20-F: Elong Power Shifts Strategy, Divests Manufacturing, Raises Capital

Elong Power Holding Limited reported a reduced net loss in 2025, driven by a strategic shift to an asset-light model focused on energy storage systems and recent capital raises, despite ongoing operational challenges and a working capital deficit.

Summary

• Reported a net loss of $5.57 million for the year ended December 31, 2025, a significant improvement from a $30.11 million net loss in 2024.
• Revenue from continuing operations was $2.05 million in 2025, compared to nil in 2024, reflecting the commencement of its new battery trading business.
• Gross profit from continuing operations was $83,018 in 2025, with a gross margin of 4%.
• Operating loss from continuing operations decreased by 87% to $1.5 million in 2025 from $11.0 million in 2024.
• Net loss from discontinued operations significantly decreased to $3.47 million in 2025 from $19.29 million in 2024.
• Cash used in operating activities was $2.66 million in 2025, a slight decrease from $2.82 million in 2024.
• The company had a working capital deficit of $14.0 million, a shareholders' deficit of $22.74 million, and an accumulated deficit of $74.47 million as of December 31, 2025.
• Completed two rounds of financing in February 2026, raising approximately $13 million in net proceeds.
• Divested 100% equity interest in its loss-making battery manufacturing business (Elong Power International Co., Limited and its subsidiaries) in March 2026 for $10,000, recognizing an estimated gain on disposal of $19.1 million.
• Transferred its Class A Ordinary Shares from the Nasdaq Global Market to the Nasdaq Capital Market in April 2026 to regain compliance with listing requirements.
• Ms. Xiaodan Liu, CEO and Chairwoman, controls 67.4% of the aggregate voting power due to the dual-class share structure.
• Identified one material weakness in internal control over financial reporting related to financial reporting and IT control environment, with remediation measures implemented.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing with cautious optimism. While the significant reduction in net loss and successful capital raises are positive, the company still faces substantial accumulated deficits and relies on future large-scale sales for profitability, with one major project already delayed. The strategic shift is promising but its full impact is yet to be realized.

Positives

• Net loss significantly reduced to $5.57 million in 2025 from $30.11 million in 2024.
• Successfully raised approximately $13 million in net proceeds from two financing rounds in February 2026, improving liquidity.
• Strategic shift to an asset-light model and divestment of loss-making manufacturing assets is expected to streamline business and strengthen working capital in 2026.
• Regained compliance with Nasdaq's minimum bid price requirement and annual report filing requirement.
• Recognized an estimated gain on disposal of approximately $19.1 million from the sale of discontinued operations.

Negatives

• Incurred a net loss of $5.57 million in 2025, continuing a trend of losses.
• Reported a working capital deficit of $14.0 million and a shareholders' deficit of $22.74 million as of December 31, 2025.
• Accumulated deficit reached $74.47 million as of December 31, 2025.
• Operating cash flows remained negative at $2.66 million in 2025.
• The company failed to meet revenue targets for earnout shares in both 2024 and 2025, resulting in the forfeiture of 7,032 Earnout Escrow Shares.
• Identified a material weakness in internal control over financial reporting, indicating deficiencies in financial reporting and IT control environment.
• The Nengjian Henan Urban Construction Engineering Co., Ltd. project, valued at approximately $67.6 million, was postponed with delivery now expected to commence in June 2026 due to pending government approvals.

Risks

• Difficulty in evaluating business prospects and successfully expanding operations or managing growth.
• Safety risks associated with lithium-ion cells in battery energy storage systems, potentially causing accidents, supply delays, and adverse market acceptance.
• Continued significant losses and inability to generate profits or positive cash flow from operating activities in the future.
• Failure to recover trade and bills receivables in a timely manner, potentially affecting financial condition and results of operations.
• Inability to meet future capital requirements, which could limit growth and materially adversely affect financial position and results of operations.
• Demand for battery energy storage systems depends on the attractiveness of fossil fuel alternatives; extended periods of low oil prices could adversely affect demand.
• Intense competition from other battery energy storage system providers, many with significantly greater resources, potentially leading to declining average selling prices and decreased gross profit margins.
• Inability to anticipate customer preferences and successfully develop attractive products could negatively impact revenue and profitability.
• Developments in alternative technology may adversely affect the demand for lithium-based battery energy storage system products.
• Reliance on third-party procurement for key inventories and components, with risks of unstable or untimely supply, rising prices, or reduced availability.
• Dependence on partners in strategic relationships, with potential lack of control over activities and risk of partners developing competitive products.
• Failure to offer high-quality technical support services may adversely affect customer relationships and financial results.
• Customers' ability to cancel or terminate contracts, especially non-binding arrangements, could materially adversely affect business.
• Lengthy and variable sales cycle makes accurate revenue forecasting difficult, leading to potential fluctuations in operating results and share price volatility.
• Working capital requirements involve estimates based on demand expectations, which may lead to excess inventory or product shortages.
• Inability to attract, train, and retain highly-skilled employees and key personnel, particularly R&D staff, could impact product technology iteration and business success.
• Acquisitions or investments in other companies/technologies could divert management attention, result in shareholder dilution, and disrupt operations.
• Impediments to moving cash out of the PRC could hamper growth and diversification, as all cash generated by PRC subsidiaries is currently reinvested in PRC operations.
• Planned expansion into new applications and markets (e.g., U.S., Europe, Southeast Asia) poses additional risks due to differing regulatory requirements, intellectual property protection, tax policies, and economic conditions.
• Financial and reputational risks from product recalls and product liability claims, potentially leading to substantial liabilities exceeding resources.
• Exposure to litigation, environmental, and other legal compliance risks, including increased climate change legislation and complex international laws.
• Failure of products to satisfy mandated safety standards could materially adversely affect demand, business, and operating results.
• Uncertainty in global economic conditions (e.g., Middle East conflicts, Russia-Ukraine invasion) could negatively affect operating results, supply chains, and market volatility.
• Facilities or operations could be damaged or adversely affected by natural disasters and other catastrophic events.
• Connected products, website, systems, and data may be subject to intentional disruption, security incidents, or alleged violations of data handling laws, leading to liability and reputational damage.
• Social media platforms present risks of negative publicity, brand damage, and potential liability.
• Dual-class share structure concentrates voting control with the CEO and Chairwoman, limiting influence of Class A Ordinary Share holders.
• Stock price may be volatile, leading to investor losses and costly securities litigation.
• No expectation of dividend payments in the foreseeable future.
• An active trading market for Class A Ordinary Shares may not be sustained.
• Risk of delisting from Nasdaq due to failure to comply with continued listing standards.
• Negative or inaccurate research by securities or industry analysts could cause share price decline.
• As a public company, subject to U.S. federal securities laws and may not adequately develop governance, compliance, risk management, and control infrastructure.
• As an emerging growth company, taking advantage of exemptions from disclosure requirements could make securities less attractive or difficult to compare.
• As a foreign private issuer, subject to more lenient reporting obligations and corporate governance practices, potentially affording less protection to shareholders.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• Difficulties in protecting interests and enforcing rights through U.S. Federal courts due to incorporation under Cayman Islands law.
• Exclusive forum provision in M&A may limit shareholders' ability to bring claims under federal securities laws in preferred judicial forums.
• Success depends on ability to obtain, maintain, and protect intellectual property rights; risk of challenges, infringement, or misappropriation.
• Substantial costs could be incurred from claims of infringement of another party's intellectual property rights.
• Exposure to infringement or misappropriation claims by third parties could lead to loss of significant rights and inability to provide existing product offerings.
• Difficulties transferring and communicating technology globally due to different platforms and restrictions.
• Uncertainties regarding the PRC Foreign Investment Law's impact on corporate structure and operations.
• Procedural requirements for foreign regulatory bodies to conduct investigations or inspections of operations in China.
• Business subject to evolving and complex laws and regulations in China, which differ from U.S. laws, leading to uncertainties in interpretation and enforcement.
• PRC government may exercise significant oversight and control over business, influencing operations and the value of Class A Ordinary Shares.
• Difficulty for shareholders to enforce foreign judgments or bring actions in China against the company or management based on foreign laws.
• Approval and filing with the CSRC may be required for future offerings under PRC laws, with uncertainty regarding timely completion or approval.
• Approval and filing with CAC or other PRC government authorities may be required for capital raising activities, with uncertainty regarding timely completion or approval.
• PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent use of offshore fund-raising proceeds.
• Delays and/or failures in obtaining and renewing relevant PRC governmental approvals, licenses, or permits for new construction/expansion projects.
• Enforcement of PRC Labor Contract Law and other labor-related regulations may adversely affect business and results of operations.
• Involvement in legal or other proceedings arising from operations, potentially leading to reputational risks and significant liabilities.
• PRC regulations relating to investments in offshore companies by PRC residents may subject beneficial owners or PRC subsidiaries to liability or penalties.
• Failure to comply with PRC regulations regarding employee stock incentive plans may subject PRC plan participants or the company to fines and sanctions.
• Reliance on dividends and other distributions from PRC subsidiaries, with limitations on their ability to make payments potentially affecting the company's ability to conduct business.
• Classification as a PRC resident enterprise for PRC income tax purposes could result in unfavorable tax consequences to the company and non-PRC shareholders.
• Dividends payable to foreign investors and gains on sale of Class A Ordinary Shares by foreign investors may become subject to PRC tax law.
• Shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies.
• Requirements and legal procedures of currency conversion may limit the ability to utilize revenues effectively and affect investment value.
• Securities may be prohibited from trading in the United States under the HFCAA if the PCAOB is unable to inspect or investigate the auditor completely in the future.
• Fluctuations in the value of the Renminbi and overall overseas financial exchange volatility may materially adversely affect investment.

Future Outlook

The company expects to continue incurring operating and net losses until at least the second half of 2026, when large-scale sales and application of its lithium battery energy storage system-related products are anticipated. It plans to continuously invest in R&D of high-performance battery technology, seek new innovations to reduce costs, and increase reliance on automated production. Global expansion, particularly in Southeast Asia and further presence in the PRC energy storage market, is a key strategic goal. The Nengjian Henan Urban Construction Engineering Co., Ltd. project, valued at approximately $67.6 million, is now expected to commence delivery in June 2026.

Management Comments

• Management believes that the implemented remediation measures have substantially addressed the identified material weakness in internal controls.
• Management believes the company has sufficient liquidity to fund operations and working capital needs for at least twelve months from the issuance date of this report, based on recent capital raises and the disposal of loss-making assets.

Industry Context

StockSavvy.ai notes that Elong Power's strategic shift towards an asset-light, technology-driven model, focusing on R&D and system integration while leveraging OEM/ODM partners, aligns with broader trends in the electrochemical energy storage industry. The industry is experiencing rapid growth, with global lithium battery energy storage additions reaching 188.5 GWh in 2024 and projected to hit 265.1 GWh in 2025. The company's focus on overseas residential and C&I storage, and China's grid-side storage, targets high-growth segments driven by renewable energy integration, high electricity prices, and policy support. However, the market is intensely competitive, with major players like CATL, BYD, Pylontech, Sungrow, and Deye expanding into sub-segments, leading to low-price competition and profitability pressure on mid-size enterprises, which Elong Power aims to mitigate through its asset-light model and focus on technical evaluation and integration capabilities.

Comparison to Industry Standards

• Elong Power's gross margin of 4% in 2025 for its new energy storage battery trading business is significantly lower than the margins typically seen in established battery manufacturing or system integration leaders like CATL, BYD, or Sungrow, which benefit from economies of scale and deeper vertical integration. However, this is a new business segment for Elong Power, and its asset-light model aims for cost flexibility rather than high manufacturing margins.
• The company's reliance on OEM partners for manufacturing, rather than self-built capacity, contrasts with the heavy-asset models of industry leaders where depreciation costs can account for 8-10% of revenue. This strategy aims for faster response times and flexible production, similar to some newer entrants or specialized integrators in the rapidly evolving energy storage market.
• The reported net loss of $5.57 million in 2025, despite a strategic shift, indicates that Elong Power is still in a growth and investment phase, unlike profitable industry giants. The company explicitly states it expects to incur losses until large-scale sales are achieved in H2 2026 or later, which is common for emerging players in capital-intensive, high-growth sectors.
• The postponement of the $67.6 million Nengjian Henan Urban Construction Engineering Co., Ltd. project due to pending government approvals highlights regulatory and execution risks common in the Chinese energy sector, which can impact project timelines and revenue recognition for companies operating in this market.

Corporate Governance

Legal Proceedings

• The company is involved in various lawsuits, primarily related to its discontinued operations, with an estimated aggregate amount of approximately $6.12 million (RMB 42.8 million) as of the report date.
• This includes $3.13 million (RMB 21.9 million) in amounts due to suppliers recorded in accounts payable and $2.99 million (RMB 20.9 million) in accrued legal expenses recognized pursuant to court judgments.
• In April 2024, a customer filed a lawsuit against Ganzhou, PRC, requesting contract termination and return of 126 undelivered battery packs (valued at $3.2 million). A court judgment requires Ganzhou, PRC to return the funds and pay liquidated damages, leading to a $0.6 million provision.
• In December 2024, a customer filed a lawsuit against Huizhou, PRC, seeking reimbursement for battery repair costs. A court judgment requires Huizhou, PRC to pay $0.4 million for battery replacement and related expenses, leading to a $0.4 million provision.
• In 2021, a user filed a lawsuit against a company customer and the company (second defendant) in Xianning, Hubei Province. The company accrued a $0.9 million (RMB 6.4 million) lawsuit compensation charge.
• In 2022, a customer filed a lawsuit against Huizhou, PRC and Ganzhou, PRC, seeking payment for vehicle power battery replacement costs. A court judgment requires joint payment of $0.8 million (RMB 5.7 million), leading to a provision of RMB 5.7 million.

Related Party Transactions

• Lease from Ms. Xiaodan Liu (CEO) for $4,174 in 2025 and $55,588 in 2024.
• Proceeds from borrowings from Ms. Xiaodan Liu of $1,380,396 in 2025.
• Outstanding borrowings of $428,994 from Beijing Xinlongmai Enterprise Management Co., Ltd. (affiliate of non-controlling interest shareholder) as of December 31, 2025.
• Outstanding borrowings of $142,998 from Huizhou Highpower Technology Co., Ltd. (affiliate of non-controlling interest shareholder) as of December 31, 2025.
• Outstanding borrowings of $1,458,347 from Ms. Xiaodan Liu as of December 31, 2025, bearing 8% interest per annum.
• Accrued interest payable related to borrowings from Ms. Xiaodan Liu was $75,060 as of December 31, 2025.
• On April 13, 2026, the company issued 10,000 Class B ordinary shares, valued at $1.56 per share, to GRACEDAN CO., LIMITED (controlled by Ms. Liu) to settle $15,600 of the principal of a loan owed to Ms. Liu.
• Security deposits of $71,499 and $68,500 due from Ms. Xiaodan Liu related to a vehicle lease as of December 31, 2025 and 2024, respectively.
• Amounts due to Ms. Xiaodan Liu for employee reimbursement of $4,713 as of December 31, 2025.
• Interest expense of $75,060 incurred on borrowings from related parties in 2025.

Stakeholder Impact

• Shareholders: The dual-class share structure and increased voting rights for Class B shares concentrate control with the CEO, limiting influence for Class A shareholders. Recent capital raises and strategic shifts aim to improve long-term value, but ongoing losses and potential dilution from future equity financings remain concerns. The transfer to Nasdaq Capital Market may affect liquidity and investor perception.
• Employees: The company's success depends on attracting and retaining highly-skilled employees, particularly in R&D. The strategic shift and focus on high-margin products could offer new opportunities but also implies potential restructuring impacts. Compliance with PRC labor laws is an ongoing risk.
• Customers: The strategic shift to an asset-light model and focus on technical evaluation and integration aims to deliver reliable, high-performance energy storage solutions. However, product safety risks and potential delays in project delivery (as seen with the Nengjian Henan project) could impact customer satisfaction and relationships. The company's ability to meet demand through OEM/ODM partners is crucial.
• Suppliers: The company's asset-light model relies heavily on third-party OEM/ODM partners and a multi-supplier strategy. This creates interdependence, and any failure by suppliers to meet quality, quantity, or delivery requirements could damage customer relationships and business opportunities. Rising prices or reduced availability of inventories could also impact profitability.
• Creditors: The company's working capital and shareholders' deficits indicate financial strain. While recent capital raises and the disposal of loss-making assets improve liquidity, the ability to meet payment obligations depends on successful execution of the new business strategy and achieving profitability. Loans from related parties and third parties are significant.

Next Steps

• Monitor the progress of government approval for the Nengjian Henan Urban Construction Engineering Co., Ltd. project, with delivery expected to commence in June 2026.
• Continue to invest in research and development of high-performance battery technology and seek new innovations to reduce costs.
• Increase reliance on automated production processes.
• Expand business globally, particularly in the Southeast Asian market, and further increase presence in the PRC energy storage market.
• Continue to refine internal controls to address the identified material weakness in financial reporting and IT control environment.
• PCAOB is making plans to resume regular inspections of audit firms in mainland China and Hong Kong in early 2023 and beyond, and will continue pursuing ongoing investigations and initiate new investigations as needed.

Key Dates

Recommendation

Elong Power's strategic pivot to an asset-light model and divestment of its loss-making manufacturing arm, coupled with recent capital injections, are positive steps towards improving its financial health and long-term viability. The significant reduction in net loss and regaining Nasdaq compliance are encouraging. However, the company still faces substantial accumulated deficits, negative operating cash flows, and a major project delay. The concentrated voting power with the CEO and the inherent risks of operating primarily in China, including regulatory uncertainties and legal proceedings related to discontinued operations, warrant a cautious approach. While the strategic direction is sound for the evolving energy storage market, the execution risks and the need to demonstrate sustained profitability suggest a 'hold' recommendation for seasoned investors, allowing time to observe the tangible benefits of the strategic realignment and improved financial performance.

Keywords

Energy Storage Systems, Lithium Battery, SEC Filing, 20-F, Financial Results, Strategic Shift, Capital Raise, Nasdaq Listing, China Operations, Corporate Governance, Risk Factors, Discontinued Operations, Asset-Light Model, BMS, EMS, PCS, Electric Vehicles, Commercial Energy Storage, Residential Energy Storage, Grid-Side Energy Storage, PRC Regulations, Foreign Private Issuer, Dual-Class Shares, Share Consolidation, Working Capital Deficit, Accumulated Deficit, Legal Proceedings, Related Party Transactions