[AMBOW LETTERHEAD]
October 20, 2017
Larry Spirgel
Assistant Director
AD Office 11 – Telecommunications
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: | Ambow Education Holding Ltd. Form 20-F for Fiscal Year Ended December 31, 2016 Response Dated October 3, 2017 File No. 001-34824 |
Dear Mr. Spirgel:
On behalf of Ambow Education Holding Ltd., a Cayman Islands company (the “Company”), we have set forth below responses to the comments of the staff (the “Staff”) of the Securities and Exchange Commission contained in its letter of October 12, 2017 with respect to the Company’s Form 20-F for Fiscal Year Ended December 31, 2016 (the “2016 20-F”) filed on March 23, 2017 by the Company (File No.: 001-34824). For your convenience, the text of the Staff’s comments is set forth below, followed in each case by the Company’s responses.
Financial Statements
Consolidated Balance Sheets, page F-3 &
Consolidated Statements of Changes in Equity (Deficit), page F-7
1. | We note the proposed revisions offered in your response to comment 5. Please also include an analysis of changes in each caption of stockholders’ equity and non-controlling interests in accordance with the guidance of Items 17(b) and 18(a) of Form 20-F and Rule 3-04 of Regulation S-X. |
RESPONSE: The Company respectfully advises the Staff that the Ordinary Shares section in the Company’s Balance Sheet will be revised in future filings to separately disclose Class A ordinary shares and Class C ordinary shares as follows:
As of December 31, | ||||||||||||
2015 | 2016 | 2016 | ||||||||||
RMB | RMB | US$ | ||||||||||
EQUITY | ||||||||||||
Class A Ordinary shares | ||||||||||||
(US$ 0.003 par value; 66,666,667 and 66,666,667 shares authorized; 33,556,762 and 33,990,680 shares issued and outstanding as of December 31, 2015 and 2016, respectively) | 627 | 636 | 92 | |||||||||
Class C Ordinary shares | ||||||||||||
(US$ 0.003 par value; 8,333,333 and 8,333,333 shares authorized; 4,708,415 and 4,708,415 shares issued and outstanding as of December 31, 2015 and 2016, respectively) | 90 | 90 | 13 |
The Company respectfully advises the Staff that in its future filings, the Company would include the analysis of changes in each caption of stockholders’ equity and non-controlling interests as below:
Attributable to Ambow Education Holding Ltd.’s Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Ordinary shares | Class B Ordinary shares | Class C Ordinary shares | Additional | Retained Earnings | Accumulated other | Non- | Total | |||||||||||||||||||||||||||||||||||||||||||
(Note 16) | (Note 16) | (Note 16) | paid-in | Statutory | (Accumulated | comprehensive | controlling | Equity | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | capital | reserves | deficit) | income(deficit) | Interest | (deficit) | |||||||||||||||||||||||||||||||||||||||
Note | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2015 | 27,552,058 | 487 | 2,984,775 | 87 | - | - | 3,325,288 | 80,777 | (3,451,958 | ) | (3,740 | ) | (4,247 | ) | (53,306 | ) | ||||||||||||||||||||||||||||||||||
Conversion of Class B ordinary shares to Class A ordinary shares | 2,984,775 | 87 | (2,984,775 | ) | (87 | ) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Exchange of Class A ordinary shares for Class C ordinary shares | (4,708,415 | ) | (90 | ) | - | - | 4,708,415 | 90 | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Conversion of convertible loans to ordinary shares | 15 | 7,244,013 | 134 | - | - | - | - | 70,012 | - | - | - | - | 70,146 | |||||||||||||||||||||||||||||||||||||
Share-based compensation | 17, 23(c) | - | - | - | - | - | - | 50,117 | - | - | - | - | 50,117 | |||||||||||||||||||||||||||||||||||||
Issuance of ordinary shares for restricted stock award | 17 | 484,331 | 9 | - | - | - | - | (9 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Appropriation to statutory reserves | 22 | - | - | - | - | - | - | - | 228 | (228 | ) | - | - | - | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | - | - | - | - | - | (1,215 | ) | - | (1,215 | ) | ||||||||||||||||||||||||||||||||||||
Disposal of subsidiaries | - | - | - | - | - | - | - | - | - | 9,084 | 5,845 | 14,929 | ||||||||||||||||||||||||||||||||||||||
Capital injection from minority shareholders | 27 | - | - | - | - | - | - | - | - | - | - | 163 | 163 | |||||||||||||||||||||||||||||||||||||
Unrealized gain on investment, net of income taxes | 5 | - | - | - | - | - | - | - | - | - | 984 | - | 984 | |||||||||||||||||||||||||||||||||||||
Non-controlling interests from reconsolidation of previously deconsolidated entities | 26(b) | - | - | - | - | - | - | - | - | - | - | (3,351 | ) | (3,351 | ) | |||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | - | 63,739 | - | 617 | 64,356 | ||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2015 | 33,556,762 | 627 | - | - | 4,708,415 | 90 | 3,445,408 | 81,005 | (3,388,447 | ) | 5,113 | (973 | ) | 142,823 |
Attributable to Ambow Education Holding Ltd.’s Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Ordinary | Class B Ordinary | Class C Ordinary | Retained | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||
shares | shares | shares | Additional | Earnings | other | Non- | Total | |||||||||||||||||||||||||||||||||||||||||||
(Note 16) | (Note 16) | (Note 16) | paid-in | Statutory | (Accumulated | comprehensive | controlling | Equity | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | capital | reserves | deficit) | income(deficit) | Interest | (deficit) | |||||||||||||||||||||||||||||||||||||||
Note | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | |||||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2016 | 33,556,762 | 627 | - | - | 4,708,415 | 90 | 3,445,408 | 81,005 | (3,388,447 | ) | 5,113 | (973 | ) | 142,823 | ||||||||||||||||||||||||||||||||||||
Share-based compensation | 17 | - | - | - | - | - | - | 7,828 | - | - | - | - | 7,828 | |||||||||||||||||||||||||||||||||||||
Issuance of ordinary shares for restricted stock award | 17 | 433,918 | 9 | - | - | - | - | (9 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | - | - | - | - | - | (1,160 | ) | - | (1,160 | ) | ||||||||||||||||||||||||||||||||||||
Appropriation to statutory reserves | 22 | - | - | - | - | - | - | - | 2 | (2 | ) | - | - | - | ||||||||||||||||||||||||||||||||||||
Unrealized gain on investment, net of income taxes | 5 | - | - | - | - | - | - | - | - | - | 1,752 | - | 1,752 | |||||||||||||||||||||||||||||||||||||
Capital injection from minority shareholders | 27 | - | - | - | - | - | - | - | - | - | - | 796 | 796 | |||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | (35,700 | ) | - | (1,318 | ) | (37,018 | ) | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2016 | 33,990,680 | 636 | - | - | 4,708,415 | 90 | 3,453,227 | 81,007 | (3,424,149 | ) | 5,705 | (1,495 | ) | 115,021 |
21. Segment Information, page F-46
2. | We note your response to comment 8. In addition to the disclosures you propose to include in future filings, please include a reconciliation of gross profit to loss before income taxes as required by ASC 280-10-50-30(b). |
RESPONSE: The Company respectfully advises the Staff that in its future filings, the Company would disclose a reconciliation of gross profit to loss before income taxes in segment information as below:
For the year ended December 31, 2015
(RMB in thousands) | Better School | Better Job | ||||||||||||||||||
Tutoring | K-12 | Subtotal | Career Enhancement | Consolidated | ||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
Net Revenues | 54,888 | 186,747 | 241,635 | 154,080 | 395,715 | |||||||||||||||
Cost of revenues | (41,048 | ) | (116,819 | ) | (157,867 | ) | (88,078 | ) | (245,945 | ) | ||||||||||
GROSS PROFIT | 13,840 | 69,928 | 83,768 | 66,002 | 149,770 | |||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Selling and marketing | (7,690 | ) | (964 | ) | (8,654 | ) | (38,976 | ) | (47,630 | ) | ||||||||||
General and administrative | (18,601 | ) | (37,787 | ) | (56,388 | ) | (48,337 | ) | (104,725 | ) | ||||||||||
Research and development | (1,773 | ) | - | (1,773 | ) | (321 | ) | (2,094 | ) | |||||||||||
Impairment loss | (2,702 | ) | - | (2,702 | ) | (7,630 | ) | (10,332 | ) | |||||||||||
Unallocated corporate expenses | - | - | - | - | (341,023 | ) | ||||||||||||||
Total operating expenses | (30,766 | ) | (38,751 | ) | (69,517 | ) | (95,264 | ) | (505,804 | ) | ||||||||||
OPERATING (LOSS) INCOME | (16,926 | ) | 31,177 | 14,251 | (29,262 | ) | (356,034 | ) | ||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||
Interest (expenses) income, net | (307 | ) | 22 | (285 | ) | (2,100 | ) | (2,385 | ) | |||||||||||
Foreign exchange gain, net | 10 | - | 10 | 24 | 34 | |||||||||||||||
Other (loss) income, net | (7,966 | ) | (237 | ) | (8,203 | ) | 665 | (7,538 | ) | |||||||||||
Loss (income) on reconsolidation of previously deconsolidated entities | (23,908 | ) | - | (23,908 | ) | 6,439 | (17,469 | ) | ||||||||||||
Gain on sale of investment available for sale | - | 1,971 | 1,971 | - | 1,971 | |||||||||||||||
Unallocated corporate other expenses | - | - | - | - | (13,984 | ) | ||||||||||||||
Total other (expenses) income | (32,171 | ) | 1,756 | (30,415 | ) | 5,028 | (39,371 | ) | ||||||||||||
(LOSS) INCOME BEFORE INCOME TAX, NON-CONTROLLING INTERESTS AND DISCONTINUED OPERATIONS | (49,097 | ) | 32,933 | (16,164 | ) | (24,234 | ) | (395,405 | ) | |||||||||||
Segment assets | 139,905 | 331,127 | 471,032 | 175,056 | 646,088 | |||||||||||||||
Unallocated corporate assets | - | - | - | - | 361,837 | |||||||||||||||
TOTAL ASSETS | 139,905 | 331,127 | 471,032 | 175,056 | 1,007,925 |
For the year ended December 31, 2016
(RMB in thousands) | Better School | Better Job | ||||||||||||||||||
Tutoring | K-12 | Subtotal | Career Enhancement | Consolidated | ||||||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
Net Revenues | 47,985 | 222,592 | 270,577 | 141,439 | 412,016 | |||||||||||||||
Cost of revenues | (33,465 | ) | (137,833 | ) | (171,298 | ) | (67,444 | ) | (238,742 | ) | ||||||||||
GROSS PROFIT | 14,520 | 84,759 | 99,279 | 73,995 | 173,274 | |||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Selling and marketing | (5,516 | ) | (1,065 | ) | (6,581 | ) | (30,810 | ) | (37,391 | ) | ||||||||||
General and administrative | (21,929 | ) | (42,205 | ) | (64,134 | ) | (34,023 | ) | (98,157 | ) | ||||||||||
Research and development | (1,445 | ) | - | (1,445 | ) | (924 | ) | (2,369 | ) | |||||||||||
Impairment loss | (21,779 | ) | - | (21,779 | ) | (623 | ) | (22,402 | ) | |||||||||||
Unallocated corporate expenses | - | - | - | - | (56,986 | ) | ||||||||||||||
Total operating expenses | (50,669 | ) | (43,270 | ) | (93,939 | ) | (66,380 | ) | (217,305 | ) | ||||||||||
OPERATING (LOSS) INCOME | (36,149 | ) | 41,489 | 5,340 | 7,615 | (44,031 | ) | |||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||
Interest income, net | 106 | 106 | 212 | 186 | 398 | |||||||||||||||
Foreign exchange gain, net | - | - | - | 12 | 12 | |||||||||||||||
Other (loss) income, net | (2,514 | ) | 195 | (2,319 | ) | (1,714 | ) | (4,033 | ) | |||||||||||
Gain on sale of investment available for sale | - | 2,464 | 2,464 | 138 | 2,602 | |||||||||||||||
Unallocated corporate other income | - | - | - | - | 13,945 | |||||||||||||||
Total other (expenses) income | (2,408 | ) | 2,765 | 357 | (1,378 | ) | 12,924 | |||||||||||||
(LOSS) INCOME BEFORE INCOME TAX AND NON-CONTROLLING INTERESTS | (38,557 | ) | 44,254 | 5,697 | 6,237 | (31,107 | ) | |||||||||||||
Segment assets | 119,878 | 381,786 | 501,664 | 190,088 | 691,752 | |||||||||||||||
Unallocated corporate assets | - | - | - | - | 284,443 | |||||||||||||||
TOTAL ASSETS | 119,878 | 381,786 | 501,664 | 190,088 | 976,195 |
Should you have any questions relating to the foregoing or wish to discuss any aspect of the Company’s filing, please contact our legal counsel Mitchell S. Nussbaum, Partner of Loeb & Loeb LLP, at 212-407-4159 or mnussbaum@loeb.com.
Sincerely,
Ambow Education Holding Ltd.
/s/ Jin Huang
Chief Executive Officer