United States securities and exchange commission logo
November 20, 2020
Bin Lin
Chief Executive Officer
Lianluo Smart Limited
Room 611, 6th Floor, Beikong Technology Building
No. 10 Baifuquan Road, Changping District
Beijing 102200, People s Republic of China
Re: Lianluo Smart
Limited
Registration
Statement on Form F-4
Filed October 26,
2020
File No. 333-249660
Dear Mr. Lin:
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.
Registration Statement on Form F-4
Questions and Answers About the Merger and the Special Meeting, page vi
1. Please add a question
and answer describing the change in the company's business due to
the merger and
disposition. In this regard, we note that the company will be disposing of
its historical business
and the business of Newegg will be the company's business post-
transaction.
2. Please add a question
and answer regarding the reasons and background for the
disposition and the
company's ongoing compliance issues with NASDAQ's listing
standards.
3. Please add a question
and answer regarding the financial terms of the disposition.
Bin Lin
FirstName LastNameBin
Lianluo Smart Limited Lin
Comapany 20,
November NameLianluo
2020 Smart Limited
November
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4. We note that, immediately following the merger, the company's
shareholders and former
Newegg shareholders are expected to own approximately 0.98% and
99.02%,
respectively, of the post-transaction company. Please add a question
and answer
addressing the substantial dilution the company's shareholders are
anticipated to
experience due to the merger transaction. Please also disclose the
implied aggregate value
of the post-transaction company that the company's shareholders will
own based upon
their 0.98% ownership.
Summary, page 1
5. Please add summaries related to the reasons, background and the
financial terms of the
disposition.
6. Please revise the summary and the prospectus in an appropriate
location to discuss the tax
consequences of the merger transaction. Refer to Item 4(a)(6) of Form
F-4.
Unaudited Pro Forma Condensed Combined Financial Information, page 12
7. Please remove the pro forma balance sheets and pro forma statements of
operations that
are not discussed in Rules 11-02(c)(1) and (2)(i) of Regulation S-X.
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2020, page
13
8. Please disclose how you arrived at the pro forma adjustment to
accumulated deficit, as it
differs from the company's accumulated deficit.
We may not have the ability to repurchase certain warrants, page 23
9. Please revise to quantify this potential cash liability so investors
can appreciate the
magnitude of this risk.
Upon consummation of the merger, Mr. Zhitao He will beneficially own
approximately 61.12%
of the voting power, page 25
10. We note that upon completion of the merger, two directors, Mr. He and
Mr. Chang, will
have combined voting power of over 97% of the post-transaction
company. Please revise
this risk factor or add a new risk factor discussing the implications
for minority investors
of this large ownership percentage. Please also highlight this fact in
the Ownership of
Common Shares After the Merger section on page 72 and in the Summary
section on page
1.
Certain types of class or derivative actions generally available under U.S. law
may not be
available, page 59
11. We note your disclosure that your amended and restated memorandum and
articles of
association will have an exclusive jurisdiction clause. Please add a
risk factor discussing
this provision and include disclosure regarding the provision in the
Description of
Bin Lin
FirstName LastNameBin
Lianluo Smart Limited Lin
Comapany 20,
November NameLianluo
2020 Smart Limited
November
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Securities section on page 185. Please also disclose whether the
provision applies to
actions arising under the federal securities laws. If the provision
applies to actions arising
under the federal securities laws, please revise the applicable risk
factor and prospectus
disclosure to state that it is uncertain whether a court would enforce
the provision.
Background of the Merger, page 66
12. Please discuss in greater detail how the financial terms of the
transaction were
determined. Include the names of the parties involved in the
negotiations and who
proposed the various financial terms. For example, and without
limitation, please discuss
how the exchange ratio was determined to include the relative
ownership of the post-
transaction company between the company's shareholders and former
Newegg shareholders. Please included enough detail so that
shareholders can understand
how the financial terms of this transaction were ultimately
determined.
13. We note that the company entered into a letter of intent with Newegg
on May 11, 2020.
Please summarize the material terms of the letter of intent, including
the financial terms.
Reports, Opinions and Appraisals, page 68
14. We note that the company provided Benchmark with a financial model of
Newegg with
projected income statement data for the fiscal years 2020-2022 and a
financial model
of Lianluo Connection with projected income statements for the
calendar years 2020-
2023. Please revise the proxy statement/prospectus to include the
financial
projections and any material assumptions necessary to understand such
projections.
15. Please revise to quantify any fees paid to Benchmark and its
affiliates relating to any
material relationship that existed during the past two years between
the company and its
affiliates and Benchmark and its affiliates. Refer to Item 1015(b)(4)
of Regulation M-A.
Selected Public Company Analysis, page 71
16. Please disclose the individual EV/Revenue calculations for each of the
selected
companies. Please also explain how you calculated enterprise value.
Lastly, please revise
the Precedent Transaction Analysis section in a similar manner for the
selected precedent
transactions and the Selected Public Company Analysis and Precedent
Transaction
Analysis sections on page 90 accordingly.
Expand private label business, page 119
17. We note your disclosure that the company offers approximately 32.6
million SKUs and
1,730 categories as of June 30, 2020 and that the Newegg Marketplace
had 13,897 sellers
offering approximately 32.5 million SKUs and 1,663 categories as of
June 30, 2020.
Please revise to quantify, by percentage or otherwise, the proportion
of products which
fall within your private label business versus those offered by third
parties.
Bin Lin
FirstName LastNameBin
Lianluo Smart Limited Lin
Comapany 20,
November NameLianluo
2020 Smart Limited
November
Page 4 20, 2020 Page 4
FirstName LastName
Management s Discussion and Analysis of Financial Condition and Results of
Operations for
Newegg
Non-GAAP Measures
Adjusted EBITDA, page 160
18. Please revise your disclosures to state, if true, that you also
exclude income/gains that you
do not consider indicative of your core operating performance from
adjusted EBITDA.
Also, tell us whether you consider gains on sales of real estate and
gains on sales of equity
method investments to be indicative of your core operating performance
and appropriate
for inclusion in adjusted EBITDA. Refer to the guidance in Question
100.03 of the Non-
GAAP Financial Measures Compliance and Disclosure Interpretations.
Critical Accounting Policies
Common Stock Valuations, page 166
19. In order to help facilitate our review of your accounting for equity
issuances including
stock compensation and beneficial conversion features, please provide
us your common
stock valuation analysis that includes quantification of significant
assumptions and
enterprise values for options that were granted during the six months
ended June 30,
2020. In addition, provide an analysis that supports the difference
between the common
stock fair value and the preferred stock fair value, in light of
preferred stock s 1:1
conversion ratio.
Board of Directors, page 170
20. We note that Digital Grid and certain legacy stockholders of Newegg
will be entitled to
nominate directors to your board of directors. Please clearly identify
by name the
directors nominated by Digital Grid and the legacy stockholder of
Newegg, respectively.
Refer to Item 6.A.5 of Form 20-F.
Director and Executive Officer Compensation, page 174
21. Please tell us whether Newegg has disclosed, or is required to
disclose, in Delaware or
elsewhere the compensation of its executive officers and directors on
an individual basis
for its most recently completed fiscal year. Refer to Item 6.B.1 of
Form 20-F.
Newegg, Inc.
Interim Consolidated Financial Statements
Consolidated Statements of Operations, page F-53
22. Please present net income (loss) allocable to common stockholders on
the face of the
statements of operations. Refer to SAB Topic 6.B.
(14) Net Income (Loss) per Share, page F-78
23. For the six months ended June 30, 2020, please provide us with your
computations of (a)
Bin Lin
FirstName LastNameBin
Lianluo Smart Limited Lin
Comapany 20,
November NameLianluo
2020 Smart Limited
November
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the dilutive effect of stock options in arriving at diluted weighted
average shares
outstanding and (b) stock options excluded because they were
anti-dilutive. Also,
reconcile them with the options disclosed in Note 13(c).
Report of Independent Registered Public Accounting Firm, page F-84
24. Please provide an audit report that covers the retrospective
adjustment that changed the
classification of Newegg s Series A and AA convertible preferred
stock to temporary
equity as described in Note 2(y).
Audited Consolidated Financial Statements
(10) Income Taxes, page F-106
25. Please provide an explanation for the significant fluctuations in the
foreign withholding
tax and prior year adjustments and other that are noted in your 2019
tax rate
reconciliation.
(19) Segment Information, page F-119
26. You state that your chief operating decision maker reviews financial
information
disaggregated by countries/regions. Please provide an analysis of
whether your operating
segments may be identified based on geography. In this regard, a chief
operating decision
maker may also be the segment manager for operating segments. Thus,
the lack of a
separate segment manager does not preclude you from identifying
separate operating
segments. If applicable, also provide an aggregation analysis for the
purpose of
identifying reportable segments. Refer to paragraphs 50-1, 50-8 and
50-11 of ASC Section
280-10-50.
27. Please disclose revenues from external customers by (a) group of
similar products and
services and (b) geographical area. Refer to paragraphs 50-40 and
50-41 of ASC Section
280-10-50.
General
28. We note that the company is a British Virgin Islands company and that
Newegg is a
Delaware corporation. Please provide the material difference
information required by
Items 4(a)(4) and 4(a)(7) of Form F-4.
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.
Bin Lin
Lianluo Smart Limited
November 20, 2020
Page 6
You may contact Keira Nakada at 202-551-3659 or Rufus Decker at
202-551-3769 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Donald Field at 202-551-3680 or Dietrich King at 202-551-8071 with any
other
questions.
FirstName LastNameBin Lin Sincerely,
Comapany NameLianluo Smart Limited
Division of Corporation
Finance
November 20, 2020 Page 6 Office of Trade &
Services
FirstName LastName