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January 2, 2020
Tie Li
Director and Chief Financial Officer
Leading Ideal Inc.
8th Floor, Block D, Building 8,
4th District of Wangjing East Garden,
Chaoyang District, Beijing 100102
People's Republic of China
Re: Leading Ideal Inc.
Draft Registration Statement on Form F-1
Submitted December 6, 2019
CIK No. 0001791706
Dear Mr. Li:
We have reviewed your 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.
Draft Registration Statement on Form F-1 filed December 6, 2019
Prospectus Summary, page 1
1. We note disclosure in the Holding Structure section on page 98. Please
clearly disclosure
here and in the Business Section that you are a holding company with no
material
operations of your own and you conduct your operations through your PRC
subsidiaries
and VIE's in China. Please also disclose in this section the fact that
the shareholders of
your VIE may have interests that conflict with you.
2. Please revise the chart on page 5 to include the jurisdiction for each
entity depicted.
Tie Li
FirstName LastNameTie Li
Leading Ideal Inc.
Comapany2020
January 2, NameLeading Ideal Inc.
Page 2
January 2, 2020 Page 2
FirstName LastName
Risk Our ability to develop...on schedule, and on a large scale is unproven and
still evolving,
page 15
3. We note your disclosure that your current manufacturing facility is
capable of producing
100,000 vehicles per year. Please disclose whether your current
facility is capable of
producing your full-size premium extended-range electric SUV that you
plan to launch in
2022.
We have received a limited number of orders for Li ONE, all of which may be
cancelled by
customers despite their deposit payment and online, page 17
4. We note that you have 7,017 unfulfilled orders with non-refundable
deposits and that you
have not delivered any vehicles yet. Please expand your discussion
here to discuss the
number of cancellations so that investors have better understanding of
this risk.
Risks Relating to Our ADSs and This Offering, page 53
5. Please add a new risk factor to disclose the risks that the company's
multi-class structure
may render its shares ineligible for inclusion in certain stock market
indices, and thus
adversely affect share price and liquidity.
We are an emerging growth company within the meaning of the Securities Act and
may take
advantage of certain reduced reporting requirements, page 60
6. We note your disclosure on page that you elected to take advantage of
the extended
transition period for complying with new or revised accounting
standards under Section
102(b)(1) of the JOBS Act. Please revise your risk factor to clearly
disclose that, as a
result of this election, your financial statements may not be
comparable to companies that
comply with public company effective dates.
Use of Proceeds, page 67
7. We note that you intend to use a portion of the proceeds to for
capital expenditures,
including further development of manufacturing facilities. To the
extent the proceeds will
not be sufficient to accomplish the development of your manufacturing
facilities or any
other intended use of the proceeds, please disclose the amount and
sources of other funds
needed. Refer to Item 3.C.1 of Form 20-F.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Contractual Obligations, page 92
8. Please consider revising your table to include a line item for
estimated interest payments
on your long-term obligations based on its current terms. Because the
table is aimed at
increasing transparency of cash flow, we believe these payments should
be included in the
table. Please also consider disclosing any assumptions you made to
derive these amounts
in a footnote to the table.
Tie Li
FirstName LastNameTie Li
Leading Ideal Inc.
Comapany2020
January 2, NameLeading Ideal Inc.
January 2, 2020 Page 3
Page 3
FirstName LastName
Business, page 109
9. We note that you expect that your revenues will mainly consist of
sales of vehicles and
provision of service packages. Please revise to disclose the service
packages that you will
offer.
Our Vehicles, page 114
10. We note your disclosure that you plan to launch your second model, a
full-size premium
extended range electric SUV in 2022. To the extent the development of
your second
model has been publicly disclosed, please disclose the status of the
development of your
second model. Refer to Item 4.B.1 of Form 20-F.
11. Please disclose the amount of time it takes to charge your vehicles
with each of the
charging methods described on page 115.
Direct Sales and Servicing Network, page 120
12. We note your disclosure that prospective customers can place orders by
paying a deposit
of RMB5,000, which becomes non-refundable after three days. Please
disclose whether
any additional deposits are required from the customer prior to
delivery.
Registration Rights, page 167
13. Please disclose whether there are any maximum cash penalties under the
registration
rights agreement, if applicable. Please also disclose any additional
penalties resulting from
delays in registering your common stock. Refer to ASC 825-20-50-1.
Governing Law, page 179
14. We note your disclosure here that any action based on the deposit
agreement may be
instituted by the depositary and holders in any competent court in the
Cayman Islands,
Hong Kong, China and/or the United States or through arbitration. Your
disclosure in this
section is inconsistent with your disclosure on page 62. Please
reconcile these
inconsistencies. We may have additional comments.
1. Organization and Nature of Operations
(b) History of the Group and basis of presentation for the Reorganization, page
F-10
15. You indicate that as the shareholdings in the Company and Beijing CHJ
were held with a
"high degree of common ownership" immediately before and after the
Reorganization,
even though no single investor controlled Beijing CHJ or Leading
Ideal.
Therefore, the Reorganization transaction was determined to be a
recapitalization with a
lack of economic substance, and was accounted for in a manner similar
to a common
control transaction. Please tell us how you and Beijing CHJ were
entities under common
control by clarifying the identity of the controlling shareholder(s)
and their ownership
interests in each entity prior to the reorganization on July 2, 2019.
Tie Li
Leading Ideal Inc.
January 2, 2020
Page 4
3. Recent Accounting Pronouncements, page F-31
16. Given your intention to take advantage of the extended transition period
provided in
Section 7(a)(2)(B) of the Securities Act, please disclose the date you
will be required to
adopt the standard(s) disclosed, assuming you remain an EGC at such time.
Refer to
Question 14 of the Jumpstart Our Business Startups Act Frequently Asked
Questions.
21. Convertible Redeemable Preferred Shares and Warrants
Accounting for Preferred Shares, page F-52
17. We note that you determined the fair value of your derivative liabilities
with the assistance
of an independent appraiser. We also note on page F-28 that you refer to
independent
valuation advice to determine the fair value of your share-based
compensation awards.
Please tell us what consideration you have given to identifying these
third party experts
and obtaining and filing related consents.
General
18. 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 Ernest Greene, Staff Accountant, at 202-551-3733 or
Kevin Stertzel,
Staff Accountant, at 202-551-3723 if you have questions regarding comments on
the financial
statements and related matters. Please contact Sherry Haywood, Staff Attorney,
at 202-551-3345
or Asia Timmons-Pierce, Special Counsel, at 202-551-3754 with any other
questions.
Sincerely,
FirstName LastNameTie Li
Division of
Corporation Finance
Comapany NameLeading Ideal Inc.
Office of
Manufacturing
January 2, 2020 Page 4
cc: Z. Julie Gao
FirstName LastName