United States securities and exchange commission logo
June 28, 2022
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. 4 to
Registration Statement on Form F-1
Filed June 17, 2022
File No. 333-261945
Dear Mr. Liu:
We have reviewed your amended 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 April
14, 2022 letter.
Amendment No. 4 to Registration Statement on Form F-1 filed June 17,
2022
Cover Page
1. We note your disclosure
that the Cayman Islands holding company controls and receives
the economic benefits
of the VIE s business operations through contractual agreements
between the VIE and
your wholly foreign-owned enterprise (WFOE) and that the Cayman
Islands holding company
is the primary beneficiary of the VIE. 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
Jie Liu
FirstName LastNameJie Liu
Hongli Group Inc.
Comapany
June NameHongli Group Inc.
28, 2022
June 28,
Page 2 2022 Page 2
FirstName LastName
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 disclosure should clarify that you are the
primary beneficiary
of the VIE for accounting purposes.
Commonly Used Defined Terms, page ii
2. We note that you exclude Hong Kong and Macau from your definition of
PRC or China.
Please revise to remove these exclusions from this definition.
Summary Consolidated Financial Data, page 26
3. We note your revised disclosures in response to prior comment 8.
Please explain to us
why the amount of the consulting fee income/consulting fee services
expense in the
consolidating income statement worksheet differs from the consulting
fee
receivable/payable in the consolidating balance sheet for fiscal 2021.
Also revise to refer
to these worksheets as condensed consolidating statements of
operations and balance
sheets.
Use of Proceeds, page 68
4. Please revise footnote (1) to clarify what is meant by "such portion"
of the proceeds will
be used to pay for the Yingxuan Assets in the event Hongli Shandong is
not able to obtain
the loan from the Bank of Weifang. In this regard, quantify the
additional proceeds that
will be used if the loan is not obtained, which appears to be
approximately $3.8 million
after factoring in the $7.2 million and $6.2 million already
disclosed.
Capitalization, page 70
5. We note your revised disclosures in response to prior comment 12.
Please further revise
to reflect the $6.2 million of proceeds that you intend to use for the
Yingxuan Asset
purchase in the "as adjusted" column as a cash reduction. Also, revise
your discussion in
footnote (3) to address, in quantified terms, the impact of the
pending loan and the
intended repayment of such loan on your cash and total capitalization
as well as the
impact should you not receive final approval for such loan. Lastly,
revise to refer to the
as-adjusted column as pro-forma.
Dilution, page 70
6. Please provide us with the calculations that support your net tangible
book value of
$10,161,237.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Factors Affecting Our Results of Operations, page 74
7. We note from your disclosures that you expect the steel price to
stabilize in the near future
and therefore, you do not think that the trend of increased steel
price will have a material
Jie Liu
FirstName LastNameJie Liu
Hongli Group Inc.
Comapany
June NameHongli Group Inc.
28, 2022
June 28,
Page 3 2022 Page 3
FirstName LastName
impact on your results of operations or liquidity in the near term.
Please revise to clarify
what is meant by "near future" and "near term." Also, explain the
basis for this
disclosure and how steel prices to date in fiscal 2022 or other
operational
strategies impacted your assertions.
8. You state that if the steel price increases by more than 10%, the PRC
operating entities
will negotiate with their customers to adjust the selling price on the
sales side. Please
clarify whether such negotiations relates to existing contracts or to
new contracts with
your customer. To the extent you renegotiate existing contracts,
please tell us how you
account for the contract modifications and revise your disclosures,
both here and in the
financial statement footnotes, as necessary.
Liquidity and Capital Resources, page 81
9. You state that to the extent you are unable to obtain the bank loan to
complete Hongli
Shandong's expansion plan, you will re-allocate 28% of the proceeds
from this offering to
pay for the Yingxuan Assets. It appears from your disclosures on page
68 that you
already plan to use $6.2 million (or 28%) of the proceeds to pay for
these Assets
regardless of whether the loan is obtained. Please explain further
this disclosure. To the
extent this is intended to convey that you will pay the remaining
$11.0 million due for the
Yingxuan Assets from the proceeds of the offering if you are unable to
obtain the loan,
then revise to clearly indicate as such and provide the dollar amount
of proceeds that you
intend to use to fund the expansion plan.
10. Please revise to include a discussion of the loan agreements with
Industrial and
Commercial Bank of China and Agricultural Bank of China that you
entered into during
fiscal 2022.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources, page 81
11. Please file the asset transfer agreements with Yingxuan regarding the
acquisition of the
Yingxuan Assets as exhibits to your registration statement. Refer to
Item
601(b)(10)(ii)(C) of Regulation S-K.
Material Income Tax Consideration, page 164
12. Please revise both here and in Section C.vi of the East & Concord
Partners opinion to state
that the disclosure regarding the PRC tax laws and regulations or
interpretations represents the opinion of counsel. Also, revise the
disclosure in the U.S.
Federal Income Taxation section to state that it represents the
opinion of Messina Madrid
Law PA. For guidance, refer to Section III.B.2 of Staff Legal Bulletin
#19.
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,
Jie Liu
Hongli Group Inc.
June 28, 2022
Page 4
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
June 28, 2022 Page 4
cc: Arila Zhou, Esq.
FirstName LastName