United States securities and exchange commission logo
November 14, 2022
Xiao Jun Kong
Chief Executive Officer, Chief Financial Officer
China Foods Holdings Ltd.
Room 2301A China Resources Building
26 Harbour Road
Wanchai, Hong Kong
Re: China Foods
Holdings Ltd.
Form 10-K for the
Fiscal Year Ended December 31, 2021
Form 10-Q for the
Three Months Ended March 31, 2022
Response dated
October 13, 2022
File No. 001-32522
Dear Xiao Jun Kong:
We have reviewed your October 13, 2022 response to our comment
letter 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 these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
May 25, 2022 letter.
Correspondence Filed October 13, 2022
Form 10-K for the Year Ended December 31, 2021
Item 1. Business, page 3
1. We note you did not
respond to our prior comment 1; therefore, we reissue in full. Please
amend this section to
provide all information required by Item 101(h) of Regulation S-K.
2. We note your response
to prior comment 3 and your proposed disclosure regarding the
legal and operational
risks associated with being based in or having the majority of the
company's operations in
China. Please revise your proposed disclosure further to
explicitly note how
recent statements and regulatory actions by China's government have
Xiao Jun Kong
FirstName LastNameXiao
China Foods Holdings Ltd.Jun Kong
Comapany 14,
November NameChina
2022 Foods Holdings Ltd.
November
Page 2 14, 2022 Page 2
FirstName LastName
or may impact the company's ability to accept foreign investments or
list on a U.S. or
other foreign exchange.
3. We note you did not respond to our prior comment 4; therefore, we
reissue in full. Please
prominently disclose whether your auditor is subject to the
determinations announced by
the PCAOB on December 16, 2021 and whether and how the Holding Foreign
Companies
Accountable Act ("HFCAA") and related regulations will affect your
company.
Additionally, please disclose prominently that you have been included
on the
Commission's conclusive list of issuers identified under the HFCAA as
having retained a
registered public accounting firm to issue an audit report where the
firm has a branch or
office that: (1) is located in a foreign jurisdiction and (2) the
PCAOB has determined that
it is unable to inspect or investigate completely because of a
position taken by an authority
in the foreign jurisdiction.
4. We note you did not respond to our prior comment 6; therefore, we
reissue in full. Provide
a clear description of how cash is transferred through your
organization. Disclose your
intentions to distribute earnings. Quantify any cash flows and
transfers of other assets by
type that have occurred between the holding company and its
subsidiaries, and direction
of transfer. Quantify any dividends or distributions that a subsidiary
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. Your disclosure should make clear if no transfers,
dividends, or
distributions have been made to date. Describe any restrictions on
foreign exchange and
your ability to transfer cash between entities, across borders, and to
U.S. investors.
Describe any restrictions and limitations on your ability to
distribute earnings from the
company, including your subsidiaries, to the parent company and U.S.
investors.
Item 9A. Controls & Procedures, page 44
5. We reference our prior comment 8. We note that you concluded that due
to the small size
of the company and lack of segregation of duties your disclosure
controls and procedures
as of the end of the period covered by this report were not effective.
However, your
management concluded that, as of December 31, 2021, your internal
control over financial
reporting (ICFR) was effective. Please explain to us how you reached
the conclusion that
your ICFR was effective despite the lack of segregation of duties and
the fact that you
determined that your disclosure controls and procedures were not
effective. Please clarify
whether you identified any material weaknesses in your ICFR. Refer to
the requirements
of Item 308(a) of Regulation S-K.
Executive Compensation, page 48
6. We note you did not respond to our prior comment 9; therefore, we
reissue in full. We
note that your disclosure both here and in your previous filings that
Kong Xiao Jun was
paid no compensation for his roles as CEO, CFO and director for the
years 2018, 2019,
2020 and 2021. Please disclose other positions held by your CEO
outside of the company
Xiao Jun Kong
FirstName LastNameXiao
China Foods Holdings Ltd.Jun Kong
Comapany 14,
November NameChina
2022 Foods Holdings Ltd.
November
Page 3 14, 2022 Page 3
FirstName LastName
and how much time he dedicates to such roles, as applicable. Please
indicate whether
such companies are competitors of the company and whether such roles
present conflicts
of interest in relation to his role as CEO, CFO and director of the
company.
Exhibits
7. We note you did not respond to our prior comment 10; therefore, we
reissue in full. Please
file all exhibits required by Item 601 of Regulation S-K with your
amended 10-K.
General
8. We note your response to prior comment 11 and your revised disclosure
regarding the
risks associated with the Chinese legal system. Please revise your
disclosure further to
discuss 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 your securities. 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.
9. We note you did not respond to our prior comment 12; therefore, we
reissue in full. Please
revise your disclosure to state that trading in your securities may be
prohibited under the
Holding Foreign Companies Accountable Act if the PCAOB determines that
it cannot
inspect or fully investigate your auditor, and that as a result an
exchange may determine to
delist your securities. In addition, please disclose that the United
States Senate has passed
the Accelerating Holding Foreign Companies Accountable Act, which, if
enacted, would
decrease the number of non-inspection years from three years to
two years, and thus,
would reduce the time before your securities may be prohibited from
trading or delisted.
Update your disclosure to reflect that the Commission adopted rules to
implement the
HFCAA and that, pursuant to the HFCAA, the PCAOB has issued its report
notifying the
Commission of its determination that it is unable to inspect or
investigate completely
accounting firms headquartered in mainland China or Hong Kong.
Form 10-Q for the Three Months Ended March 31, 2022
Financial Statements
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page 9
10. We reference our prior comment 15. It appears from your disclosure
that 100% of your
sales for the three months ended March 31, 2021 were returned. As
previously requested
please revise to disclose the reason for the significant returns and
how these are reflected
in your financial statements. In addition, explain to us why revenue
was recognized for
Xiao Jun Kong
China Foods Holdings Ltd.
November 14, 2022
Page 4
these sales and how these returns impact your revenue recognition
policy. Your revenue
recognition accounting policy should also be revised to address returns.
11. We reference our prior comment 16. Please reconcile the disclosure on
page 13 that
indicates the $167,643 relates to consultancy service fee income with
the disclosure in the
table in Note 3 on page 14 that this represents the sale of wine
products. These tables
should be revised to indicate the correct periods (i.e., three months
rather than year
ended). Your revenue recognition policy should also clearly indicate
whether this revenue
is from the sale of products or services and is recognized on a gross or
net basis. Refer to
ASC 606-10-55-36.
Item 2. Managements Discussion and Analysis or Plan of Operations
Results of Operations Revenue, page 20
12. We reference our prior comment 17. Please revise to explain the specific
reason for the
significant drop in sales in the PRC. This should also be addressed in
the Form 10-Q for
the quarterly period ended June 30, 2022.
Item 6. Exhibit 31.1, page 23
13. We reference our prior comment 18. The certification filed as Exhibits
31.1 is not in the
proper form. Please revise the language related to internal control over
financial reporting
in an amendment to comply with the guidance set forth in Item 601(b)(31)
of Regulation
S-K. This should also be addressed in the Form 10-Q for the quarterly
period ended June
30, 2022.
You may contact Julie Sherman at (202) 551-3640 or Brian Cascio,
Accounting Branch
Chief, at (202) 551-3676 if you have questions regarding comments on the
financial statements
and related matters. Please contact Joshua Gorsky at (202) 551-7836 or Laura
Crotty at (202)
551-7614 with any other questions.
Sincerely,
FirstName LastNameXiao Jun Kong
Division of
Corporation Finance
Comapany NameChina Foods Holdings Ltd.
Office of Life
Sciences
November 14, 2022 Page 4
cc: Conn Flanigan
FirstName LastName