United States securities and exchange commission logo
July 8, 2021
Jie Liu
Chief Executive Officer
Hongli Group Inc.
Beisanli Street, Economic Development Zone
Changle County, Weifang
Shandong, China 262400
Re: Hongli Group Inc.
Amendment No. 1 to
Draft Registration Statement on Form F-1
Submitted June 11,
2021
CIK No. 0001855557
Dear Mr. Liu:
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.
Amendment No. 1 to Draft Registration Statement on Form F-1 Submitted on
June 11, 2021
Cover Page
1. Your disclosure that
you have received approval from Nasdaq to have your ordinary
shares listed on the
Nasdaq Capital Market is inconsistent with your disclosure elsewhere
in the filing that you
intend to apply to list your ordinary shares on the Nasdaq Capital
Market. Please advise
or revise.
2. Please identify Mr. Jie
Liu, your chief executive officer and Chairman of the Board, as the
shareholder who will
control substantially all of the voting power.
Jie Liu
FirstName LastNameJie Liu
Hongli Group Inc.
Comapany
July 8, 2021NameHongli Group Inc.
July 8,2 2021 Page 2
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FirstName LastName
Prospectus Summary
Our Company, page 1
3. Please disclose the source of your statement that you are a leading
cold roll formed steel
profile manufacturer in China. Discuss the measure by which you are
a leading manufacturer. For example, disclose whether you lead by
market share, sales,
revenues, etc.
Our Competitive Strengths, page 3
4. Please disclose that LOVOL, South Korean VOLVO and SDLG accounted for
79%
and 80% of sales for the fiscal years ended December 31, 2020 and
2019, respectively.
Also, we note your statement that you supply "some of the world s
leading original
equipment manufacturers, such as XCMG, Caterpillar Inc." Please
explain the
signficance of highlighting XCMG and Caterpillar in your filing and
clarify whether you
have material relationship or derive a material portion of your
revenue from these
customers.
Market Opportunities and Competition, page 4
5. Please disclose the source of your statements in this section
regarding the market for cold
roll formed steel in China.
Our Corporate Structure, page 10
6. Please revise your organization chart, both here and on page 72, to
address the following:
Disclose the percentage ownership of public shareholders and
individual affiliate
owners following the offering;
Disclose the individual owners in Hongli Shandong along with their
percentage
ownership in the VIE and any related-party interests with the
company; and
Parenthetically within the chart, provide the abbreviated names
for each entity as
referenced throughout the filing.
Emerging Growth Company Status, page 11
7. You state that you have elected to take advantage of the extended
transition period for
complying with new or revised accounting standards pursuant to Section
107 of the JOBS
Act. Your disclosures indicate that such election is irrevocable;
however, the election to
take advantage of the extended transition period is not irrevocable.
Please clarify your
intent and revise your disclosures as necessary. To the extent you
intend to take advantage
of this provision, revise to include risk factor disclosures
indicating that as a result of such
election, your financial statements may not be comparable to companies
that comply with
public company effective dates.
Jie Liu
FirstName LastNameJie Liu
Hongli Group Inc.
Comapany
July 8, 2021NameHongli Group Inc.
July 8,3 2021 Page 3
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FirstName LastName
Risk Factors, page 14
8. Please add a risk factor that discusses your current indebtedness and
disclose whether your
bank loans are secured by substantially all of your assets.
9. We note that you are an emerging growth company. Please add a risk
factor that discusses
the reduced disclosure requirements applicable to emerging growth
companies.
Any decline in the availability or increase in the cost of raw materials...,
page 15
10. Please clarify that you purchased 44% and 62% of your raw materials
from Shanghai
Wanhe Supply Chain Management Co., Ltd. for the years ended December
31, 2019 and
2020, respectively. Describe the material terms of your agreement with
this supplier
including the term and any material termination provisions.
The loss of any of our key customers could reduce our revenues and our
profitability..., page 16
11. You state here that your 3 major customers have been with you for more
than three years.
Please reconcile this statement with your disclosures on page 64 where
you refer to
relationships with these customers for much longer terms and revise
your disclosures as
necessary.
12. Please briefly describe the material terms of your agreements with
LOVOL, South Korean
VOLVO and SDLG including the term and any material termination
provisions. Also, file
the agreements with LOVOL and South Korean VOLVO as exhibits to your
registration
statement. Refer to Item 601(b)(10)(ii)(B) of Regulation S-K.
Risks Related to Doing Business in China, page 24
13. Please expand your risk factor disclosures to address the following:
The impact of the Holding Foreign Companies Accountable Act
enacted in December
2020 and the SEC's interim final rules adopted in March 2021 on
your ability to list
your securities on a U.S. national exchange, and
The potential conflicts of interests that may arise between U.S.
and VIE shareholders
due to the fact that your VIE shareholder's also have ownership
interests,
management positions or board seats in the company.
Use of Proceeds, page 34
14. We note that you intend to use a portion of the proceeds of the
offering to repay your bank
loan. Please disclose interest rate and maturity of such indebtedness.
Refer to Item 3.C.4.
of Form 20-F.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Factors Affecting Our Results of Operations , page 39
15. Please tell us and revise to disclose any key performance indicators
that you use to
Jie Liu
FirstName LastNameJie Liu
Hongli Group Inc.
Comapany
July 8, 2021NameHongli Group Inc.
July 8,4 2021 Page 4
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FirstName LastName
manage your business along with an explanation for any significant
variance in such
measures between periods. Refer to SEC Release No. 33-10751.
Results of Operations
For the Years Ended December 31, 2020 and 2019, page 40
16. You state that the increase in revenue for fiscal 2020 was primarily
due to increased
demand for your products as well from fiscal 2019 orders that were
delivered in 2020.
Please revise to quantify the relative significance for each of these
factors. Also, tell us
whether you have a similar backlog of orders in fiscal 2020 that will
be delivered in fiscal
2021 and if not, explain whether this a potential negative trend that
should be discussed.
Lastly, clarify the extent to which your revenues were impacted by
changing prices and to
the extent material, revise your disclosures as necessary. Refer to
Item 303(a)(3) of
Regulation S-K and Section III.D of SEC Release No. 33-6835.
17. Please revise here to separately disclose the sales and marketing
expense for each period
presented as you provide on page F-13. Also, include a discussion of
the factors that
contributed to the change in both R&D and sales and marketing expenses
separate from
your discussion of total SG&A expenses. To the extent more than one
factor contributed
to the change in such expenses, please ensure that you appropriately
quantify the impact
of each such factor.
Liquidity and Capital Resources, page 43
18. Please revise to disclose the minimum period of time that you will be
able to conduct
planned operations using only currently available capital resources
without regard to any
potential financing. Refer to Item 303(a)(1) of Regulation S-K and FRC
Section 501.03.a.
19. Please revise here to disclose any restrictions on foreign exchange
and your ability to
transfer cash between entities, across borders and to U.S. investors.
Our Business
Expansion Plan, page 65
20. Please explain further the following as it relates to your Expansion
Plan:
Clarify whether the letter of intent entered into in November 2020
includes the
purchase of new production facilities. If not, to the extent you
have committed to
purchase such facilities, revise to include a quantified
discussion of such
commitment.
Revise to include a discussion regarding your commitment to
purchase the industrial
park assets in Changle County, Weifang City in the notes to your
financial
statements. Refer to ASC 440-10-50-1(f).
Similarly, include a discussion of this commitment in your
liquidity section along
with a discussion of how you intend to finance this obligation.
Tell us the current status of any loan negotiations to fund the
Expansion Plan and to
the extent you have obtained such financing, ensure you disclose
this information in
Jie Liu
FirstName LastNameJie Liu
Hongli Group Inc.
Comapany
July 8, 2021NameHongli Group Inc.
July 8,5 2021 Page 5
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FirstName LastName
your liquidity discussion and subsequent events footnote. Refer
to ASC 855-10-50-2.
Business
Intellectual Property, page 70
21. Please disclose the expiration date for each of your utility patents.
Contractual Arrangements, page 74
22. Please disclose that East & Concord Partners has opined that the
ownership structures of
your VIE and your WFOE in China, both currently and immediately after
giving effect to
this offering, are not in violation of applicable PRC laws and
regulations currently in
effect; and the contractual arrangements between your WFOE, your VIE
and its
shareholders governed by PRC law are valid, binding and enforceable,
and will not result
in any violation of applicable PRC laws and regulations currently in
effect.
Principal Shareholders, page 91
23. Please disclose the portion of each class of securities held by record
holders in the United
States and the number of record holders in the United States. Refer to
Item 7.A.2 of Form
20-F.
Underwriter's Warrants, page 118
24. Please disclose the material terms of the warrants to be issued to the
underwriter including
the exercise price and the number shares underlying each warrant.
Also, clarify whether
the Class A shares underlying the warrants will have different terms
than your ordinary
shares.
Underwriting
Lock-up Agreements, page 118
25. Please disclose the exceptions to the lock-up agreements with your
officers, directors and
principal stockholders.
Notes to the Consolidated Financial Statements
Note 1 - Organization and Nature of Operations, page F-7
26. Please expand your disclosures regarding the nature, purpose, size and
activities of your
VIEs. Also revise to include a description of the recognized and
unrecognized revenue-
producing assets held by your VIEs. These assets may include licenses,
trademarks, other
intellectual property, facilities or an assembled workforce. Refer to
ASC 810-10-50-5A.d.
Note 2 - Significant Accounting Policies
Revenue Recognition, page F-12
27. Please revise to disclose the amount of remaining performance
obligations that are
Jie Liu
Hongli Group Inc.
July 8, 2021
Page 6
unsatisfied as of the end of the reporting period. Also, include an
explanation of when
you expect to recognize revenue associated with such remaining
performance obligations.
Refer to ASC 606-10-50-13.
Note 12 - Income Taxes, page F-19
28. You disclose that 30% of your revenue in 2020 was derived in South Korea.
Please tell us
whether you are subject to income taxes in South Korea and if so, revise
your disclosures
accordingly.
29. You disclose that deferred tax assets and liabilities are determined
based on the difference
between the financial reporting and tax bases of assets and liabilities
using enacted tax
rates that will be in effect in the period in which the differences are
expected to reverse.
Please tell us whether you have any deferred tax assets and/or
liabilities and if so, revise to
provide the disclosures required under ASC 740-10-50-2.
General
30. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact David Edgar, Senior Staff Accountant, at (202) 551-3459
or Kathleen
Collins, Accounting Branch Chief, at (202) 551-3499 if you have questions
regarding comments
on the financial statements and related matters. Please contact Jeff Kauten,
Staff Attorney, at
(202) 551-3447 or Jan Woo, Legal Branch Chief, at (202) 551-3453 with any other
questions.
Sincerely,
FirstName LastNameJie Liu
Division of
Corporation Finance
Comapany NameHongli Group Inc.
Office of
Technology
July 8, 2021 Page 6
cc: Arila Zhou, Esq.
FirstName LastName