United States securities and exchange commission logo
February 8, 2022
Yi Shao
Chief Executive Officer
Oriental Culture Holding LTD
Room 1402, Richmake Commercial Building
198-200 Queen s Road Central, Hong Kong
Re: Oriental Culture
Holding LTD
Registration
Statement on Form F-3
Filed January 28,
2022
File No. 333-262398
Dear Mr. Shao:
We have limited our review of your registration statement to
those issues we have
addressed in our 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-3 filed January 28, 2022
Prospectus Cover Page
1. We note your disclosure
that you "are a Cayman Islands holding company without
material operations and
[y]our business is conducted by [y]our subsidiaries in Hong Kong
and variable interest
entity ( VIE ) and its subsidiaries in China and this structure
involves unique risks
to investors." In addition, please:
Disclose
prominently on the prospectus cover page that you are not a Chinese
operating company
and that your business is conducted through contractual
arrangements with a
variable interest entity ("VIE") (emphasis added). If true,
disclose that these
contracts have not been tested in court.
Yi Shao
FirstName LastNameYi
Oriental Culture HoldingShao
LTD
Comapany8,NameOriental
February 2022 Culture Holding LTD
February
Page 2 8, 2022 Page 2
FirstName LastName
Explain whether the VIE structure is used to provide investors
with exposure to
foreign investment in China-based companies where Chinese law
prohibits direct
foreign investment in the operating companies.
Disclose that investors may never hold equity interests in the
Chinese operating
company (emphasis added), as we note that your disclosure only
states that
"[i]nvestors of [y]our ordinary shares will not own any equity
interests in [y]our VIE"
(emphasis added).
Your disclosure should acknowledge that Chinese regulatory
authorities could
disallow this structure (emphasis added), which would likely
result in a material
change in your operations and/or a material change in the value
of the securities you
are registering for sale, including that it could cause the value
of such securities to
significantly decline or become worthless. In this regard, we
note your disclosure
only discusses the results regarding "[a]ny change in foreign
investment regulations,
and other policies in China or related enforcement actions by
China government."
Provide a cross-reference to your detailed discussion of risks
facing the company and
the offering as a result of this structure. In this regard, we
note your risk factor cross-
reference does not refer to your risk factor discussing the risks
related to the VIE
structure.
2. We note your disclosure that "[a]ny change in foreign investment
regulations, and other
policies in China or related enforcement actions by China government
could result in a
material change in [y]our operations and the value of [y]our ordinary
shares and could
significantly limit or completely hinder our ability to offer [y]our
ordinary shares to
investors or cause the value of [y]our ordinary shares to
significantly decline or be
worthless." Please revise your disclosure and make conforming changes
throughout the
prospectus to clarify that this applies to the value of the securities
you are registering for
sale, as we note that you are registering not only ordinary shares but
also preferred shares,
warrants, rights and units. Please make conforming changes in each
appropriate instance
throughout the prospectus. Your disclosure should also address how
recent statements and
regulatory actions by China s government, such as those related to
the use of variable
interest entities and data security or anti-monopoly concerns, have or
may impact the
company s ability to conduct its business, accept foreign
investments, or list on a U.S. or
other foreign exchange. Your prospectus summary should address, but
not necessarily be
limited to, the risks highlighted on the prospectus cover page.
3. We note your disclosure that "[t]he Company, we, us, our company, and
our are referred
to Oriental Culture Holding LTD. ("Oriental Culture"), a holding
company incorporated
under the laws of the Cayman Islands, its subsidiaries, VIE and the
subsidiaries of VIE."
We also note your disclosure on page ii under the heading "About This
Prospectus" that
"all references in this prospectus to "Oriental Culture", "OCG," "we,"
"us," "our," "the
Company," "the "Registrant" or similar words refer to Oriental Culture
Holding LTD.,
Yi Shao
Oriental Culture Holding LTD
February 8, 2022
Page 3
together with our subsidiaries, VIE and its subsidiaries." Please
revise your disclosure to
refrain from using terms such as "we" or "our" when describing
activities or functions of a
VIE and ensure consistency in how you will refer to the holding
company, subsidiaries
and VIE when providing the disclosure throughout the document, so that
it is clear to
investors which entity the disclosure is referencing and which
subsidiaries or entities are
conducting the business operations. For example, disclose, if true,
that the VIE is
consolidated for accounting purposes but is not an entity in which you
own equity.
4. We note your disclosure that "neither any of [y]our subsidiaries or
[y]our VIE has made
any dividends or other distributions to [y]our holding company or any
U.S. investors as of
the date of this prospectus." Please also state whether any other
transfers have been made
to date, whether any transfers, dividends or distributions have been
made to date between
the holding company, its subsidiaries, and consolidated VIEs, or to
investors other than
U.S. investors, and quantify the amounts where applicable. Please also
provide a
description of how cash is transferred through your organization and
disclose your
intentions to distribute earnings or settle amounts owed under the VIE
agreements.
Provide cross-references to the condensed consolidating schedule and
the consolidated
financial statements.
Prospectus Summary, page 1
5. We note your discussion of your VIE structure on page 1, the related
risks discussed on
page 2 including that such "contractual arrangements may not be as
effective as direct
ownership . . . ," and the organization chart provided on page 9.
Describe all contracts and
arrangements through which you claim to have economic rights and
exercise control that
results in consolidation of the VIE s operations and financial
results into your financial
statements. In describing the relevant contractual agreements between
the entities, please
further discuss how this type of corporate structure may affect
investors and the value of
their investment, including that the company may incur substantial
costs to enforce the
terms of the arrangements.
6. We note your disclosure that the Cayman Islands holding company controls
and receives
"the economic benefits of the business operations of Jiangsu Yanggu
through a series of
contractual agreements (the "VIE Agreements")." However, neither the
investors in the
holding company nor the holding company itself have an equity ownership
in, direct
foreign investment in, or control of, through such ownership or
investment, the VIE.
Accordingly, please refrain from implying that the contractual
agreements are equivalent
to equity ownership in the business of the VIE. Any references to
control or benefits that
accrue to you because of the VIE should be limited to a clear
description of the conditions
you have satisfied for consolidation of the VIE under U.S. GAAP.
Additionally, your
FirstName LastNameYi Shao
disclosure should clarify that you are the primary beneficiary of the
VIE for accounting
Comapany NameOriental
purposes. Culture
Please also Holding
disclose, LTD
if true, that the VIE agreements have
not been tested in a
court
February of law.
8, 2022 Page 3
FirstName LastName
Yi Shao
FirstName LastNameYi
Oriental Culture HoldingShao
LTD
Comapany8,NameOriental
February 2022 Culture Holding LTD
February
Page 4 8, 2022 Page 4
FirstName LastName
7. Please disclose the risks that your corporate structure and being
based in or having the
majority of the company s operations in China and Hong Kong poses to
investors. In
particular, describe the significant regulatory, liquidity, and
enforcement risks with cross-
references to the more detailed discussion of these risks in the
prospectus. For example,
specifically discuss risks arising from the legal system in China,
including risks and
uncertainties regarding the enforcement of laws and that rules and
regulations in China
can change quickly with little advance notice; and the risk that the
Chinese government
may intervene or influence your operations at any time, or may exert
more control over
offerings conducted overseas and/or foreign investment in China-based
issuers, which
could result in a material change in your operations and/or the value
of the securities you
are registering for sale. Acknowledge any risks that any actions by
the Chinese
government to exert more oversight and control over offerings that are
conducted overseas
and/or foreign investment in China-based issuers could significantly
limit or completely
hinder your ability to offer or continue to offer securities to
investors and cause the value
of such securities to significantly decline or be worthless.
8. We note your disclosure pertaining to required permissions from
Chinese authorities on
page 2. In connection therewith:
Your disclosure states that your VIE and its subsidiaries have
received all required
permissions from Chinese authorities to operate its current
business in China. Please
specifically disclose each permission or approval that your VIE
and its subsidiaries
have received.
Please revise your disclosure throughout this paragraph to
clarify when you are
discussing your VIE and its subsidiaries compared to your holding
company and its
subsidiaries. As example only, we note your disclosure that "[a]s
our VIE and its
subsidiaries provide marketing, warehouse storage and technical
maintenance
services in China, based on the advice of our PRC counsel, we do
not believe that we
are a Critical Information Infrastructure Operator . . . "
(emphasis added). In this
regard, we note that your disclosure should discuss each
permission or approval that
you, your subsidiaries, or the VIE are required to obtain from
Chinese authorities to
operate your business and to offer the securities being
registered to foreign investors,
and that you should state whether you, your subsidiaries, or VIE
are covered by
permissions requirements from the China Securities Regulatory
Commission
(CSRC), Cyberspace Administration of China (CAC) or any other
governmental
agency that is required to approve the VIE s operations
(emphasis added).
We note your disclosure regarding the "Opinions" and the
uncertainty regarding the
"current PRC regulatory environment" and how this relates to
whether you will be
required to obtain permissions. Please also describe the
consequences to you and your
investors if you, your subsidiaries, or the VIEs: (i) do not
receive or maintain such
permissions or approvals, (ii) inadvertently conclude that such
permissions or
Yi Shao
FirstName LastNameYi
Oriental Culture HoldingShao
LTD
Comapany8,NameOriental
February 2022 Culture Holding LTD
February
Page 5 8, 2022 Page 5
FirstName LastName
approvals are not required, or (iii) applicable laws,
regulations, or interpretations
change and you are required to obtain such permissions or
approvals in the future.
Ensure that your discussion applies to the securities being
registered for sale pursuant
to this prospectus (emphasis added), as your disclosure here only
refers to your
"Ordinary Shares or Preferred Shares."
9. We note your description of how cash is transferred through your
organization under the
sub-heading "Dividend Distribution." In particular:
We note your disclosure states that "[y]our WFOE receives
payments from Jiangsu
Yanggu, pursuant to the VIE Agreements." Disclose your intentions
to distribute
earnings or settle amounts owed under the VIE agreements.
Quantify any cash flows
and transfers of other assets by type that have occurred between
the holding
company, its subsidiaries, and the consolidated VIEs, and
direction of transfer.
Quantify any dividends or distributions that a subsidiary or
consolidated VIE have
made to the holding company and which entity made such transfer,
and their tax
consequences. Similarly quantify dividends or distributions made
to U.S. investors,
the source, and their tax consequences.
We note your disclosure that "[a]s of the date of this
prospectus, neither WFOE or
any of our subsidiaries in Hong Kong has not made any dividends
or distributions to
the Company, the Company has not made any dividends or
distribution to the holding
company, and no dividends or distributions have been made by the
Company."
Please revise your disclosure to disclose whether any transfers,
dividends, or
distributions have been made to date. In this regard, we note
your disclosure does not
address "transfers." Further, please clarify what you mean by the
"Company" as
compared to the "holding company," as we note your disclosure on
the cover page
and page ii indicates that both references are to Oriental
Culture Holding LTD.
We note your disclosure that "[c]urrent PRC regulations permit
our WFOE to pay
dividends to the Company only out of its accumulated profits . .
.. ." Please also
describe any restrictions and limitations on your ability to
distribute earnings from
the company, including your subsidiaries and/or the consolidated
VIEs, to the parent
company and U.S. investors as well as the ability to settle
amounts owed under the
VIE agreements.
10. We note your inclusion of the selected consolidating statements of
income and cash flows
for the years ended December 31, 2020 and 2019 and selected balance
sheet information
as of December 31, 2020 and 2019 showing financial information for the
Company
(excluding the VIEs), the VIEs, eliminating entries and consolidated
information. Please
also revise such schedules to disaggregate the BVI subsidiary, Hong
Kong subsidiaries
and the WFOE that is the primary beneficiary of the VIE. The objective
of this disclosure
is to allow an investor to evaluate the nature of assets held by, and
the operations of,
Yi Shao
Oriental Culture Holding LTD
February 8, 2022
Page 6
entities apart from the VIE, as well as the nature and amounts
associated with
intercompany transactions. We also note that any intercompany amounts
should be
presented on a gross basis and when necessary, additional disclosure
about such amounts
should be included in order to make the information presented not
misleading.
Risk Factors, page 11
11. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China (CAC) over data security, particularly for companies seeking to
list on a foreign
exchange, please revise your disclosure to explain how this oversight
impacts your
business and your offering and to what extent you believe that you are
compliant with the
regulations or policies that have been issued by the CAC to date. In
doing so, please
address the applicability of new regulations that will go into effect
on February 15 that
will require internet platform operators holding data of more than 1
million users to
undergo a network security review, which we note you refer to on page
2 in the prospectus
summary.
"If the Chinese government determines that the contractual arrangements through
which we
control our VIE . . . ", page 11
12. Please revise your risk factor to acknowledge that if the PRC
government determines that
the contractual arrangements constituting part of the VIE structure do
not comply with
PRC regulations, or if these regulations change or are interpreted
differently in the future,
the securities you are registering may decline in value or become
worthless if the
determinations, changes, or interpretations result in your inability
to assert contractual
control over the assets of your PRC subsidiaries or the VIEs that
conduct all or
substantially all of your operations.
"The Chinese government exerts substantial influence over the manner in which
we must
conduct our business . . . ", page 13
13. Please revise your disclosure that such actions by the Chinese
government may "cause the
value of [y]our Ordinary Shares to significantly decline or be
worthless" to refer to the
value of the securities you are registering (emphasis added). Please
make conforming
changes throughout the prospectus.
Part II
Item 9. Exhibits, page II-1
FirstName LastNameYi Shao
14. We note your reliance on the advice of your PRC counsel in certain
instances throughout
Comapany NameOriental
the prospectus. Culture
Please Holding
file your PRCLTD
counsel's consent as an exhibit
to the registration
statement
February 8, 2022 as required
Page 6 by Section 7 of the Securities Act and Securities
Act Rule 436.
FirstName LastName
Yi Shao
FirstName LastNameYi
Oriental Culture HoldingShao
LTD
Comapany8,NameOriental
February 2022 Culture Holding LTD
February
Page 7 8, 2022 Page 7
FirstName LastName
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 Brian Fetterolf at 202-551-6613 or Jennifer L pez
Molina at 202-551-
3792 if you have any questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Jeffrey Li