nresults could differ from those estimates.\n\n \n\n**Related Parties Transactions**\n\n \n\nA related party is generally defined as (i) any\nperson that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii)\nsomeone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly\ninfluence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there\nis a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary\ncourse of business. Related parties may be individuals or corporate entities.\n\n \n\nTransactions involving related parties cannot\nbe presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not\nexist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated\non terms equivalent to those that prevail in arm’s length transactions unless such representations can be substantiated.\n\n \n\nF-11\n\n \n\n \n\n**Foreign Currency Translation**\n\n \n\nThe Company’s principal country of operations is the PRC. The\nfinancial position and results of its operations are determined using RMB, the local currency, as the functional currency. The consolidated\nfinancial statements are reported using US$. The results of operations and the statement of cash flows denominated in foreign currency\nare translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at\nthe balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional\ncurrency is translated at the historical rate of exchange at the time of capital contribution. As a result, amounts related to assets\nand liabilities reported on the consolidated statements of cash flows may not necessarily agree with changes in the corresponding balances\non the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are\nincluded as a separate component of accumulated other comprehensive income (loss) included in consolidated balance sheets and statements\nof changes in shareholders’ equity. Transactions denominated in foreign currencies are translated into the functional currency at\nthe exchange rates prevailing on the transaction dates with any transaction gain and or losses are included in the results of operations\nas incurred.\n\n \n\nThe value of RMB against U.S. Dollar may fluctuate\nand is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of\nRMB may materially affect the Company’s consolidated financial condition in terms of reporting. The following table outlines\nthe currency exchange rates that were used in the consolidated financial statements:\n\n \n\n** **** **\n**December 31,**** **** **\n**December 31,**** **** **\n**December 31,**** **\n\n** **** **\n**2025**** **** **\n**2024**** **** **\n**2023**** **\n\n1 US$ = RMB \n    \n    \n   \n\nSpot rate \n 6.9931  \n 7.2993  \n 7.0999 \n\nAverage rate \n 7.1875  \n 7.1957  \n 7.0809 \n\n \n\n**Foreign Currency Exchange Rate Risks**\n\n \n\nThe Company’s PRC subsidiaries may be exposed to significant\nforeign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the US$ and the RMB. As of December\n31, 2025 and 2024, the RMB denominated cash and cash equivalents and restricted cash amounted to $1,868,831 and $917,467, respectively.\n\n \n\n**Fair Value Measurement**\n\n \n\nThe fair value of a financial instrument is defined\nas the exchange price that would be received from an asset or paid to transfer a liability (as exit price) in the principal or most advantageous\nmarket for the asset or liability in an orderly transaction between market participants at the measurement date. The carrying amounts\nof financial assets and liabilities, such as cash and cash equivalents, time deposits, accounts receivable, and other current assets,\naccounts payable, short-term bank borrowings and other current liabilities, approximate their fair values because of the short maturity\nof these instruments and market rates of interest.\n\n \n\nASC 825-10 requires certain disclosures regarding\nthe fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer\na liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes\nthe inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use\nof unobservable inputs. The three levels of inputs used to measure fair value are as follows:\n\n \n\n●Level\n1 — Quoted prices in active markets for identical assets and liabilities.\n\n \n\n●Level\n2 — Quoted prices in active markets for similar assets and liabilities, or other inputs\nthat are observable for the asset or liability, either directly or indirectly, for substantially\nthe full term of the financial instrument.\n\n \n\n●Level\n3 — Unobservable inputs that are supported by little or no market activity and that\nare significant to the fair value of the assets and liabilities. This includes certain pricing\nmodels, discounted cash flow methodologies and similar techniques that use significant unobservable\ninputs.\n\n \n\nThe Company considers the carrying amounts of its financial assets\nand liabilities, which primarily include cash and cash equivalents, restricted cash, notes receivable, accounts receivable, and other\ncurrent assets, accounts payables, other current payables, and short-term loans to approximate their fair values as of December 31, 2025\nand 2024, due to their short-term maturities or because they are recorded at present value.\n\n \n\nF-12\n\n \n\n \n\n**Earnings (Loss) per Share**\n\n \n\nUnder the provisions of ASC 260, “Earnings\nPer Share”, basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the\nweighted average number of ordinary shares outstanding for the periods presented. Diluted income (loss) per share reflects the potential\ndilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares\nor resulted in the issuance of ordinary shares that would then share in the income of the company, subject to anti- dilution limitations.\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nNumerator for earnings (loss) per share: \n   \n   \n  \n\nNet income (loss) attributable to the Company’s ordinary shareholders \n 1,942,840  \n (1,881,635) \n 864,722 \n\nDenominator for basic and diluted earnings per share: \n    \n    \n   \n\nBasic and weighted average ordinary shares \n 73,438,750  \n 17,451,865  \n 11,752,180 \n\n**Per share amount:** \n    \n    \n   \n\nPer share - basic and diluted \n 0.03  \n (0.11) \n 0.07 \n\n \n\n**Cash and Cash Equivalents**\n\n \n\nCash and cash equivalents include cash on hand,\ncash accounts, interest-bearing savings accounts and time certificates of deposit with a maturity of three months or less when purchased.\nThe Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase\nto be cash equivalents. The Company maintains most of the bank accounts in the PRC.\n\n \n\n**Restricted Cash**\n\n \n\nRestricted cash consists of cash deposited with the PRC bank, which\nis used as collateral to secure the Company’s loans.\n\n \n\n**Accounts Receivable, Net**\n\n \n\nAccounts receivable are recognized and carried\nat original invoiced amount less an estimated allowance expected credit losses. ASU No. 2016-13, Financial Instruments-Credit Losses\n(Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition\nof expected credit losses to all financial assets held at amortized cost. CECL model requires measurement of the expected credit loss\neven if that risk of loss is remote. The company adopts a combination of aging schedule and the roll rate method in computation of the\ncurrent expected credit losses and compute the credit losses based on historical repayment trend. The company uses both quantitative\nand qualitative methods in considering all available information relevant to assessing collectability. This may include internal information,\nexternal information or a combination of both relating to past events, current conditions and reasonable and supportable forecasts.\n\n \n\n**Notes Receivable**\n\n \n\nNotes receivable represent trade accounts receivable due from various\ncustomers where the banks have guaranteed the payment (“Bank Acceptance Notes”) or the customers’ financial institutions\nhave guaranteed the payment (“Commercial Acceptance Notes”). These notes are non - interest bearing and normally paid within\nthree to six months. Notes receivable may be discounted (sold) to financial institutions or other third parties before maturity, and derecognized\nbased on ASC860. Additionally, notes receivable can be endorsed to third parties (e.g., suppliers or creditors) as a form of settlement\nor guarantee.\n\n \n\nThe Company assesses notes receivable for impairment\nat each reporting date in alignment with ASC 326’s current expected credit loss (“CECL”) model, which requires estimation\nof expected credit losses over the life of the notes. The approach differs based on the type of note: (1) Bank Acceptance Notes are considered\nlow - risk, due to bank guarantees. Impairment is typically minimal, and is calculated based on the issuing bank’s credit rating\nand historical default rates. Expected credit losses are recognized only in rare cases where the issuing bank’s creditworthiness\nis in doubt; (2) Commercial Acceptance Notes carry the credit risk of the issuer, requiring a more detailed analysis. The impairment\nassessment considers the issuer’s financial condition, historical default rates, forward - looking economic conditions, and the\nspecific terms of the note (e.g., duration and collateral). As a result, expected credit losses for Commercial Acceptance Notes may be\nmore significant than for Bank Acceptance Notes. The Company continuously monitors the creditworthiness of its customers and evaluates\nthe potential for credit losses, considering factors such as the financial stability of the guarantor institutions and the general economic\nenvironment. No significant credit risk was identified.\n\n \n\nF-13\n\n \n\n \n\n**Inventories, Net**\n\n \n\nInventories are stated at the lower of cost or net realizable value.\nCost is determined on the weighted average basis. Work-in- progress inventories consisted of raw materials, direct labor and overhead\nassociated with the manufacturing process. Finished goods included inventory finished in the Company’s own warehouse and goods in\ntransit, which has not met the criteria of revenue recognition. The Company periodically assesses the recoverability of all inventories\nto determine whether adjustments are required to record inventories at the lower of cost or net realizable value. Inventories that the\nCompany determines to be obsolete or in excess of forecasted usage are reduced to its estimated realizable value based on assumptions\nabout future demand and market conditions. A write down of potentially obsolete or slow-moving inventory is recorded based on management’s\nanalysis of inventory levels.\n\n \n\n**Deferred Offering Costs**\n\n \n\nDeferred offering costs consist principally of\nall direct offering costs incurred by the Company, such as underwriting, legal, accounting, consulting, printing, and other registration\nrelated costs in connection with the initial public offering (“IPO”) of the Company’s ordinary shares. Such costs are\ndeferred until the closing of the offering, at which time the deferred costs are offset against the offering proceeds. In the event the\noffering is unsuccessful or aborted, the costs will be expensed. The Company consummated its IPO on March 31, 2023 and the underwriter\nexercised the over-allocation option on May 2, 2023. The deferred offering costs incurred in connection with the IPO and the underwriter’s\noption exercised have been charged to additional capital.\n\n \n\n**Property, Plant and Equipment, Net**\n\n \n\nProperty, plant and equipment are stated at cost less accumulated depreciation.\nDepreciation are computed using the straight-line method over the estimated useful lives of the assets with a 5% residual value. The\nestimated useful lives are as follows:\n\n \n\n \n \n**Estimated Useful Life**\n \n\nBuildings\n \n30 years\n \n\nMachinery equipment\n \n10 years\n \n\nVehicles\n \n4-5 years\n \n\nOffice equipment\n \n3-5 years\n \n\nTools\n \n3-5 years\n \n\nElectronic devices\n \n3-5 years\n \n\n \n\nThe cost and related accumulated depreciation of assets sold or otherwise\nretired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations and comprehensive\nincome. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which\nare expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine\nwhether subsequent events and circumstances indicate a change in estimates of useful lives.\n\n \n\n**Intangible Assets, Net**\n\n \n\nIntangible assets are stated at cost, less accumulated amortization.\nAmortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. All land in China is owned\nby the government and cannot be sold or transferred by or to any individual or private entity. Instead, the government grants or allocates\nlandholders “land use rights.” The Company has obtained rights to use various parcels of land for 46-50 years. The\nCompany amortizes the cost of the land use rights over their useful life using the straight-line method.\n\n \n\n**Impairment for Long-Lived Assets**\n\n \n\nLong-lived assets, including property, plant and equipment, intangible\nassets with finite lives, and prepayments for purchase of Yingxuan assets are reviewed for impairment whenever events or changes in circumstances\n(such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value\nof an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows\nthe assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result\nfrom the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset.\nIf an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted\ncash flows approach or, when available and appropriate, to comparable market values. There was no impairment of long-lived assets recognized\nfor the years ended December 31, 2025, 2024 and 2023, respectively.\n\n \n\nF-14\n\n \n\n \n\n**Lease**\n\n \n\nThe Company has adopted the new lease standard, ASC 842, Leases (Topic\n842) for all periods presented.\n\n \n\n*Financing lease and operating lease classification*\n\n \n\nThe Company classifies a lease as a financing lease at lease commencement\nwhen the lease meets any one of the criteria:\n\n \n\na. The lease transfers ownership of the underlying asset to the lessee\nby the end of the lease term.\n\n \n\nb. The lease grants the lessee an option to purchase the underlying\nasset that the lessee is reasonably certain to exercise.\n\n \n\nc. The lease term is for a major part of the remaining economic life\nof the underlying asset.\n\n \n\nd. The present value of the sum of the lease payments and any residual\nvalue guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all the fair value\nof the underlying asset.\n\n \n\ne. The underlying asset is of such a specialized nature that it is\nexpected to have no alternative use to the Company at the end of the lease term.\n\n \n\nWhen none of the criteria are met, the Company classifies a lease as\nan operating lease. \n\n \n\n*Operating lease right-of-use assets and finance lease right-of-use\nassets*\n\n \n\nThe right-of-use of asset is initially measured at cost, which comprises\nthe initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct\ncosts incurred and less any lease incentive received.\n\n \n\nFor operating lease, lease expense is recorded on a straight-line basis\nover the lease term. The amortization of the right-of-use assets is calculated as the difference between the straight-line lease expense\nand the interest calculated on the lease liability. For finance lease, the amortization of the right-of-use assets is calculated on a\nstraight-line basis over the lease term.\n\n \n\n*Operating lease liabilities and finance lease liabilities*\n\n \n\nLease liability is initially measured at the present value of the outstanding\nlease payments at the commencement date, discounted using the Group’s incremental borrowing rate. The incremental borrowing rate\nis the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the\nlease payments in a similar economic environment.\n\n \n\nLease payments included in the measurement of the lease liability comprise\nfixed lease payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value\nguarantee and any exercise price under a purchase option that the Company is reasonably certain to exercise. Lease liability is measured\nat amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments, if there\nis a change in the estimate of the amount expected to be payable under a residual value guarantee, or if there is any change in the Company\nassessment of option purchases, contract extensions or termination options.\n\n \n\nIn cases of sale and leaseback transactions, if the transfer of the\nasset to the lessor does not qualify as a sale, then the transaction constitutes a failed sale and leaseback and is accounted for as a\nfinancing transaction. For a sale to have occurred, the control of the asset would need to be transferred to the lessor, and the lessor\nwould need to obtain substantially all the benefits from the use of the asset. The Company has entered into a sale and leaseback transaction\nwhich qualified as failed sale and leaseback transaction as the Company has a purchase obligation to acquire the machinery at the end\nof the lease term. The asset has been included in the property, plant and equipment, and the amortization is computed based on the shorter\nof the financing terms or the estimated useful life. Amounts received was presented in Finance lease obligation.\n\n \n\n**Revenue Recognition**\n\n \n\nThe Company has adopted the new revenue standard,\nASC 606, Revenue from Contracts with Customers (Topic 606) for all periods presented. Under ASC 606, the Company recognizes revenue when\na customer obtains control of promised goods, in an amount that reflects the consideration which the Company expects to receive in exchange\nfor the goods. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five\nsteps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction\nprice; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity\nsatisfies a performance obligation. The Company applies the five-step model to contracts when it is probable that the entity will collect\nthe consideration it is entitled to in exchange for the goods it transfers to the customer. Revenue is recognized net of value-added\ntax.\n\n \n\nThe Company’s revenue is principally derived\nfrom sales of products in domestic and overseas markets. Revenue is recognized at the point in time when the performance obligation has\nbeen satisfied and control of the products have been transferred to the customers, which generally occurs upon shipment for overseas\ncustomers and acceptance for domestic customers based on the terms of the sales contracts.\n\n \n\nF-15\n\n \n\n \n\nRevenue is measured by the transaction price, which\nis defined as the amount of consideration the Company expects to receive in exchange for selling products to customers through the end\nof the return period (considering expected product returns). The Company offers customers right to return the goods upon mutual agreement.\nThe Company recognizes the amount received or receivable that is expected to be returned as a refund liability, representing its obligation\nto return the customer’s consideration, as well as a return asset (and adjusts cost of revenues) for its right to recover the goods\nreturned by the customer, at the time of the initial sale. The Company updates its assessment of expected returns and the related refund\nliabilities and return assets at each financial reporting date and reflects any changes in assumptions about expected returns. Any adjustments\nmade to the estimate will result in a corresponding adjustment to amounts recognized as revenues for the satisfied performance obligations\nand costs in the value of the returned goods. The refund liability and return asset should be relieved only when cash is refunded or\nthe refund privilege expires. Refund liabilities are included in “Accrued expenses and other current liabilities”. Return\nassets were included in “Prepayments and other current assets”.\n\n \n\nAmounts billed and due from customers are short\nterm in nature and are classified as receivables since payments are unconditional and only the passage of time is required before payments\nare due. The Company does not grant payment terms greater than one year. Additionally, the Company does not offer promotional payments,\ncustomer coupons, rebates or other cash redemptions offers to its customers.\n\n \n\nThe Company does not have any contract asset. Contract liabilities\nare recorded when consideration is received from a customer prior to transferring the control of goods to the customer or other conditions\nunder the terms of a sales contract. As of December 31, 2025 and 2024, the Company recorded contract liabilities, included in accrued\nexpenses and other payables, of $162,120 and $219,933, respectively. The Company recognized $79,488, $24,484 and $45,800 of beginning\ncontract liabilities as revenue for the years ended December 31, 2025, 2024 and 2023, respectively. Contract liabilities totaling $162,120\nas of December 31, 2025, are expected to be recognized as revenue for the year end December 31, 2026.\n\n \n\nThe Company also provides a regular warranty\nservice for 12 to 24 months, aiming to ensure the products meet the quality standards as agreed in the contract, which is also a general\nprotective term required by law, and are common quality assurance obligations in the industry, of which the warrant period is also in\nline with related industry practice. The warranty does not provide a customer with a service in addition to the assurance that the products\ncomply with agreed-upon specifications. Besides, the warranty period conforms to industry practices and does not include the content\nof extended warranty services that can be purchased separately, which means the warranty does not provide the customer an option to purchase\na warranty separately. Therefore, it falls into the category of assurance-type warranties, instead of a performance obligation.\n\n \n\nThe Company estimates the probability of the warranty based on the\nhistorical repair costs and frequency rates and account for it under ASC 460 by accruing the estimated liability. The estimation of warranty-related\ncosts is updated at each reporting date using best-available information and revisions to estimates are made as necessary. Warranty cost\nis recorded as a component of sales and marketing expenses in the consolidated statements of operations and comprehensive income and is\nrecognized at the time the related revenues are recognized (upon product sale).\n\n \n\nThe Company’s net revenue segregated by\ngeographic regions is as follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nPRC \n 16,581,343  \n 12,196,548  \n 12,117,240 \n\nOverseas \n 3,019,348  \n 1,909,072  \n 3,880,714 \n\nTotal \n **19,600,691**  \n 14,105,620  \n 15,997,954 \n\n \n\n**Value Added Tax**\n\n \n\nHongli Shandong and its subsidiaries are subject\nto a VAT of 13% for its business practice. The amount of VAT liability is determined by applying the applicable tax rate to the\ninvoiced amount of the product sold. The Company reports revenue net of PRC’s VAT for all the periods presented on the consolidated\nstatements of operations and comprehensive income.\n\n \n\n**Cost of Revenues**\n\n \n\nAmounts recorded as cost of revenue relate to direct expenses incurred\nin order to generate revenue. Such costs are recorded as incurred. Cost of revenues consists of product costs, including production overhead,\ncosts of raw material, contract manufacturers for production, shipping and handling costs, manufacturing and tooling equipment depreciation.\n\n \n\n**Sales and Marketing Expenses**\n\n \n\nSales and marketing expenses consist primarily of salary and welfare\nfor sales and marketing personnel, promotion and marketing expenses and other expenses associated with sales and marketing personnel.\nAdvertising expenses primarily consisted of cost of funding payments for the promotion of corporate image and product marketing. The Group\nexpenses all advertising costs as incurred and classifies these costs under sales and marketing expenses. For the years ended December\n31, 2025, 2024 and 2023, the advertising expenses were $13,869, $65,005 and $7,037, respectively.\n\n \n\n**General and Administrative Expenses**\n\n \n\nGeneral and administrative expenses mainly consisted of (i) staff\ncosts related to general and administrative personnel, (ii) professional service fees; and (iii) other corporate expenses.\n\n \n\nF-16\n\n \n\n \n\n**Income Taxes**\n\n \n\nThe Company follows the liability method of accounting\nfor income taxes in accordance with ASC 740 (“ASC 740”), Income Taxes. Under this method, deferred tax assets and liabilities\nare determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates\nthat will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset\ndeferred tax assets if based on the weight of available evidence; it is more-likely-than-not that some portion, or all, of the deferred\ntax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that\nincludes the enactment date of the change in the tax rate.\n\n \n\nThe Company accounted for uncertainties in income\ntaxes in accordance with ASC 740. Interest and penalties related to unrecognized tax benefit recognized in accordance with ASC 740 are\nclassified in the consolidated statements of operations and comprehensive income as income tax expense. No such expenses incurred during\nthe years ended December 31, 2025, 2024 and 2023.\n\n \n\n**Share-based Compensation**\n\n \n\nThe Group applies ASC 718, Compensation—Stock Compensation (‘‘ASC\n718’’), to account for its employee share-based payments. In accordance with ASC 718, the Group determines whether an award\nshould be classified and accounted for as a liability award or an equity award. All of the Group’s share-based awards to employees\nwere classified as equity awards. The Group measures the employee share-based compensation based on the fair value of the award at the\ngrant date. The share-based compensation to the Company was $nil, $1,968,000 and $nil for the years ended December 31, 2025, 2024 and\n2023, respectively and included in general and administrative expenses in the consolidated statements of operations and comprehensive\nincome (loss).\n\n \n\n**Government Subsidy**\n\n \n\nGovernment grants include cash subsidies as well\nas other subsidies received from various government agencies by the subsidiaries of the Company. Such subsidies are generally provided\nas incentives from the local government to encourage the expansion of local business. The government grant is recognized in the consolidated\nstatements of income and comprehensive income when the relevant performance criteria specified in the grant are met, for instance, locating\ncontact centers in their jurisdictions or helping local employment needs. The government subsidy granted to the Company was $67,614,\n$101,350 and $26,996 for the years ended December 31, 2025, 2024 and 2023, respectively and included in other income in the consolidated\nstatements of operations and comprehensive income.\n\n \n\n**Statutory Reserves**\n\n \n\nThe Company’s PRC subsidiaries are required to make appropriations\nto certain non-distributable reserve funds.\n\n \n\nUnder the PRC Company Law, the Company’s PRC subsidiaries that\nare companies incorporated in mainland China are required to allocate 10% of their after-tax profits, as determined in accordance with\nthe Accounting Standards for Business Enterprises promulgated by the Ministry of Finance of the PRC, to their statutory reserve when distributing\nafter-tax profits. Such appropriation is no longer required once the accumulated statutory reserve reaches 50% of the registered capital\nof the relevant company. After making appropriations to the statutory reserve, a company may, upon approval by its shareholders, make\nappropriations to its discretionary reserve. Statutory reserves and discretionary reserves may be used to make up losses, expand production\nand business operations, or increase registered capital, but they are not distributable as cash dividends in the ordinary course of business.  \n\n \n\n**Comprehensive Income (Loss)**\n\n \n\nComprehensive income (loss) is comprised of net\nincome (loss) and all changes to the statements of shareholders’ equity, except those due to investments by shareholders, changes\nin paid-in capital and distributions to shareholders. For the Company, comprehensive income (loss) for the years ended December 31, 2025,\n2024 and 2023 consisted of net income (loss) and unrealized gain (loss) from foreign currency translation adjustment.\n\n \n\n**Segment Reporting**\n\n \n\nThe Company follows the ‘management approach’ in determining\nits reportable operating segments, as prescribed by ASC 280. The Group’s Chief Executive Officer are the chief operating decision-maker\n(“CODM”). When making decisions about allocating resources and assessing the performance of the Group as a whole, the CODM\nreview operating metrics and consolidated financial statements.\n\n \n\n**Recently Issued Accounting Pronouncements**\n\n \n\nThe Company considers the applicability and impact\nof all ASUs. Management periodically reviews new accounting standards that are issued and assesses the impacts on the Company’s\nconsolidated financial position and/or results of operations.\n\n \n\nIn November 2023, the Financial Accounting Standards\nBoard (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.\nThe ASU requires public entities to disclose significant segment expense categories and other information used by the Chief Operating\nDecision Maker (CODM) in assessing segment performance, even if the entity has only one reportable segment. ASU 2023-07 is effective\nfor the Company’s annual periods beginning January 1, 2024 and for its interim periods beginning January 1, 2025. The Company adopted\nASU 2023-07 on January 1, 2024. Adoption of the ASU did not affect the determination of the Company’s operating or reportable segments.\nHowever, it resulted in expanded disclosures regarding significant expense categories regularly reviewed by the CODM. These disclosures\nare included in Note 19 – Segment Reporting to the consolidated financial statements.\n\n \n\nF-17\n\n \n\n \n\nIn December 2023, the FASB issued Accounting Standards Update (ASU)\n2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). The ASU focuses on income tax disclosures around\neffective tax rates and cash income taxes paid. ASU 2023-09 largely follows the proposed ASU issued earlier in 2023 with several important\nmodifications and clarifications. Key features of ASU 2023-09 include: rate reconciliation disclosures, disaggregate income taxes paid\nby federal, state, and foreign jurisdictions, and removes the need for certain disclosures previously required. ASU 2023-09 is effective\nfor public business entities for annual periods beginning after December 15, 2024 (generally, calendar year 2025) and effective for all\nother business entities one year later; early adoption is permitted. Entities should adopt this guidance on a prospective basis, though\nretrospective application is permitted. The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated\nfinancial statements and disclosures.\n\n \n\nOn November 4, 2024, the FASB issued ASU 2024-03, Disaggregation of\nIncome Statement Expenses (DISE), which requires disaggregated disclosure of income statement expenses for public business entities (PBEs).\nThe DISE does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation\nof certain expense captions into specified categories in disclosures within the footnotes to the financial statements. On January 6, 2025,\nthe FASB issued ASU 2025-01, Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which amends the effective\ndate of Update 2024-03. DISE is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods\nwithin annual reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for\nretrospective application. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the\nCompany’s consolidated financial statements and disclosures.\n\n \n\nIn July 2025, the FASB issued ASU 2025-05, “Financial\nInstruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”. ASU 2025-05\nprovides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract\nassets. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within\nthose annual reporting periods and should be applied prospectively. Early adoption is permitted, and the Company is currently assessing\nthe impact of adoption.\n\n \n\nThe Company does not believe other recently issued\nbut not yet effective accounting standards would have a material effect on its consolidated balance sheets, statements of operations\nand comprehensive income, changes in shareholders’ equity and cash flows.\n\n \n\n**NOTE 3 — ACCOUNTS RECEIVABLE, NET**\n\n \n\nAccounts receivable consisted of the following:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nAccounts receivable, gross \n 9,494,308  \n 5,898,773 \n\nLess: allowance for current expected credit loss \n (221,292) \n (89,399)\n\nAccounts receivable, net \n 9,273,016  \n 5,809,374 \n\n \n\nThe movement of the allowance for current expected credit loss was\nas follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nBalance at beginning of the year \n (89,399) \n (52,773) \n \n-\n \n\nProvision \n (124,517) \n (38,616) \n (52,914)\n\nExchange difference \n (7,376) \n 1,990  \n 141 \n\nBalance at end of the year \n (221,292) \n (89,399) \n (52,773)\n\n \n\nAs of December 31, 2025, accounts receivable totaling $1,944,888 (RMB13,600,794)\nwere pledged as collateral to secure a short-term loan of $1,286,983 (RMB 9,000,000) from China Minsheng Bank (see Note 10).\n\n \n\nAs of December\n31, 2024, accounts receivable totaling $1,525,377 (RMB11,134,187) were pledged as collateral to secure a short-term loan of $684,997 (RMB 5,000,000)\nfrom China Minsheng Bank (see Note 10).\n\n \n\nThe Company had no accounts receivable factoring activities for\nthe years ended December 31, 2024 and 2023. For the year ended December 31, 2025, the Company entered into accounts receivable\nfactoring agreements with XCMG Commercial Factoring (Xuzhou) Co., Ltd. The Company received total proceeds of amounted to $886,588\n(RMB6,200,000) for receivables factored with recourse in November and December 2025, of which $672,091 (RMB4,700,000) was\noutstanding as of December 31, 2025 as short-term borrowing, secured by the accounts receivable amounted to US$672,091(RMB4,700,000)\nwith recourse. This secured short-term borrowing is disclosed in Note 10.\n\n \n\nF-18\n\n \n\n \n\n**NOTE 4 — NOTES RECEIVABLES**\n\n \n\nNotes receivable consisted of the following:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nNotes receivable \n 1,041,185  \n 522,331 \n\nProvision for notes receivable \n \n-\n  \n \n-\n \n\nNotes receivable, net \n 1,041,185  \n 522,331 \n\n \n\nNo provision of credit losses was recorded for notes receivable for\nthe years ended December 31, 2025, 2024 and 2023, respectively.\n\n \n\n**NOTE 5 — INVENTORIES, NET**\n\n \n\nInventories are summarized as follows:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nRaw materials \n 1,346,138  \n 848,123 \n\nWork in progress \n 1,126,943  \n 1,633,948 \n\nFinished goods \n 153,270  \n 224,297 \n\nSubtotal \n 2,626,351  \n 2,706,368 \n\nInventory provision \n (162,891) \n (32,367)\n\nTotal \n 2,463,460  \n 2,674,001 \n\n \n\nThe Company evaluates inventories for excess\nand obsolescence on a regular basis, based on management’s assessment of product life cycles, historical and forecasted demand,\nand market conditions. A write-down is recognized when the carrying amount of inventory exceeds its estimated net realizable value.\n\n \n\nThe movement of the inventory valuation allowances was as follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nBalance at beginning of the year \n 32,367  \n 38,415  \n 6,894 \n\nProvision \n 125,614  \n 488  \n 32,412 \n\nExchange difference \n 4,910  \n (6,536) \n (891)\n\nBalance at end of the year \n 162,891  \n 32,367  \n 38,415 \n\n \n\nF-19\n\n \n\n \n\n**NOTE 6 — PREPAYMENTS AND OTHER CURRENT ASSETS**\n\n \n\nThe prepayments and other current assets consisted of the following:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nAdvance to suppliers \n 902,590  \n 1,842,903 \n\nPrepaid operating cost \n 52,043  \n 96,165 \n\nPrepaid service cost \n 4,238  \n 52,506 \n\nOthers* \n 105,785  \n 13,315 \n\nTotal \n 1,064,656  \n 2,004,889 \n\n \n\n*Others\nincluded the return assets in relation to the provision of warranty-related cost.\n\n \n\n**NOTE 7 — PROPERTY, PLANT AND EQUIPMENT, NET**\n\n \n\nProperty, plant and equipment, net consisted of the following:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nBuildings \n 9,881,158  \n 7,620,784 \n\nMachinery equipment and tools \n 6,863,743  \n 6,244,008 \n\nElectronic devices \n 125,669  \n 96,866 \n\nOffice equipment \n 33,438  \n 21,054 \n\nVehicles \n 245,455  \n 324,888 \n\nConstruction in progress \n \n-\n  \n 230,966 \n\n**Subtotal**** **\n** ****17,149,463**** **** **\n** ****14,538,566**** **\n\nLess: accumulated depreciation \n (4,857,249) \n (4,152,824)\n\nTotal \n **12,292,214**  \n 10,385,742 \n\n \n\nDepreciation expenses for the years ended December 31, 2025, 2024 and\n2023 amounted to $687,159, $804,395 and $871,445, respectively.\n\n \n\nDuring the year ended December 31, 2025, the\nCompany disposed of certain equipment and received cash proceeds of $61,607. As a result, fixed assets with a costs basis of $216,389\nand related accumulated depreciation of $178,704 were derecognized. This transaction resulted in a net gain of $16,835, which included\na value-added tax (VAT) of $7,087.\n\n \n\nDuring the year ended December 31, 2024, the\nCompany disposed of certain portions of its manufacturing buildings and received cash proceeds of $2,779. As a result, fixed assets with\na costs basis of $158,739 and related accumulated depreciation of $79,171 were derecognized. This transaction resulted in a net loss\nof $77,109, which included a value-added tax (VAT) of $320. In addition, during 2024, the Company incurred $28,845 disposal loss related\nto certain assets that had previously been included in construction in progress.\n\n \n\nDuring the year ended December 31, 2023, the Company disposed of portions\nof its manufacturing buildings, resulting in cash proceeds of approximately $1,337,870. Consequently, fixed asset costs totaling $2,839,029\nand accumulated depreciation of $1,100,663 were eliminated from the Company’s records. This transaction resulted in a net gain of\n$222,064. In addition, the Company sold a vehicle and recognized a gain of $1,176 during the year ended December 31, 2023.\n\n \n\nAs of December 31, 2025 and 2024, properties totaling $5,194,274 and\n$4,108,743 were pledged as collaterals to secure the Company’s bank loans from Rural Commercial Bank of Shandong, Bank of Weifang\nand Agricultural Bank of China (see Note 10).\n\n \n\nDuring the years ended December 31, 2025, 2024\nand 2023, the Company did not recognize any impairment losses on its property, plant and equipment.\n\n \n\nF-20\n\n \n\n \n\n**NOTE 8 — INTANGIBLE ASSETS, NET**\n\n \n\nIntangible assets consisted of the following:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nLand use rights \n 4,833,247  \n 4,630,496 \n\nLess: accumulated amortization \n (334,261) \n (198,093)\n\nIntangible assets, net \n **4,498,986**  \n 4,432,403 \n\n \n\nAmortization expense for the years ended December 31, 2025, 2024 and\n2023 was $124,047, $101,315 and $100,689, respectively.\n\n \n\nAs of December 31, 2025 and 2024, land use rights totaling $ 3,766,943\nand $3,918,126 were pledged as collaterals to secure the Company’s bank loan from Bank of Rizhao, Rural Commercial Bank of Shandong,\nBank of Beijing, Bank of Weifang and Agricultural Bank of China (see Note 10).\n\n \n\nDuring the years ended December 31, 2025, 2024\nand 2023, the Company did not recognize any impairment losses on its intangible assets.\n\n \n\nDuring the year ended December 31, 2023, the Company disposed of portions\nof its manufacturing buildings (see Note 7). In connection with this transaction, a parcel of land use right was sold, resulting\nin cash proceeds of $738,437. As a result, land use right with a cost of $865,720 and related accumulated amortization of $243,160 was\nderecognized from the intangible assets. This transaction resulted in a net gain of $115,877.\n\n \n\nIn 2023, the Company acquired two parcels of land use rights for total\nconsideration of $559,893. The land was reserved for future development.\n\n \n\nAmortization of intangible assets attributable\nto future periods as of December 31, 2025 is as follows:\n\n \n\nTwelve months ended \nAmortization amount \n\n  \nUS$ \n\n2026 \n 103,747 \n\n2027 \n 103,747 \n\n2028 \n 103,747 \n\n2029 \n 103,747 \n\n2030 \n 103,747 \n\nThereafter \n 3,980,251 \n\nTotal \n **4,498,986** \n\n \n\n**NOTE 9 — OTHER NONCURRENT ASSETS**\n\n \n\nDeposit for investment\n\n \n\nOn December 6, 2024, WFOE deposited an amount of approximately $32.9\nmillion to Jinan Langchi Heavy Industry Co., Ltd. (“Langchi”), in anticipation of a joint investment with Zhongke Hongyuan\n(Beijing) Holdings Co., Ltd. (“Zhongke”) in Langchi under an investment framework contract for a new factory in Xuzhou, Jiangsu\nProvince, under which Hongli WFOE was expected to serve as the managing entity while Zhongke was expected to act as the investing shareholder\nof Jinan Langchi. The framework contract had a definite effective date until December 31, 2025 and the deposit should be returned if the\ninvestment cannot be consummated during the effective period of the framework contract.\n\n \n\nF-21\n\n \n\n \n\nIn 2025, the investment underlying the abovementioned framework contract\nwas not completed and the investment framework agreement terminated in accordance with its terms. Later, the Company further signed certain\nagreements with two new partners for a potential investment plan. According to the entrustment contract, the deposit amount would be used\nas part of the consideration in the upcoming investment projects. The deposit does not constitute an equity investment, loan, or capital\ncontribution before it is finally executed in a definite contract. The Company retains control over the use of the funds, and any unused\nportion is contractually refundable upon demand.\n\n \n\nAs of December 31, 2025, no investment project has been completed and\nthe related investment project sourcing activities remain in progress. Accordingly, the balance continues to be presented as a deposit.\nThe Company will reclassify the deposit as part of the consideration transferred upon execution of a definitive agreement and the transfer\nof the related rights and obligations.\n\n \n\nThe Company assesses the recoverability of the deposit on an ongoing\nbasis. As of the reporting date, management has concluded that the deposit is fully recoverable, and no impairment loss has been recognized.\n\n \n\nPrepayments for purchase of Yingxuan Assets\n\n \n\nIn November 2020 and January 2021, Hongli Shandong entered into agreements\nwith Yingxuan Heavy Industry Co., Ltd. (“Yingxuan”) to acquire certain industrial land use rights, buildings, facilities and\ninfrastructure. In May 2023, the parties entered into a supplementary agreement to revise the total consideration to approximately $21.9\nmillion (RMB 151.4 million).\n\n \n\nAs of December 31, 2025, the Company had paid approximately $18.9 million\n(RMB 132.1 million) under the agreements. Of the amount paid, approximately $9.3 million (RMB 65.0 million) had been recorded as property,\nplant and equipment and approximately $4.6 million (RMB 32.5 million) had been recorded as intangible assets, representing assets that\nhad been legally transferred to the Company. As of December 31, 2025, approximately $5.0 million (RMB 34.6 million) was recorded as prepayments\nfor purchase of Yingxuan Assets. The remaining unpaid balance was approximately $2.8 million (RMB 19.3 million). Pursuant to the supplementary\nagreement, upon receipt of the remaining payment from Hongli Shandong, Yingxuan shall cooperate with Hongli Shandong to complete the transfer\nof the remaining real estate within 30 days, at which time Hongli Shandong will obtain the beneficial ownership and control of the relevant\nproperties and land use rights. As of the filing date of this report, assets valued at approximately $7.7 million (RMB 53.9 million) had\nnot yet been legally transferred to the Company.\n\n \n\n \n\nF-22\n\n \n\n \n\n**NOTE 10 — LOANS**\n\n \n\nLoans represent amounts payable to various banks\nand financial institutions in accordance with the scheduled payment terms outlined in the respective loan agreements. These loans are\nsecured by collateral or guarantees and are classified as either short-term or long-term based on their respective maturities.\n\n \n\n              **As of December 31,**  \n\n**Financial Institutions**   **Loan period**   **Interest rate**     **2025**     **2024**  \n\n              **US$**     **US$**  \n\nChina Minsheng Bank(1)(3)   February 11, 2025 to February 11, 2026     3.30 %     285,996       **-**  \n\nChina Minsheng Bank(1)(3)   June 30, 2025 to June 30, 2026     3.30 %     428,994       **-**  \n\nChina Minsheng Bank(1)(3)   September 3, 2025 to September 3, 2026     3.30 %     571,992       **-**  \n\nBank of Rizhao(2)   April 10, 2025 to April 10, 2026     3.50 %     714,990       **-**  \n\nRural Commercial Bank of Shandong(2)   September 29, 2025 to September 29, 2026     3.20 %     3,574,952       **-**  \n\nRural Commercial Bank of Shandong(2)   November 21, 2025 to November 18, 2026     3.50 %     714,990       **-**  \n\nXCMG Commercial Factoring (Xuzhou) Co., Ltd(1)(4)   November 28, 2025 to February 25, 2026     3.50 %     500,493       **-**  \n\nXCMG Commercial Factoring (Xuzhou) Co., Ltd(1)(4)   December 12, 2025 to March 25, 2026     3.50 %     171,598       **-**  \n\nBank of Beijing(1)(3)   December 29, 2025 to December 29, 2026     3.10 %     714,990       **-**  \n\nIndustrial and Commercial Bank of China   March 21, 2025 to March 20, 2026     3.65 %     142,998       **-**  \n\nIndustrial and Commercial Bank of China   March 21, 2025 to March 18, 2026     3.65 %     285,999       **-**  \n\nBank of Beijing(1)   December 25, 2024 to December 25, 2025     3.10 %     **-**       958,995  \n\nRural Commercial Bank of Shandong(1)(2)   December 2, 2024 to November 26, 2025     4.35 %     **-**       684,997  \n\nBank of Rizhao(1)(2)   April 17, 2024 to April 10, 2025     3.70 %     **-**       1,095,996  \n\nChina Minsheng Bank(1)(3)   August 30, 2024 to August 30, 2025     4.00 %     **-**       684,997  \n\nWeihai City Commercial Bank(1)   February 29, 2024 to February 25, 2025     3.75 %     **-**       1,095,996  \n\nAgricultural Bank of China(1)(2)   September 29, 2024 to September 28, 2025     3.90 %     **-**       1,315,195  \n\n**Short-term loans**                 **8,107,992**       **5,836,176**  \n\n                             \n\nShenzhen Qianhai WeBank Co., Ltd.(1)(2)   January 30, 2024 to February 1, 2026     6.28 %     40,857       234,856  \n\nBank of Weifang(1)(2)   April 25, 2023 to April 22, 2026     2.80 %     100,099       -  \n\nBank of Weifang(1)(2)   May 10, 2023 to April 22, 2026     2.80 %     1,272,683       5,480  \n\nRural Commercial Bank of Shandong(1)(2)   April 28, 2023 to April 27, 2026     3.50 %     1,993,393       2,740  \n\n**Current portion of long-term loans**                 **3,407,032**       **243,076**  \n\n**Total short-term loans**                 **11,515,024**       **6,079,252**  \n\n                             \n\nShenzhen Qianhai WeBank Co., Ltd.(1)(2)   January 30, 2024 to February 1, 2026     6.28 %     -       39,143  \n\nBank of Weifang(1)(2)   April 25, 2023 to April 22, 2026     2.80%-3.30 %     -       136,999  \n\nBank of Weifang(1)(2)   May 10, 2023 to April 22, 2026     2.80%-3.30 %     -       1,219,295  \n\nRural Commercial Bank of Shandong(1)(2)   April 28, 2023 to April 27, 2026     3.50%-4.10 %     -       1,909,772  \n\n**Non-current portion of long-term loans**                 **-**       **3,305,209**  \n\n \n\n(1)The\nloans were guaranteed by the CEO, Jie Liu, and/or the family members of the CEO, Yuanqing Liu, Ronglan Sun and Hongyu Hao.\n\n \n\n(2)The\nloans were secured by various patents, land use rights and construction in progress, real estate.\n\n \n\n(3)The\nloans were secured by accounts receivable.\n\n \n\n(4)The\nloans were secured by recourse financing on eligible accounts receivable.\n\n \n\nInterest expense pertaining to the above short-term\nloans for the years ended December 31, 2025, 2024 and 2023 amounted to $226,264, $281,139 and $450,929, respectively, which included\nin the “Interest and financing expenses, net” in the Company’s consolidated statements of operations and comprehensive\nincome (loss). The weighted average interest rate for short-term loans was 3.29%, 4.35% and 5.70% for the years ended December 31, 2025,\n2024 and 2023, respectively.\n\n \n\nInterest expense pertaining to the above long-term loans for the years\nended December 31, 2025, 2024 and 2023 amounted to $165,003, $155,472 and $91,135, respectively, which included in the “Interest\nand financing expenses, net” in the Company’s consolidated statements of operations and comprehensive income (loss).\n\n \n\nAll the bank loans were denominated in RMB.\n\n \n\nF-23\n\n \n\n \n\n**NOTE 11 — ACCRUED EXPENSES AND OTHER PAYABLES**\n\n \n\nAccrued expenses and other payables consisted of the following:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nSalary and welfare payable \n 247,113  \n 285,195 \n\nVAT and other taxes payables \n 112,917  \n 114,114 \n\nInterest payable \n 22,029  \n 21,398 \n\nContract liabilities \n 162,120  \n 219,933 \n\nOther accrued expenses* \n 233,409  \n 54,072 \n\nTotal \n 777,588  \n 694,712 \n\n \n\n*Other accrued expenses included the return liabilities and warranty\nliabilities in relation to the revenue generated.\n\n \n\n**Failed sale and leaseback**\n\n \n\nIn 2021 and 2022, the Company engaged in three\nsale and leaseback transactions involving the 2-year leasing of four pieces of machinery. These agreements provided the Company\nwith an option to buy the machinery at the lease’s conclusion for RMB100, a price significantly below market value. Upon reviewing\nthe value of the assets at the end of the lease term and comparing it to the nominal purchase price, management determined that it was\nhighly likely the Company would exercise this purchase option. As a result, these transactions do not meet the criteria for sale and\nleaseback transactions and are instead treated as financing arrangements by the Company.\n\n  \n\nFor the years ended December 31, 2025, 2024 and\n2023, the interest related to the failed sale and leaseback was nil, nil and $9,371, respectively. There were no financing liabilities\nas of December 31, 2025 and 2024, respectively. All financing liabilities were fully paid off as of December 31, 2024.\n\n \n\n**NOTE 12 — LEASES**\n\n \n\nThe Company entered into several lease agreements to lease machineries\nto facilitate its manufacturing. The original lease terms range from 13 months to three years. As the lease term includes\nthe lessee’s option to purchase assets at a nominal amount by the end of the lease term, and the Company is reasonably certain to\nexercise an option to purchase the underlying asset, the Company accounted for the leases as finance leases.\n\n \n\nFor the years ended December 31, 2025, 2024 and 2023, right-of-use\nassets of nil, $626,414 and $508,617, respectively, were transferred to property and equipment upon full repayment of the related\nleases, and the Company exercised the option to purchase the underlying asset during the year ended December 31, 2024 and 2023. There\nwere no finance lease right-of-use assets and liability as of December 31, 2025 and 2024, respectively.\n\n \n\nThe Components of lease expenses were as follows:\n\n \n\n  \nFor the year ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nFinance Lease Cost: \n   \n   \n  \n\nAmortization of right-of-use assets \n \n-\n  \n 37,335  \n 73,422 \n\nInterest on lease liabilities \n \n-\n  \n 539  \n 10,036 \n\nTotal finance lease cost \n \n-\n  \n 37,874  \n 83,458 \n\n \n\nThe remaining lease terms and discount rates were as follows:\n\n \n\n   For the years ended December 31, \n\n   2025   2024   2023 \n\n             \n\nWeighted-average remaining lease term (in years)   \n-\n    \n-\n    0.46 \n\nWeighted-average discount rate   \n-\n    \n-\n    5.84%\n\n \n\nF-24\n\n \n\n \n\n**NOTE 13 — INCOME TAXES**\n\n \n\n**Cayman Islands**\n\n \n\nUnder the current laws of the Cayman Islands,\nthe Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman\nIslands withholding tax will be imposed.\n\n \n\n**Hong Kong**\n\n \n\nHongli HK is incorporated in Hong Kong and is\nsubject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with\nrelevant Hong Kong tax laws. The applicable tax rate is 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part\nof assessable profits over HK$2,000,000 on its taxable income generated from operations in Hong Kong. The Company did not make any\nprovisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Additionally,\npayments of dividends by the subsidiary incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.\n\n \n\n**United States**\n\n \n\nThe Company and its subsidiaries have no presence in the United States\nand does not conduct business in the United States, accordingly no United States Income Tax should be imposed upon the Company and its\nsubsidiaries.\n\n \n\n**PRC**\n\n \n\nIncome Tax\n\n \n\nOn March 16, 2007, the National People’s\nCongress of the PRC enacted an Enterprise Income Tax Law (“EIT Law”), under which Foreign Investment Enterprises (“FIEs”)\nand domestic companies would be subject to EIT at a uniform rate of 25%. The EIT law became effective on January 1, 2008.\n\n \n\nThe Company’s operating subsidiaries are\nall incorporated in the PRC and are subject to PRC income tax, which is computed according to the relevant laws and regulations in the\nPRC. Under the Corporate Income Tax Law of PRC, the current corporate income tax rate of 25% is applicable to all PRC companies,\nincluding both domestic and foreign-invested companies.\n\n \n\nHongli Shandong obtained its High and New Technology\nEnterprises (“HNTE”) certificate with a valid period of three years in 2017. Therefore, Hongli Shandong is eligible to enjoy\na preferential tax rate of 15% from 2017 to 2020 to the extent it has taxable income under the EIT Law, as long as it maintains\nthe HNTE qualification and duly conducts relevant EIT filing procedures with the relevant tax authority. Hongli Shandong further extended\nits HNTE qualification at the end of 2020 for another three years. On December 7, 2023, the Company obtained a new certificate of HNTE\nfurther extended for another three years.\n\n \n\nThe current and deferred portions of income tax\nexpense included in the consolidated statements of operations and comprehensive income were as follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nCurrent tax provision \n 246,804  \n 39,615  \n 92,869 \n\nDeferred tax benefit \n (18,120) \n (31,223) \n (25,129)\n\nIncome tax expense \n 228,684  \n 8,392  \n 67,740 \n\n \n\nThe following\ntable reconciles the statutory rates to the Company’s effective tax rate in the PRC:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\nPRC statutory income tax rate \n 25% \n 25% \n 25%\n\nEffect of preferential tax rates \n (10)% \n (10)% \n (10)%\n\nEffect of additional deduction allowed for tax purposes \n (6)% \n (15)% \n (8)%\n\nEffect of non-deductible expense and others \n 2% \n \n-\n  \n \n-\n \n\nEffective tax rate \n 11% \n \n-\n  \n 7%\n\n \n\nF-25\n\n \n\n \n\nThe\ntax effects of temporary differences that give rise to the deferred assets and liabilities were as follows:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nDeferred Tax Assets \n   \n  \n\nDepreciation and amortization \n 9,519  \n 28,948 \n\nAllowance for CECL \n 33,194  \n 6,971 \n\nInventory reserve \n 5,068  \n 4,854 \n\nNet operating losses \n 10,085  \n \n-\n \n\nLess: valuation allowance \n (10,085) \n \n-\n \n\nDeferred tax assets, net \n 47,781  \n 40,773 \n\n \n\nNet operating losses (NOLs) carryforwards of the Company’s PRC\nsubsidiary is $10,085 as of December 31, 2025 will expire in calendar years 2026 through 2030, if not utilized.\n\n \n\nFor the years ended December 31, 2025, 2024 and 2023, the Company recorded\n$10,085, nil, and nil valuation allowance for deferred tax assets, respectively.\n\n \n\nAggregate undistributed earnings of the Company’s\nsubsidiary, VIE and VIE’s subsidiaries located in the PRC that are available for distribution at December 31, 2025, 2024 and 2023\nare considered to be indefinitely reinvested and accordingly, no provision has been made for the Chinese dividend withholding taxes that\nwould be payable upon the distribution of those amounts to any entity within the Company that is outside of the PRC.\n\n \n\nThe Company does not have any present plan to\npay any cash dividends on its ordinary shares in the foreseeable future. It intends to retain most of its available funds and any future\nearnings for use in the operation and expansion of its business. As of December 31, 2025 and 2024, the Company has not declared any dividends.\n\n \n\nAs of December 31, 2025 and 2024, the Company\nhad no significant uncertain tax positions that qualify for either recognition or disclosure in the financial statements. As of December\n31, 2025, income tax returns for the tax years ended December 31, 2020 through December 31, 2024 remain open for statutory examination\nby PRC tax authorities.\n\n \n\nThe uncertain tax positions are related to tax\nyears that remain subject to examination by the relevant tax authorities. Based on the outcome of any future examinations, or as a result\nof the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits\nfor tax positions taken regarding previously filed tax returns, might materially change from those recorded as liabilities for uncertain\ntax positions in the Company’s consolidated financial statements as of December 31, 2025 and 2024. In addition, the outcome of\nthese examinations may impact on the valuation of certain deferred tax assets (such as net operating losses) in future periods. The Company’s\npolicy is to recognize interest and penalties accrued on any unrecognized tax benefits, if any, as a component of income tax expense.\nThe Company does not anticipate any significant increases or decreases to its liability for unrecognized tax benefit within the next\ntwelve months.\n\n \n\nAccording to the PRC Tax Administration and Collection\nLaw, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer.\nThe statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment\nof income tax liability exceeding $13,700 (RMB100,000) is specifically listed as a special circumstance. In the case of a transfer pricing\nrelated adjustment, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion.\n\n \n\nAccounting for Uncertainty in Income Taxes\n\n \n\nThe tax authority of the PRC Government conducts\nperiodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises have completed their relevant\ntax filings. Therefore, the Company’s PRC entities’ tax filings results are subject to change. It is therefore uncertain\nas to whether the PRC tax authority may take different views about the Company’s PRC entities’ tax filings, which may lead\nto additional tax liabilities.\n\n \n\nASC 740 requires recognition and measurement\nof uncertain income tax positions using a “more-likely-than-not” approach. The Company’s management has evaluated the\nCompany’s tax positions and concluded that provision for uncertainty in income taxes was not necessary as of December 31, 2025\nand 2024.\n\n \n\nF-26\n\n \n\n \n\n**NOTE 14 — CONCENTRATIONS**\n\n \n\nCustomer concentration risk \n\n \n\nFor the years ended December 31, 2025, 2024 and 2023, the customers\naccounted for more than 10% of the Company’s total revenue was as follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\nCustomer A \n 35% \n 43% \n 43%\n\nCustomer B \n 23% \n 17% \n \n*\n \n\nCustomer C \n 13% \n 12% \n 22%\n\n \n\nAs of December 31, 2025 and 2024, the customers accounted for more\nthan 10% of the Company’s total accounts receivable was as follows:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\nCustomer A \n 40% \n 42%\n\nCustomer B \n 28% \n 25%\n\nCustomer C \n 10% \n \n*\n \n\n \n\n*Present the percentage less than 10%.\n\n \n\nVendor\nconcentration risk\n\n \n\nFor the years ended December 31, 2025, 2024 and 2023, the supplier\naccounted for more than 10% of the Company’s total purchase was as follows:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\nSupplier A \n *  \n 15% \n 48%\n\nSupplier B \n *  \n 20% \n * \n\nSupplier C \n 33% \n *  \n * \n\nSupplier D \n 12% \n *  \n * \n\n \n\n* Present the percentage less than 10%.\n\n \n\nAs of December 31, 2025 and 2024, the Company had no supplier accounted\nfor more than 10% of the Company’s total accounts payable.\n\n \n\nConcentration of Credit Risks\n\n \n\nThe Company’s operations are conducted in the People’s\nRepublic of China (“PRC”). As such, the Company’s business, financial condition, and results of operations may be influenced\nby the political, economic, and legal environment in the PRC, as well as by the overall state of the PRC economy. The Company’s\noperations are subject to specific considerations and significant risks not typically associated with companies operating in North America.\nThese risks include changes in governmental policies regarding laws and regulations, anti-inflationary measures, currency conversion and\nremittance restrictions, and tax rates and methods, among other factors. Such changes could have a material adverse effect on the Company’s\nresults of operations and financial condition.\n\n \n\nFinancial instruments that potentially subject the Company to concentrations\nof credit risk include cash and accounts receivable arising from its normal business activities. The Company places its cash with financial\ninstitutions it believes to be creditworthy. All cash is maintained with the banks in the PRC. Under PRC regulations, the maximum insured\namount per financial institution per entity is approximately $69,000 (RMB 500,000). As of December 31, 2025 and 2024, the Company’s\nuninsured cash balances totaled $1,253,370 and $544,449, respectively. The Company has not experienced any losses related to these bank\ndeposits and believes it is not exposed to significant credit risk with respect to its cash balances.\n\n \n\nThe Company routinely evaluates the financial condition of its customers\nand establishes an allowance for doubtful accounts based on expected credit losses and other relevant risk factors. As a result, the Company\nbelieves its exposure to credit risk on accounts receivable, beyond the recorded allowance, is not significant.\n\n \n\nF-27\n\n \n\n \n\n**NOTE 15 — RELATED PARTY**\n\n \n\nThe related parties had transactions for the years ended December 31,\n2025, 2024 and 2023 consisted of the following:\n\n \n\n**Name of the related parties**   **Nature of the relationship**\n\nJie Liu   CEO and Chairman of the Company\n\nJian Liu   Vice president of the Company\n\nYuanqing Liu   Family member of the CEO, Father of the CEO\n\nRonglan Sun   Family member of the CEO, Mother of the CEO\n\nHongyu Hao   Family member of the CEO and Vice President of Purchase Department\n\nYuanxiang Liu   Family member of the CEO, Uncle of the CEO\n\nLi Liu   Family member of the CEO, Sister of the CEO\n\nYongqing Dong   Family member of the CEO\n\n \n\nCertain loans were guaranteed by the CEO, Jie Liu, and the family members\nof the CEO, Yuanqing Liu, Ronglan Sun and Hongyu Hao. Details please see Note 10 Loans.\n\n \n\nAmount due from related parties:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nJie Liu(1) \n 356,556  \n \n-\n \n\nJian Liu(5) \n 20  \n \n-\n \n\nTotal \n 356,576  \n \n-\n \n\n \n\nAmount due to related parties:\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nJie Liu(2)(3)(5) \n \n-\n  \n (17,875)\n\nHongyu Hao(5) \n \n-\n  \n (629)\n\nYongqing Dong(4) \n (4,207) \n (2,743)\n\nTotal \n (4,207) \n (21,247)\n\n \n\nRelated party transactions:\n\n \n\n  \nFor the year ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nAdvance to related parties(1) \n (410,017) \n \n-\n  \n (351,924)\n\nRepayment from related parties(1) \n 423,930  \n 346,238  \n \n-\n \n\nAdvances from related parties(2) \n \n-\n  \n 1,064,327  \n 4,566,368 \n\nRepayments to related parties(2) \n \n-\n  \n (1,041,097) \n (5,127,251)\n\nSale to a related party(3) \n 19,868  \n \n-\n  \n \n-\n \n\nPurchase from a related party(4) \n 16,751  \n \n-\n  \n \n-\n \n\n \n\n(1)The Company made interest-free loan to Jie Liu, which is due on demand, and received repayment for the loan.\n\n \n\n(2)The Company received interest-free loan from Jie Liu, which is due on demand, and made repayment for the loan.\n\n \n\n(3)The Company sold a vehicle to Jie Liu.\n\n \n\n(4)The Company received freight service from Yongqing Dong.\n\n \n\n(5)The\nCompany made reimbursement to Jie Liu, Jian Liu, Hongyu Hao, Yuanqing Liu, and Yuanxiang Liu.\n\n \n\nF-28\n\n \n\n \n\n**NOTE 16 — SHAREHOLDERS’ EQUITY**\n\n \n\nOrdinary shares\n\n \n\nOn February 9, 2021, Hongli Cayman was incorporated\nin the Cayman Islands. Hongli Cayman issued 97 Ordinary Shares at $0.0001 par value per share to Hongli Development Limited\n(“Hongli Development”) and issued 3 Ordinary Shares at $0.0001 par value per share to Hongli Technology Limited\n(“Hongli Technology”).\n\n \n\nOn March 28, 2022, the Company’s shareholders\napproved an issuance of 17,999,900 new Ordinary Shares at par value $0.0001 per share, among which, 17,459,903 new\nOrdinary Shares were issued to Hongli Development and 539,997 new Ordinary Shares were issued to Hongli Technology, which share\nissuances were equivalent to a forward split of the Company’s outstanding Ordinary Shares at an approximate or rounded ratio of 180,000-for-1 share.\nAs a result, the Company had $50,000 divided into 500,000,000 Ordinary Shares with a par value of $0.0001 per share.\n\n \n\nOn September 13, 2022, the current existing shareholders\nof the Company surrendered 1,500,000 Ordinary Shares in total, of which Hongli Development Limited surrendered 1,455,000 Ordinary\nShares and Hongli Technology Limited surrendered 45,000 Ordinary Shares, respectively. Furthermore, Hongli Development Limited\nsurrendered another 6,500,000 Ordinary Shares on December 1, 2022. As a result, 10,000,000 Ordinary Shares were issued\nand outstanding as of December 31, 2022, among which, Hongli Development Limited holds 9,505,000 Ordinary Shares and Hongli\nTechnology Limited holds 495,000 Ordinary Shares, respectively. The shares and per share data are presented on a retroactive\nbasis as if the reorganization, share issuance, and share surrender made by the current existing shareholders of the Company had been\nin existence from the earliest period presented. The Company issued 2,062,500 Ordinary Shares in connection with the initial\npublic offering closed on March 31, 2023. The Company issued 309,375 Ordinary Shares in connection with the underwriter’s\nexercise of the over-allotment option on May 2, 2023. On November 23, 2023, Hongli Technology Limited surrendered 133,125 ordinary\nshares to the Company.\n\n \n\nInitial Public Offering\n\n \n\nOn March 31, 2023, the Company closed its Offering\nof 2,062,500 Ordinary Shares at a public offering price of $4.00 per share for total gross proceeds of $8.25 million\nbefore deducting underwriting discounts and offering expenses. Net proceeds of the Company’s Offering were approximately $7.2 million.\nIn addition, the Company granted the underwriters a 45-day option to purchase up to an additional 309,375 Ordinary Shares at\nthe public offering price. On May 2, 2023, the underwriter exercised the over-allotment option in full for total gross proceeds of $1,237,500 before\ndeducting underwriting discounts and commissions. Net proceeds of our over- allotment option were approximately $1.1 million. The\nCompany’s Ordinary Shares began trading on the Nasdaq Capital Market under the symbol “HLP” on March 29, 2023.\n\n \n\nShare Based Compensation\n\n \n\nOn March 20, 2024, the board of directors of the Company approved and\nadopted the 2024 Equity Incentive Plan which allows the Company to offer incentive awards to three employees and officers (the “Participants”).\nUnder the 2024 Equity Incentive Plan, the Company may issue incentive awards to the Participants to purchase not more than 1,200,000 Ordinary\nShares.\n\n \n\nOn May 7, 2024, the Company issued a total of 1,200,000 Ordinary\nShares to three employees of the Company. The equity incentive plan agreement does not impose any vesting conditions or restrictions\nrelated to employee termination. As a result, $1,968,000 was recognized as wages and employment benefits expenses for the year ended\nDecember 31, 2024. Additionally, $120 was recorded as common stock and $1,967,880 as additional paid-in capital in the equity\nsection of the consolidated financial statements.\n\n \n\nPrivate Placement\n\n \n\nOn November 13, 2024, the Company entered into\na Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain non-U.S. investors (the “Purchasers”)\nfor a private placement offering, pursuant to which the Company agreed to sell and issue 60,000,000 ordinary shares, par value\n$0.0001 per share, at a purchase price of $0.55 per share, for an aggregate purchase price of $33,000,000. The transaction\nclosed on December 5, 2024. Upon closing, the Company issued 60,000,000 ordinary shares to the Purchasers and received gross\nproceeds of RMB239,979,300, equivalent to $33,000,000. The ordinary shares issued in this transaction were offered and sold in reliance\non the exemption from registration provided by Rule 903 of Regulation S under the Securities Act of 1933, as amended.\n\n \n\nF-29\n\n \n\n \n\n**NOTE 17 — STATUTORY RESERVE**\n\n \n\nThe statutory reserves in the consolidated balance\nsheets mainly include the Company’s statutory reserve. In accordance with the relevant laws and regulations of the PRC, the Company\nis required to set aside at least 10% of its respective after-tax net profits each year determined in accordance with PRC GAAP and\nif any, to fund the statutory reserve until the balance of the reserve reaches 50% of its respective registered capital. The statutory\nreserve is not distributable in the form of cash dividends and can be used to make up cumulative prior year losses. During the years\nended December 31, 2025, 2024 and 2023, no earnings were appropriated to surplus reserve. The statutory reserve of Hongli Shandong amounted\nto $370,683 and $370,683, which reached 50% of its respective registered capital, as of December 31, 2025 and 2024, respectively.\n\n \n\n**NOTE 18 — COMMITMENT AND CONTINGENCIES**\n\n \n\nLegal Proceedings\n\n \n\nFrom time to time, we may become involved in\nlegal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any legal proceedings\nthat in the opinion of the management, if determined adversely to us, would have a material adverse effect on our business, financial\ncondition, operating results or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense\nand settlement costs, diversion of management resources and other factors.\n\n \n\n**NOTE 19 — SEGMENT REPORTING**\n\n \n\nThe Company adopted Accounting Standards Update\n(ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures on January 1, 2024. This update enhances\nsegment reporting by requiring disclosure of significant expense categories and other items regularly reviewed by the chief operating\ndecision maker (“CODM”), even for entities with a single reportable segment.\n\n \n\nThe Company operates as a single reportable\nsegment. The CODM, identified as the Chief Executive Officer, reviews consolidated financial information and manages the business as\na single unit. The Company manufactures and sells agricultural machinery cab assemblies, construction machinery cab assemblies, excavator\ncab assemblies, and special-shaped steel pipes. All products are manufactured at a single facility located in China.\n\n \n\nDuring the year ended December 31, 2025 and 2024, approximately 15.4%\nand 13.5% of revenue was derived from export sales, with the remainder from customers in China. The CODM does not evaluate performance\nbased on geographic region, as the products, production processes, customer base, and distribution channels are consistent across all\nmarkets.\n\n \n\nThe measure of segment profit or loss used by the CODM is operating\nincome. Significant expense categories regularly provided to and reviewed by the CODM are those presented in the consolidated statements\nof comprehensive income. The CODM does not review information on segment assets, liabilities, or capital expenditures; therefore, such\ninformation is not disclosed.\n\n \n\n**NOTE 20 — RESTRICTED NET ASSETS**\n\n \n\nAs a result of the PRC laws and regulations and the requirement that\ndistributions by PRC entities can only be paid out of distributable profits computed in accordance with PRC GAAP, the PRC entities are\nrestricted from transferring a portion of their net assets to the Group. Amounts restricted include additional paid-in capital and the\nstatutory reserves of the Company’s PRC subsidiaries, affiliates and VIEs. As of December 31, 2025 and 2024, the total of restricted\nnet assets were $980,284 and $980,284, respectively.\n\n \n\nF-30\n\n \n\n \n\n**NOTE 21 — SUBSEQUENT EVENTS**\n\n \n\nThe Company evaluated subsequent events and transactions\nthat occurred after the balance sheet date through the date the financial statements were issued. Based on this evaluation, and except\nas disclosed below, the Company did not identify any subsequent events that require adjustment to, or disclosure in, the financial statements\nin accordance with U.S. GAAP.\n\n \n\nPrivate Placement\n\n \n\nOn April 11, 2026, the Company entered into a Securities Purchase Agreement\n(the “Securities Purchase Agreement”) with a U.S. investor (the “Investor”) for a private placement offering,\nproviding the sale and issuance of 1,300,000 ordinary shares of the Company, par value $0.0001 per share (the “Shares”), at\na purchase price of $0.25 per Share, for aggregate gross proceeds of $325,000. The Securities Purchase Agreement contains customary representations\nand warranties of the Company and the Investor and customary indemnification and obligations of the parties. On April 24, 2026, the transaction\ncontemplated by the Securities Purchase Agreement was closed. Upon closing, the Company issued a total of 1,300,000 ordinary shares to\nthe Investor following receipt of gross proceeds of $325,000. \n\n \n\nShort-Term Loans\n\n \n\nOn February 5, 2026, the Company obtained a short-term\nloan of $428,994 (RMB 3,000,000) from XCMG Group Commercial Factoring (Xuzhou) Co., Ltd. The loan bears interest at an annual\nrate of 3.5% per annum and is scheduled to mature on May 25, 2026. The loan is secured by accounts receivable totaling $428,994 (RMB 3,000,000)\nand is personally guaranteed by the CEO and one family member.\n\n \n\nOn March 4, 2026, the Company obtained a short-term\nloan of $220,217 (RMB 1,540,000) from XCMG Group Commercial Factoring (Xuzhou) Co., Ltd. The loan bears interest at an annual\nrate of 3.5% per annum and is scheduled to mature on June 25, 2026. The loan is secured by accounts receivable totaling $220,217 (RMB 1,540,000)\nand is personally guaranteed by the CEO and one family member.\n\n \n\nRelated Party Transaction\n\n \n\nFor the subsequent periods after financial statement date till the\nfinancial statement issue date, the Company received totaling $328,896 interest free loan from its related parties, which is due on demand.\n\n \n\n**NOTE 22 —PARENT COMPANY’S CONDENSED\nFINANCIAL STATEMENTS**\n\n \n\nThe following condensed financial statements present the financial\nposition and results of operations of Hongli Group Inc., the parent company, which is a holding company with several subsidiaries. The\ncondensed financial information is provided in accordance with Schedule I of Article 5-04 of Regulation S-X, issued by the U.S. Securities\nand Exchange Commission.\n\n \n\nThe Company and its subsidiaries and VIEs were included in the consolidated\nfinancial statements where the intercompany transactions and balances were eliminated upon consolidation. For purpose of the Company’s\nstandalone financial statements, its investments in subsidiaries were reported using the equity method of accounting. The Company’s\nprofits or deficit in subsidiaries were reported as equity in income or losses of subsidiaries in the accompanying parent company financial\nstatements.\n\n \n\nF-31\n\n \n\n \n\n**HONGLI GROUP INC.**\n\n**CONDENSED BALANCE SHEETS\n(PARENT COMPANY ONLY)**\n\n**(Amounts in US$, except for number of shares\nand per share data)**\n\n \n\n  \nAs of December 31, \n\n  \n2025  \n2024 \n\n  \nUS$  \nUS$ \n\nAssets \n   \n  \n\nCash \n 4,632  \n 4,654 \n\nDue from subsidiaries, net \n 40,422,612  \n 40,422,612 \n\nInvestment in subsidiaries \n 17,404,880  \n 13,066,030 \n\nTotal Assets \n 57,832,124  \n 53,493,296 \n\n  \n    \n   \n\nLiabilities and Equity \n    \n   \n\nCurrent liability \n 1  \n 1 \n\nTotal Liabilities \n 1  \n 1 \n\nOrdinary shares, $0.0001 par value, 500,000,000 shares\nauthorized, 73,438,750, 73,438,750 and 12,238,750 shares issued and outstanding as of December 31, 2025 and 2024, respectively  \n 7,344  \n 7,344 \n\nAdditional paid-in capital \n 42,998,556  \n 42,998,556 \n\nStatutory reserves \n 370,683  \n 370,683 \n\nRetained earnings \n 13,666,910  \n 11,724,073 \n\nAccumulated other comprehensive loss \n 788,630  \n (1,607,361)\n\nTotal Hongli Group Inc. shareholders’ equity \n 57,832,123  \n 53,493,295 \n\nTotal Liabilities and Equity \n 57,832,124  \n 53,493,296 \n\n \n\nF-32\n\n \n\n \n\n**HONGLI GROUP INC.**\n\n**CONDENSED STATEMENTS\nOF OPERATIONS (PARENT COMPANY ONLY)**\n\n**(Amounts in US$, except for number of shares\nand per share data)**\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nRevenue \n \n-\n  \n \n-\n  \n \n-\n \n\nShare of profit in subsidiaries \n 1,942,862  \n 86,387  \n 864,733 \n\nShare based compensation \n \n-\n  \n (1,968,000) \n \n-\n \n\nOther general and administrative expenses \n (22) \n (22) \n (11)\n\nTotal operating expenses \n (22) \n (1,968,022) \n (11)\n\nNet income (loss) \n 1,942,840  \n (1,881,635) \n 864,722 \n\nOther comprehensive income (loss): \n    \n    \n   \n\nForeign currency translation adjustments \n 2,395,988  \n (700,623) \n (659,161)\n\nComprehensive income (loss) \n 4,338,828  \n (2,582,258) \n 205,561 \n\n \n\nF-33\n\n \n\n \n\n**HONGLI GROUP INC.**\n\n**CONDENSED STATEMENTS\nOF CASH FLOWS (PARENT COMPANY ONLY)**\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \nUS$  \nUS$  \nUS$ \n\nCash Flows from Operating Activities \n   \n   \n  \n\nNet income (loss) \n 1,942,840  \n (1,881,635) \n 864,722 \n\nNon-cash adjustment \n (1,942,862) \n (86,387) \n (864,734)\n\nShare based compensation \n \n-\n  \n 1,968,000  \n \n-\n \n\nAdjustments to reconcile net income (loss) to net cash used in operating activities: \n    \n    \n   \n\nIncrease in accrued liabilities \n \n-\n  \n \n-\n  \n 1 \n\nNet Cash Used in Operating Activities \n (22) \n (22) \n (11)\n\n  \n    \n    \n   \n\nCash Flows from Investing Activities: \n    \n    \n   \n\nAdvance to subsidiary \n \n-\n  \n \n-\n  \n (8,368,964)\n\nNet Cash Used in Investing Activities \n \n-\n  \n \n-\n  \n (8,368,964)\n\n  \n    \n    \n   \n\nCash Flows from Financing Activities: \n    \n    \n   \n\nProceeds from initial public offering, net of costs \n \n-\n  \n \n-\n  \n 7,228,964 \n\nProceeds from exercise of option, net of costs \n \n-\n  \n \n-\n  \n 1,144,687 \n\nNet Cash Provided by Financing Activities \n \n-\n  \n \n-\n  \n 8,373,651 \n\n  \n    \n    \n   \n\nNet (decrease) increase in cash and cash equivalents \n (22) \n (22) \n 4,676 \n\nCash and cash equivalents - beginning of the year \n 4,654  \n 4,676  \n \n-\n \n\nCash and cash equivalents - end of the year \n 4,632  \n 4,654  \n 4,676 \n\n  \n    \n    \n   \n\nNon-cash investing and financing activities: \n    \n    \n   \n\nOffering costs paid by the VIE \n \n-\n  \n \n-\n  \n 946,352 \n\nProceeds of private placement deposited into WFOE 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