Mail Stop 4720
September 12,
2019
Shy Datika
President
INX Limited
57/63 Line Wall Road
Gibraltar, GX11 1AA
Gibraltar
Re: INX Limited
Registration Statement on Form F-1
Filed August 19, 2019
File No. 333-233363
Dear Mr. Datika:
We have reviewed your 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 amending your registration
statement and providing the
requested information. 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 any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Unless we note
otherwise, our references to prior comments are to comments in our June 28,
2019 letter.
Cover Page
1. We note your revision on page 112. Please also revise your cover
page to clearly identify
A-Labs as an underwriter pursuant to Item 501(b)(8) of Regulation
S-K.
Prospectus Summary
2. We note that your prospectus summary and business section include
references to
materials prepared by third parties with footnotes providing
inactive URLs where this
information can be accessed online. We assume that you do not intend
to make the
information contained on those websites part of the prospectus. If
true, please include a
statement to denote that these URLs are inactive textual references
only.
Shy Datika
INX Limited
September 12, 2019
Page 2
Corporate Information and Structure of INX, page 2
3. Please revise your graphic on page 3 to reflect your current
subsidiaries.
Industry Overview
Background & Current Market
Blockchain Asset Exchanges, page 5
4. Please update the information in the first paragraph of this section
regarding the numbers
of trading platforms with trading volumes over $20 million or $100
million to a more
recent date. Information on the website you cite indicates that
significantly fewer trading
platforms currently have this volume of trading than at February 21,
2019. If this
reduction represents any material trends or volatility in trading
volumes for blockchain
assets, please address this and the impact it may have on the operations
of the INX
Digital trading platform and INX Securities trading platform.
Risk Factors
Risks Related to Our Company's Operations
We may be unable to raise sufficient funds . . . Further, our commitment to
maintain the Cash
Fund may limit our ability to invest in our future growth, page 22
5. Your risk factor caption refers to your "commitment to maintain the Cash
Fund." In an
appropriate section of the prospectus, please elaborate on your
commitment to maintain
this fund. We note a number of references throughout the prospectus to
the Cash Fund
and its purpose. However, it is unclear whether and how you will
replenish or maintain
this fund if you must use any of the proceeds in it to cover the types
of losses you
describe. Also clarify whether insurance is available to cover such
losses.
Risks Related to an Investment in Our Tokens
There can be no assurance that we will be able to pay any cash distributions to
the holders of
Tokens, page 32
6. Please revise, either here or in a separate risk factor, to disclose
that the calculation of
your cumulative Adjusted Operating Cash Flow is not self-executing and
will be
determined by your Board of Directors in good faith. Please further
disclose, if true, that
neither the calculation of cumulative Adjusted Operating Cash Flow nor
any pro rata
distributions thereof to tokenholders will be audited, even though this
calculation will be
based on your audited financial statements.
Shy Datika
INX Limited
September 12, 2019
Page 3
Business, page 51
7. We note that you intend to register with FinCEN as a money transmitter.
Please revise to
disclose when you expect to begin the process of registration with
FinCEN and how long
the registration process is expected to take. To the extent that
registration with FinCEN
is a necessity to your rollout of the INX Digital platform, please
revise your disclosure
and update your risk factor disclosure, as appropriate.
Certain Relationships and Related Party Transactions
Relationships and Transactions with Directors and Executive Officers
Mr. Alan Silbert
Transactions Involving the Company's Securities, page 85
8. We note your revisions referencing the "Rozzi" Employment Agreement.
However, this
disclosure appears to refer to Mr. Silbert's employment agreement
attached as Exhibit
10.14. Please revise or advise.
Principal Shareholders, page 88
9. We note the Simple Agreements for Future Equity attached as Exhibits
10.27 and 10.28,
as well as your disclosure in footnotes (2) and (6) that the number of
shares to be issued
"cannot be calculated as of the date hereof." Please revise to outline
the material terms of
these agreements, including but not limited to the minimum number of
shares that may be
issued. Please make conforming revisions on pages 85 and 87 and address
the anti-
dilutive impact that the potential 25% discount may have.
Description of INX Tokens
Technical Features of the INX Token, page 96
10. We note your revision in response to comment 6. Please further revise
page 97 to outline
the circumstances in which you would instruct the smart contract to
automatically reject
some or all digital wallet addresses from participating in transfers of
INX Tokens,
notwithstanding the listing of such addresses in the Whitelist Database,
and whether this
is similar to "freezing" suspicious wallet addresses as described on
page 98.
11. We note your revision in response to comment 7. Please revise page 98 to
clarify the
actions that you may take with respect to the tokens after freezing
suspicious wallet
addresses, e.g. release, burning, etc., and discuss the material impacts
for investors. In
the event of asset forfeiture, please also revise to clarify whether you
retain the right to
unilaterally transfer INX Tokens from one wallet to another and, if so,
how.
Shy Datika
INX Limited
September 12, 2019
Page 4
Holding and Transferring INX Tokens, page 98
12. We note your disclosure on page 99 that INX Token transfers are executed
by the smart
contract under conditional permission based on each party being listed
on the Whitelist
Database, and that "If both the sender and receiver wallet are listed in
the Whitelist
Database, the INX Token Distributed Ledger is updated to reflect the
transfer of INX
Tokens." Please revise to reflect your revisions to Section 3 of Exhibit
B to the Form of
INX Token Purchase Agreement that you retain sole discretion to
immediately freeze one
or more digital wallets from transferring or receiving INX Tokens and
may also reject
transfers if you determine, in good faith and at your sole discretion,
that such transfers are
"not to be in good order."
Participation Right in Adjusted Operating Cash Flow
Sample Calculation of Participation Right in Adjusted Operating Cash Flow...,
page 101
13. We note your revisions in response to comment 8, including your sample
calculation for
the participation right in Adjusted Operating Cash Flow for future
years, i.e. "20X1," and
that you intend to issue a press release providing for the calculation
of the annual amount
of the Company's Adjusted Operating Cash Flow that is distributable on a
pro rata basis
to each INX Token. Please revise to also disclose the actual calculation
of your
cumulative Adjusted Operating Cash Flow for the year ended December 31,
2018 using
the format of your sample calculation, as well as this calculation for
the six month period
ended June 30, 2019. Such disclosure is necessary to clarify the
operation of your sample
calculation and will impact the amount to be paid, if any, to
tokenholders on April 30,
2021 given the cumulative nature of this calculation. Please make
corresponding
revisions to your Management's Discussion and Analysis of Financial
Condition and
Results of Operations as we believe this information is, and will
continue to be, necessary
for an investor's understanding of your financial condition, changes in
financial condition
and results of operations.
14. We note your response to comment 8 that the number of INX Tokens that
are deemed to
be outstanding for purposes of the annual pro rata distribution of 40%
of your Adjusted
Operating Cash Flow "will not include (i) INX Tokens held in the
Company's wallet...;
and (ii) INX Tokens held in the INX Services' or another subsidiary's
wallet." Please
revise to clarify whether and how an investor using an Ethereum network
block explorer
will be able to determine:
the number of tokens held in wallets of the company, INX Services, or
its subsidiaries
versus the number held in wallets entitled to the distribution so
that they can verify
the number of tokens entitled to share in the distribution;
Shy Datika
INX Limited
September 12, 2019
Page 5
the number of tokens held in each of the separate wallets you will
maintain for tokens
available for an Initial Sale (whose proceeds, if sold, would not be
included in
Cumulative Adjusted Operating Cash Flow) versus tokens received by
INX Services
as transaction fees (whose proceeds, if sold, would be included in
Cumulative
Adjusted Operating Cash Flow).
Exhibit Index
15. Please revise your Exhibit Index to include Hosho's audit of the INX
Token smart
contract code.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
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) 551-3765 with any other
questions.
Sincerely,
/s/ Pamela A. Long
Pamela A. Long
Assistant Director
Office of Financial
Services
cc: Mark S. Selinger, Esq.