Mail Stop 4720
June 5, 2018
Shy Datika
Chief Executive Officer
INX Limited
57/63 Line Wall Road
Gibraltar, GX11 1AA
Re: INX Limited
Amendment No. 1 to
Draft Registration Statement on Form F-1
Submitted April 12, 2018
CIK No. 0001725882
Dear Mr. Datika:
We have reviewed your amended draft registration statement and have
the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested information
and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments. Unless we note otherwise, our references to prior comments are to
comments in our
February 23, 2018 letter.
General
1. The INX Token appears to have characteristics of an equity
security. As such, please
disclose that the INX Token is an equity security or otherwise
provide us with your
detailed legal analysis demonstrating why the INX Token does not
represent an
"equity security" as such term is defined in Section 3(a)(11) of
the Securities
Exchange Act of 1934.
2. You disclose that as part of your INX Exchange platform, you have
created the INX
Token. In addition, you also disclose that the "INX Exchange will
enable peer-to-peer
trading "via web portal and application programming interface
("API") solutions"
Shy Datika
INX Limited
June 5, 2018
Page 2
while, in response to comment 44, you state that the INX Token is an
ERC20
compliant Token issued on the Ethereum blockchain. To better
understand the nature
of the token and the INX Exchange platform, please address the
following in your
disclosures:
Please clarify the relationship among, and describe the
interoperability of, the INX
Exchange, INX Token distributed ledger and INX Token Blockchain,
and the
Ethereum blockchain. It is not clear whether your platform will
represent a
blockchain application built on the Ethereum platform, and if
that is not the case,
please explain to us how the INX Exchange and the INX Token
would be
compatible.
Your revised disclosure on page 72 indicates that the "INX Token
distributed
ledger will service as the register of the INX Token ownership
and will be initially
maintained by the Company" and that upon the issuance of the
tokens "or
periodically after trades of the INX Tokens on the INX Exchange,
INX Services
will record changes in ownership of INX Tokens as data embedded
into the
Ethereum blockchain." Please clarify whether the "INX Token
distributed ledger"
represents the company's own internal blockchain independent of
the Ethereum
blockchain, requiring cryptographic validation which you seem to
have not yet
developed. In addition, please describe in detail how you will
embed the record-
keeping of ownership changes of INX Tokens into the Ethereum
Blockchain and
specify the actual trigger when it will occur. Please also
explain who is
responsible for the transaction fees on the Ethereum blockchain
when transactions
are reflected on the Ethereum blockchain.
Explain in detail how the ownership information will be visible
to the public "in its
encrypted and anonymized form" given your response to comment 32
that INX
Token holders will not hold encrypted keys. Please also describe
how these
statements are consistent with your revised disclosure on page
73 indicating that
the INX Registry will hold specified information regarding the
holder of each INX
Token, including beneficial ownership and reference to KYC/AML
information.
Since the rights of the INX Token holders and uses of these
tokens are not defined
by attributes of the INX Token source code, please disclose how
a purchaser of an
INX Token on a secondary trade will be informed of such rights.
Please disclose
whether all the rights of the tokenholders will be disclosed and
where. If accurate,
please disclose that entry into an INX Token Purchase Agreement
is part of the
account opening process. If not accurate, please describe how a
secondary market
purchaser would have an enforceable entitlement to the rights
set forth in the INX
Token Purchase Agreement as disclosed on page 75.
Please reconcile your disclosures of the INX Exchange being a
peer-to-peer
trading platform (in which no intermediary can affect a
transaction), including the
Shy Datika
INX Limited
June 5, 2018
Page 3
trading of INX Tokens, with your disclosures that the company
will have sole
control over the INX Registry and the recording of ownership of
the INX Tokens
and that no transaction may take place until the company
generates keys necessary
to record such transactions. In addition, please address any
functionality and
timing concerns, as well as the robustness of the system
required for the company
to execute and validate every single transaction.
Please describe how an INX Token holder may initiate a
transaction on the INX
Exchange.
3. We note your response to comments 24 and 25. Once the INX platform
becomes
operational, please revise to disclose how you intend to determine
the value of your
INX Tokens to be used as payment of "fixed" transaction fees and/or
posting of
collateral. Your disclosure should also address the valuation
methodology if a market
for your tokens does not develop. Please discuss the interplay
between various
valuation methods, such as the impact that one may have on the other
as well as the
effect any "promotional incentives" that you may offer may have on
the token
valuation.
Prospectus Cover Page
4. Please describe the material features of the INX Tokens pursuant to
Item 501(b)(2) of
Regulation S-K. In this regard, please disclose that:
INX Tokens may never be privately-traded or traded on platforms
other than the
INX Exchange because INX Tokens may not be withdrawn from the
INX
Exchange to an offline or "cold storage device." Instead, INX
Tokens may only
be transferred between holders through your "sole control over
the INX Registry
and the recording of ownership of the INX Tokens" and, as a
result, that
"investors purchasing the INX Tokens in the Offering may be
required to hold
purchased INX Tokens until the INX Exchange has obtained all
required
regulatory licenses for its lawful operation." Please also
disclose whether the
restrictions precluding trading of INX Tokens on other platforms
will be
embedded in the code, given that the INX Token is an ERC20
compliant token.
Otherwise, disclose how you will achieve trading of INX Tokens
solely on the
INX Exchange.
None of the features of your INX Tokens are defined by the "INX
Token source
code," the underlying blockchain, or its "network attributes."
Instead, holders
only have "contractual rights determined by the INX Token
Purchase Agreement"
and a holders' security interests will be evidenced by the INX
Tokens whose
ownership will be disseminated through your web-based portal and
online
account.
Shy Datika
INX Limited
June 5, 2018
Page 4
The pro rata distribution of your adjusted annual net cash flow
is not self-
executing and requires your board of directors to calculate and
distribute the
amount in good faith pursuant to the terms of the INX Token
Purchase
Agreement.
All rights under the INX Token Purchase Agreement are contingent
upon your
holders satisfying your KYC/AML procedures; clarifying the
extent to which
holders need to periodically or otherwise update this
information.
Please make corresponding revisions throughout your prospectus when
discussing
your INX Tokens. In addition, please include a new subheading under
your
Description of INX Tokens on page 72 discussing why an INX Token is
necessary to
execute a transaction on the INX Exchange considering that your
tokens differ from
other digital assets which are fully self-executing smart contracts
that allow for
decentralized trading, where holders maintain private keys and can
maintain their
anonymity.
5. We note your disclosure in Schedule 1 to your Form of INX Token
Purchase
Agreement that currencies acceptable for payment of INX Tokens "are
USD,
BTC[Bitcoin], and ETH[Ether]." Please revise your prospectus cover
page
accordingly. In light of the provisions of the token purchase
agreement that "[t]he
BTC/USD and ETH/USD exchange rates will be determined by TradeBlock's
XBX
and ETX Indices, respectively, as of 12:00 a.m. (GMT) on the date of
execution of the
Agreement," please expand your disclosure to discuss how you have
selected these
indices, and why they represent an accepted standard of valuing
non-cash
consideration. In addition, please add appropriate risk factor
disclosure alerting
investors that the exchange value of Bitcoin and Ether may
significantly change from a
time an investor signs the INX Token Purchase Agreement and when the
exchange
rate gets determined, such that the investor may receive
significantly less INX Tokens
than originally subscribed for.
6. To the extent that you intend to continue the offering 365 days after
meeting the
minimum offering requirement, rather than 365 days after the
registration statement is
declared effective, please revise your disclosure accordingly.
Otherwise, as currently
disclosed, your offering may terminate on the 365th day following
effectiveness to the
extent that you meet the minimum offering requirement on that day.
7. We note your response to comment 10. Please disclose your net
proceeds after your
underwriter's discounts and commissions in accordance with your
assumptions in
footnote (2).
Shy Datika
INX Limited
June 5, 2018
Page 5
Prospectus Summary
Industry Overview
Background & Current Market
Poor Price Discovery, page 4
8. Please clarify how an exchange acts as "a trading participant on
[its] own platform"
and substantiate your disclosures that this impairs "price
discovery," "does not
represent a picture of the true market" and that "[d]ecisions based
on this data tend to
reinforce false pricing trends." Please also clarify how exchanges
"actively affect
trading markets" other than through acting as a trading participant
thereon.
Our Solution: A Single Regulated Integrated Platform..., page 4
9. You disclose among other things that you are designing a robust
pre-trade and post-
trade services platform and that you believe your technology
"will...help improve
market liquidity, decrease bid-ask spreads and enhance market
efficiencies." Since in
response to our comment 44 you do not appear to have developed a
white paper or
otherwise have a proof of concept or undergone a peer review of your
intended
product, please revise to provide a reasonable basis substantiating
your statements.
Please expand your disclosure on page 43 to disclose whether
Committed, your
software developer, has successfully launched similar products in the
past.
10. We note your response to comment 35. Please describe in detail the
process by which
transactions in "blockchain assets" that are entered into on the
registered ATS would
be cleared and settled. For example, would there be a process to
compare and confirm
the material terms of the transactions? By what means would funds be
exchanged for
and "blockchain assets" be delivered? Would payment and delivery
obligations be
discharged simultaneously? Would any third party entities be involved
in the
provision of clearance and settlement services (e.g., escrow agent,
custodian bank,
clearing broker-dealer, transfer agent)? For transactions in
"blockchain assets," please
describe how settlement finality would be defined and achieved.
The Offering
Rights Upon Liquidation, page 8
11. In an appropriate section of the filing, please discuss how you will
determine the
payment amount due to the token holders in the event of liquidation.
Please also
disclose whether you may issue senior or collateralized debt and how
this would
impact INX Token holders in the event of liquidation. Please also
discuss how
Shy Datika
INX Limited
June 5, 2018
Page 6
holding assets in your operating subsidiaries may impact these rights
in the event of
liquidation.
Risk Factors, page 10
12. We note your response to comment 15 that "INX Tokens received in
payment of
transaction fees will remain outstanding...[u]ntil reissued." Given
that the number of
INX Tokens that may be created is fixed it appears that your proposed
business as well
as the market for INX Tokens will depend, at least in part, upon your
ability to resell
INX Tokens received as payment for transaction fees or collateral
deposits. Please tell
us how you intend to comply with the registration requirements of the
Securities Act
of 1933 as each reissuance will be a primary offering and further
disclose the material
risks if you are unable to do so in the future.
13. Please include sufficient risk factor disclosure concerning the
operation of your system
as an ATS and the possibility that the currently proposed structure
of, or details
relating to the INX Exchange may not occur. In this regard, we note
that in response
to comments 35 and 37 you state that you "anticipate that the
exchange will include
[certain] functions but such determinations remains subject to [y]our
further
development of the exchange infrastructure and [y]our application
with
FINRA." Please address your "plan to provide trading of different
types of digital
assets, including `security' and `utility' tokens and virtual
currencies" on the same
platform and how this might occur.
Our operations of business outside of the United States and our acceptance of
currencies other
than U.S. Dollar will subject to currency risk, page 19
14. Your revised disclosure indicates that you will accept various
currencies and digital
assets as payment for the purchase of INX Tokens.
Please disclose how you will hold the digital assets, if in hot
wallets, where those
wallets will be located and who will have access to those
wallets or if in cold
storage, where and how the private key(s) will be located and
who will have
access to them.
Since you may be acting as custodian for digital assets, please
tell us whether you
need to or intend to register with state or federal regulators,
as well as the nature
and status of the registration.
Please disclose how you will determine the value of your
cryptographic and other
digital assets.
Shy Datika
INX Limited
June 5, 2018
Page 7
Please provide a detailed analysis of the status of the company
under Section 3 of
the Investment Company Act of 1940, including a discussion of
any specific
exemptions (or exclusions) that the company intends to rely on.
Dilution, page 29
15. We note your revision in response to comment 7. Please also disclose
dilution in the
event that you only sell the minimum number of tokens.
Business, page 34
16. We note your responses to comments 14, 17, 22, and 35 through 38.
Please describe
the material aspects of the market structure of your platform. For
example:
Disclose how the ATS will bring together the orders of multiple
buyers and
sellers in securities, and the facilities or procedures
governing trading on the ATS.
Alternatively, if the platform will not operate as an ATS (e.g.,
a single-dealer
system), disclose how it will operate.
Substantiate your disclosure on page 38 that you will "help
improve market
liquidity." For example, will your broker-dealer operator or an
affiliate of the
broker-dealer operator trade in the ATS? Do you have any
agreements with a
liquidity provider to make markets in any securities?
Disclose, if true, that you will treat all platform subscribers
the same. If not, how
would you differentiate among subscribers?
17. We note your response to comment 37. Please advise how you intend to
comply with
Rule 301(b)(11) of Regulation ATS, which states that an ATS shall not
use in its name
the word "exchange," or derivations of the word "exchange," such as
the term "stock
market."
Phases of Development, page 39
18. Please expand your disclosure here to identify which phase(s) of
development you
may be able to achieve if you only raise the minimum offering amount.
Our Development Plan
Phases of Development, page 39
19. Please revise your disclosure to identify the specific timing and
estimated costs for,
and current status of, your regulatory approvals and applications.
Please also clarify
which of the five categories of the use of net proceeds accounts for
these registration
Shy Datika
INX Limited
June 5, 2018
Page 8
and regulatory compliance costs and, if material, delineate
individual costs (e.g. ATS
registration).
Material Agreements
A-Labs Finance and Advisory Ltd. ("A-Labs"), page 42
20. You disclose that A-Labs will receive among other things, a $500,000
cash payment
"payable upon completion of an offering under which the Company has
raised from
U.S. persons not less than $10,000,000." [emphasis added] You also
disclose that
with respect to services in the U.S. or any U.S. person, A-Labs will
provide only
advisory services. Please expand your disclosure to materially
describe these advisory
services.
Principal Shareholders, page 60
21. We note your response to comment 43. Please respond to the following:
Supplementally provide us with detailed journal entries for each
example of where
you have determined a counterparty is acting in the capacity of
a founder, a service
provider or an investor in exchange for INX tokens.
Tell us the specific criteria you use to differentiate your
determination between
counterparties acting in the capacity of founders, service
providers and investors.
Further, tell us whether there are cases in which the same
counterparty has been
designated to have acted in the capacity of more than one role
and address the
specific characteristics on which you rely to classify issuance
of INX tokens for
each capacity.
Tell us how your determination changes when the counterparty is
a related party.
We continue to evaluate your response to comment 43 and may have
further
comments.
Description of INX Tokens
Technical Features, page 72
22. Your revised disclosure suggests that certain attributes of the
tokens may represent
terms and conditions determined by the INX Exchange in its sole
discretion. It is also
unclear whether you could or would implement changes to the
attributes of the tokens
during the offering period.
Since you are ineligible to conduct a delayed offering at
this time, the terms of
the tokens must be defined at the time the registration
statement is declared
Shy Datika
INX Limited
June 5, 2018
Page 9
effective. As such, please further revise your disclosure to
provide context to
your statements.
To the extent that you intend to make material changes to the
attributes of then
outstanding tokens, please disclose this fact and describe
how the changes will
be communicated to the outstanding token holders. Please also
discuss
whether the nature and the extent of the changes will be
determined solely at
your discretion. In addition, please tell us what
consideration you have given
as to whether any material changes could result in a
potential mandatory
exchange of outstanding tokens for a new security and how
such exchange
would be made.
Please tell us whether material modifications to the terms of
the tokens could
result in a new security, and if so, how you will comply with
any registration
obligations.
23. Your revised disclosure indicates that the Company plans to engage a
third party
service provider to conduct an audit of the functionality and
security of the INX
Token. Please disclose how frequently and when such audit will be
conducted and
whether the results of the audit will be made publicly available, if
material.
The INX Token Blockchain, page 72
24. Please expand disclosure to explain how information regarding
individual holdings
will be shared with each investor, describing also the nature of an
INX Exchange
account. Please also disclose what information will be made available
to the public
via the INX Exchange website.
The INX Token Distributed Ledger, page 73
25. At the end of page 73 you disclose that the company will generate
keys as necessary to
record transactions on the INX Registry and that those keys will be
stored with the
company. Please explain how these keys will be stored, how such keys
will be used
for authentication if the Company holds them, and how you intend to
maintain the
security of the keys.
Participation Right in Adjusted Operating Cash Flow, page 74
26. Please clarify the operation of annual payments from your Adjusted
Operating Cash
Flow. For example:
Please disclose whether INX Tokens used as payment of
transaction fees will be
excluded from the pro-rata calculation, as your disclosure and
response to
comment 15, suggest, such that other holders of INX Tokens will
receive larger
Shy Datika
INX Limited
June 5, 2018
Page 10
payments from your Adjusted Operating Cash Flow as a result, or
whether the
Adjusted Operating Cash Flow payment amount will be reduced
proportionally to
account for the distribution amounts that such INX Tokens would
have otherwise
received.
Please clarify whether INX Tokens will be tradeable in the
period between March
31 and April 30 of each calendar year and, if so, how this will
or will not impact
such payments.
Please explain if INX Tokens posted as collateral on the
measurement date would
entitle holders to annual distributions (if not subsequently
forfeited as a part of
that transaction).
Please clarify the mechanics of the any payments related to the
participation right
by answering the following:
o Will the board first declare that the participation right will
be paid?
o Will the participation right be in the form of a dividend?
o Once declared, does the board have discretion to pay the
participation right in
part?
o If the board declares payment of the participation right, but
payment does not
occur or it is not paid out in full, will there be an accrual
on the unpaid
amount?
27. Please disclose the material implications for how you calculate
Adjusted Operating
Cash Flow when determining the pro rata distribution to INX Token
holders. For
example, please address your decision to:
Include cash flow from the sale and purchase of blockchain
assets, which may or
may not be securities under the Investment Company Act of 1940.
Exclude cash received for interest and income taxes during the
prior calendar
year, and whether you plan to receive a material amount of
interest.
Include cash paid for interest and income taxes, and whether you
plan to issue
debt to finance your operations.
28. You disclose that a token holder's pro rata portion of the Adjusted
Operating Cash
Flow will be distributed by crediting the INX Token holder's "account
on the INX
Exchange." Please specifically state whether the credits will be in
US dollars, any
other fiat currency, or in INX Tokens. If the latter, prominently
disclose this fact in
the summary of the offering terms, and ensure that Risk Factor
disclose highlights the
risk that an INX Token holder may never be able to monetize its
investment.
Shy Datika
INX Limited
June 5, 2018
Page 11
29. Further elaborate your statement that there "is no solvency condition
regarding the
distribution." For example, will you continue to make distributions
even when your
operating results are insufficient to meet your general obligations?
Please explain how
your officers and directors would be complying with their fiduciary
duties under those
circumstances.
Capital Reserve and Liquidity Fund..., page 75
30. We note your response to comment 54. Please respond to the following:
Provide us with detailed journal entry examples for the
establishment,
maintenance and relief of the intended capital reserve and
liquidity fund.
Supplementally provide us with your analysis explicitly linking
each step to
authoritative accounting literature or guidance supporting your
determination for
how you will account for the INX Tokens that establish and
maintain the capital
reserve and liquidity fund.
Address how activity within the capital reserve and liquidity
fund will be reflected
on the statement of cash flows.
We continue to evaluate your response to comment 54 and may have
further
comments.
Trading and Secondary Market for INX Tokens, page 76
31. Please describe in detail how the Purchasing Account and the Trading
Account will
function and interact. For example, will the Trading Accounts be
tracked on a
separate distributed ledger? Since you control the data entry into
the INX Registry
which records the ownership of INX Tokens, how and who will perform
these
functions as they relate to the Trade Accounts? In addition, if a
participant in your
INX Exchange can create a Trade Account without being required to be
an INX Token
holder, how those participants can transfer assets on their Trade
Accounts to execute
transactions on your platform?
Shy Datika
INX Limited
June 5, 2018
Page 12
Tokens Eligible for Future Sale
Original Token Issuance, page 77
32. We note your response to comment 4. Please explain how the 17,626,562
currently
outstanding INX Tokens were issued since your web-based portal and
online account
appear to have been under development at that time. In addition, we
note that through
this amendment, you made significant changes to the terms of the INX
Tokens being
offered pursuant to this registration statement. Please disclose
whether the currently
outstanding INX Tokens constitute different securities from the
tokens being
registered in this offering.
Plan of Distribution, page 81
33. We note your response to comment 3. For transactions in the INX
Tokens, please
describe how settlement finality would be defined and achieved.
34. We note your revisions in response to comment 48 that in order to
purchase tokens,
investors must first apply for a Purchasing Account and complete
certain KYC/AML
procedures which must then be reviewed and accepted or rejected by
you in a process
that you estimate "will take up to 30 days." We further note that
investors must also
execute an INX Token Purchase Agreement for a certain quantity of INX
tokens after
setting up a Purchasing Account which will also be reviewed and may
be rejected by
you at your discretion. Accordingly, please explain how this offering
complies with
Securities Act Rule 415(a)(ix)'s requirement that a continuous
offering must
commence "promptly" considering that you are ineligible to make this
offering on a
delayed basis.
35. Please disclose whether sales will be made continuously after your
minimum offering
amount is reached or whether you intend to conduct a series of
closings and, if so, at
what intervals. Please also state that any rejected subscription will
be returned
"promptly."
36. We note your response to comment 58. It appears that at least some of
your officers
and directors are ineligible to rely on Exchange Act 3a4-1's
non-exclusive safe harbor
as their bonuses "are based [on] the sale of a certain amount of
Tokens in the offering"
and thereby are being indirectly compensated in connection with their
participation in
this offering. Please advise whether you intend to rely on a
different safe harbor or
whether these insiders will be registered as broker-dealers pursuant
to Section 15(a)(1)
of the Exchange Act.
37. We note that "[p]ursuant to the A-Labs Engagement Agreement, A-Labs
will
receive...(ii) a grant of 4,550,000 INX Tokens, subject to a
repurchase option by the
Company, under which the Company is entitled to repurchase INX Tokens
for $0.01
Shy Datika
INX Limited
June 5, 2018
Page 13
per Token.... The Company's INX Token repurchase option shall lapse
immediately
after the consummation of an offering raising not less than
$10,000,000 from third
parties on or prior to September 26, 2018." Regulation M, subject to
certain
exceptions, prohibits any distribution participant (i.e.,
underwriters, brokers, dealers,
or other persons who have agreed to participate or are participating
in a distribution of
securities) and its "affiliated purchasers" from bidding for,
purchasing, or attempting
to induce any person to bid for or purchase, any security that is the
subject of a
distribution until after the applicable restricted period, except as
specifically permitted
in Rule 101, and issuers, selling security holders, and any
affiliated purchaser of such
person from bidding for, purchasing, or attempting to induce any
person to bid for or
purchase a covered security during the applicable restricted period
in connection with
a distribution of securities effected by or on behalf of an issuer or
selling security
holder, except as specifically permitted in Rule 102. Please explain
how you intend to
comply with Regulation M.
38. We note that your offering is now subject to a minimum offering
amount of $5
million. To the extent that you engage the services of broker-dealers
at any time prior
to the termination of this offering (refer to footnote (2) disclosure
on the prospectus
cover page), please note that your disclosure must reflect compliance
with Exchange
Act Rule 15c2-4(b) related to the custody of payments in an offering
conducted on an
"all or none" basis. In addition, please ensure that the "Investor
Account" is
consistently defined throughout the filing as the "Company's
segregated bank
account." Otherwise, please advise.
39. Please disclose whether you or your affiliates, including any
broker-dealers you
engage, or any other party involved in marketing the securities,
reserves the right to
purchase securities to meet the minimum contingency. If so, please
disclose the
amount of securities that may be purchased, and include a statement
that such persons
are purchasing the securities for investment and not for resale. If
such amounts would
represent a material portion of the minimum offering requirement,
please update
relevant risk factor disclosure to highlight this fact and the
resulting risks.
Index to Financial Statements
Financial Statements as of December 31, 2017
Balance Sheet, page F-3
40. We note your response to comments 59 and 65. Please respond to the
following:
Tell us, in greater detail, exactly what valuation technique(s)
and related inputs
were utilized in the determination of INX Token fair value and
how they comply
with IFRS 13 paragraph 61.
Shy Datika
INX Limited
June 5, 2018
Page 14
Supplementally provide us with your detailed calculations used
to determine the
fair value of the 4,550,000 Tokens paid to A-Labs, such that we
may understand
all variables and assumptions in your determination of a fair
value of $6,000.
Include all the journal entries in your response.
Identify the characteristics you used to distinguish this
transaction as an objective
exchange between market participants when formulating your
assumptions
pursuant to IFRS 13 paragraph 23.
Likewise, supplementally provide us with your detailed
calculation used to
determine the your fair value of the INX Token liability in
respect to the
17,626,562 INX Tokens, which resulted in a $50,000 fair value
adjustment to the
statement of comprehensive loss. Include all the respective
journal entries in your
response.
Tell us why your transactions with A-Labs, a related party,
should be considered
an orderly transaction between market participants for purposes
of determining
the fair value of INX Tokens.
We continue to evaluate your response to comments 59 and 65 and may
have further
comments.
Notes to the Financial Statements
Note 3: INX Token Liability, page F-14
41. We note your response to comment 65. Further, we note that you
consider your fair
value measurement method of the INX Token liability a Level 2 fair
value measure.
Please provide us supplementally with your rationale for this
determination. Include
in your response the specific inputs used, the related values and
variables, and how
they qualify for Level 2 classification pursuant to IFRS 13
paragraphs 81-85.
Note 5: Convertible Loans, page F-16
42. We note your response to comment 66; however, copies of the
convertible loan
agreements were not included in the response. Please supplementally
provide us with
copies of the convertible loan agreement so that we can better
understand your
analysis and conclusion. We continue to evaluate your response to
comment 66 and
may have further comments.
Shy Datika
INX Limited
June 5, 2018
Page 15
Exhibit Index
43. We note your response to comment 27. Please file as an exhibit with
your next
amendment the legal opinion attached as Appendix II pursuant to Item
601(b)(5) of
Regulation S-K, and revise your Exhibit Index accordingly. Please
further direct
counsel to remove the limitations on reliance from its opinion
consistent with Section
II.A.3.d of Staff Legal Bulletin No. 19. Otherwise, please tell us
you why you believe
you are not required to do so.
Exhibit 4.1
44. We note your responses to comments 3, 5 and 20 stating among other
things, that the
"only way to transfer of ownership of INX Tokens will be through the
change of
ownership recorded on the INX Registry," "no transfers may occur
without the
Company recording such transfer on the ledger," and "[a]ll
transactions in INX Tokens
will take place on the INX Exchange." Please advise how your
responses are
consistent with the provisions of Section 1.6 and 1.7 of Exhibit B
to the Form of INX
Token Purchase Agreement stating that "INX Tokens are freely
tradable securities"
that may be repurchased "on another platform on which the INX Tokens
may be
traded." Please revise your disclosures as necessary to accurately
describe whether or
not the INX Tokens can trade on trading platforms outside of INX
Exchange.
You may contact Lory Empie, Staff Accountant, at (202) 551-3714 or
Stephen Kim,
Assistant Chief Accountant, at (202) 551-3291 if you have questions regarding
comments on the
financial statements and related matters. Please contact Christopher Dunham,
Staff Attorney, at
(202) 551-3783 or, in his absence, me at (202) 551-3369 with any other
questions.
Sincerely,
/s/ Era Anagnosti
Era Anagnosti
Legal Branch Chief
Office of Financial
Services
cc: Mark S. Selinger, Esq.