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United States securities and exchange commission logo
April 13, 2021
Kerry Xuefeng Chen
Chief Executive Officer
AiHuiShou International Co. Ltd.
12th Floor, No. 6 Building, 433 Songhu Road
Shanghai, People s Republic of China
Re: AiHuiShou
International Co. Ltd.
Draft Registration
Statement on Form F-1
Submitted March 17,
2021
CIK No. 0001838957
Dear Mr. Chen:
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 Submitted March 17, 2021
Prospectus Summary
Overview, page 1
1. We note your statements
that you have "created the infrastructure for pre-owned consumer
electronics
transactions and services by digitalizing and standardizing the industry," that
your processing
"creates widely accepted benchmarks for quality and pricing in the
industry," that "there
are few trusted channels to purchase high-quality and reliable pre-
owned devices," and
that your "platform captures unparalleled supply and demand for pre-
owned consumer
electronics." Please provide support for these claims, and any other
similar claims your
make throughout your registration statement. Otherwise, please
recharacterize these
statement as your beliefs.
Kerry Xuefeng Chen
FirstName
AiHuiShouLastNameKerry
International Co.Xuefeng
Ltd. Chen
Comapany
April NameAiHuiShou International Co. Ltd.
13, 2021
April 213, 2021 Page 2
Page
FirstName LastName
Use of Proceeds, page 86
2. We note that you intend to use approximately 30% of proceeds to
further expand AHS
store network and develop new sales channels for Paipai Marketplace
and use
approximately 20% of proceeds for general corporate purposes, which
may
include potential strategic investments and acquisitions. In addition,
we note your
statement on page 114 that you may "wish to pursue opportunities for
investment,
acquisition, capital expenditure or similar actions" and your
statement on page 153 that
you may "pursue new strategic initiatives to expend [your] business
overseas in the future,
including through mergers, acquisitions and joint ventures." To the
extent that proceeds
are being used directly or indirectly to acquire assets, other than in
the ordinary course of
business, briefly describe the assets and their cost. If the proceeds
may be used to finance
acquisitions of other businesses, please give a brief description of
such businesses and
information on the status of the acquisitions. Please refer to Item
3.C. of Form 20-F.
Key Factors Affecting our Results of Operations, page 102
3. We note your strategic partnerships with "major phone brands and
retailers" and "strong
strategic alliances with leading consumer electronics brands ... and
authorized distributors
of certain leading consumer electronics brands" and participation from
third-party
merchants. We also note that you "entered into business collaboration
arrangements with
other strategic business partners, such as branded consumer
electronics manufacturers and
distributors." To the extent you have any material agreements with any
of these parties,
please file such agreements as exhibits. Please refer to Item 601 of
Regulation S-K.
Management's Discuss and Analysis of Financial Condition and Results of
Operations, page 102
4. We note that that certain of your offline stores were shut down in the
first half of 2020
primarily due to the COVID-19 outbreak. Please update and expand your
discussion of
the COVID-19 pandemic on your results of operations and operating
income. Please refer
to the Commission's CF Disclosure Guidance: Topic No. 9 and 9A, which
is available on
our website.
Key Operating Metrics, page 105
5. We note that you define the number of consumer products transacted as
"the number of
consumer products distributed to merchants and consumers through
transactions on our
platform in a given period, prior to returns and cancellations."
Please revise to
clarify whether this definition includes the initial C2B transaction
via AHS Recycle.
6. Please revise your disclosure to explain what you mean by the word
"platform" each time
you use it in a different capacity. For example, we note that your GMV
measures product
sales through your "platform" (as compared to online marketplaces),
but you generate net
revenues from product sales and services that you provide through your
"platform" (which
presumably includes your online marketplaces).
Kerry Xuefeng Chen
AiHuiShou International Co. Ltd.
April 13, 2021
Page 3
Results of Operations, Year Ended December 31 2020 Compared to Year Ended
December 31,
2019
General and administrative expenses, page 111
7. We note the increase in general and administrative expenses for 2020
was mainly due to
an increase in the impairment loss recognized for the MTA machines ...
Please explain
what MTA machines are as we were not able to locate this acronym
elsewhere in your
document. Furthermore, we note on page 113 you disclose that the
increase in general
and administrative expenses in 2019 was due to an increase in assets
impairment loss.
Please revise your disclosure to explain in greater detail the nature
of this impairment and
indicate where this matter has been disclosed in the notes to the
financial statements.
Business Combination, page 122
8. We note your description of your June 3, 2019 acquisition of PaiPai
from JD.com. Please
expand your disclosure to include a more detailed description of the
assets that were
purchased in this transaction and the nature of the operations of
PaiPai at the time of
purchase.
Critical Accounting Policies
Fair Value of the Options, page 124
9. The disclosure on page 125 indicates that the analysis of discounted
cash flows used in
valuing stock option grants included the use of discounts for lack of
marketability or
DLOM. Please revise to discuss the DLOMs used in valuing stock option
grants for each
period presented. Also, to the extent these DLOMs exceeded 15-20% for
the latest fiscal
year presented in your financial statements, please explain in further
detail why you
believe the use of these DLOMs was appropriate.
Proprietary and innovative technologies, page 140
10. We note your statements regarding the capabilities of your proprietary
and innovative
technologies, including your "technological strength," as well as the
"efficiency" and
"accuracy" achieved by your technologies. Please provide supplemental
support for these
statements or recharacterize them as your beliefs.
Third Party Merchants, page 149
FirstName LastNameKerry Xuefeng Chen
11. We note that you sometimes act as the seller under the POP model. Please
revise to
Comapany NameAiHuiShou
clarify International
whether you inspect Co.consumer
pre-owned Ltd. electronics when you
sell under this
model.
April 13, 2021 Page 3
FirstName LastName
Kerry Xuefeng Chen
FirstName
AiHuiShouLastNameKerry
International Co.Xuefeng
Ltd. Chen
Comapany
April NameAiHuiShou International Co. Ltd.
13, 2021
April 413, 2021 Page 4
Page
FirstName LastName
Transactions with Related Parties, page 191
12. Please add the acquisition of PaiPai Marketplace from JD Group in 2019
as a related party
transaction or tell us why you believe this is not required. Please
refer to Item 7.B of
Form 20-F.
Description of Share Capital
Preferred Shares
Follow-on Series E Convertible Loans, page 203
13. We note your disclosure of the convertible loan agreements entered
into with three RMB
investors that entered into the Series E Follow-on SPA on September 4,
2020 and the loan
agreement entered into with Minsheng on November 19, 2020 on pages 203
and 204.
Please revise the notes to your financial statements to disclose the
nature and significant
terms of these transactions. Alternatively, please explain why you do
not believe this is
required.
Experts, page 240
14. In the Experts section, you indicate that the report of Deloitte
Touche Tohmatsu contains
an explanatory paragraph referring to the translation of Renminbi
amounts to United
States dollar amounts. However, in the audit report of this firm on
page F-2, we noted no
such explanatory paragraph. Please reconcile and revise these
disclosures to correct this
inconsistency.
2. Summary of significant accounting policies
2.11 Goodwill, page F-19
15. We note you performed a quantitative assessment in connection with
your annual
goodwill impairment analysis. This disclosure is not consistent with
your critical
accounting policy disclosure on page 123, which indicates you
performed a qualitative
analysis. Please explain and revise if necessary. Additionally, in
order for investors to be
able to assess the probability of future goodwill impairment, and to
assess if your
reporting unit is at risk of failing the quantitative impairment test
you should disclose:
the percentage by which fair value exceeded carrying value at the
date of the most
recent test;
a more detailed description of the methods and key assumptions
used and how the
key assumptions were determined;
a discussion of the degree of uncertainty associated with the
assumptions; and
a description of potential events and/or changes in circumstances
that could
reasonably be expected to negatively affect the key assumptions.
If your reporting unit is not at risk of failing the quantitative
impairment test, please
disclose that the fair value of your reporting unit is substantially
in excess of carrying
value and not at risk of failing. Please refer to Item 303(a)(3)(ii)
of Regulation S-K and
Section V of SEC Release No. 34-48960.
Kerry Xuefeng Chen
AiHuiShou International Co. Ltd.
April 13, 2021
Page 5
2.17 Revenue Recognition, page F-21
16. For transactions involving trade-in devices we note the purchase of
the pre-owned product
and the sale of new product were separately settled in cash on a gross
basis and accounted
for as two separate transactions. However, in July 2020 you began to
net settle the trade-
in transaction and the fair value of the trade-in product is
recognized as non-cash
consideration for the sale of the new product. Please explain the
impact that this change
had on your financial statements and your consideration of ASC 250.
Notes to the Consolidated Financial Statements
12. Convertible bonds, page F-37
17. Your disclosure in Note 12 indicates that the Group determined that
there is no beneficial
conversion feature associated with the conversion option of the bonds
as the effective
conversion price was lower than the fair value of the underlying
shares. Since the
effective conversion price of the bonds is lower than the fair value
of the shares and
therefore in the money, it appears that there is a beneficial
conversion feature that should
be accounted for pursuant to the guidance in ASC 470-20-25-5. Please
advise or revise as
appropriate.
Item 7. Recent Sales of Unregistered Securities, page II-1
18. Your disclosure on page II-2 indicates that you issued 403,747 Series
E Preferred Shares
to Shanghai Zhengmu Investment Center on February 8, 2021 for the US $
equivalent of
RMB 50,000,000 and your disclosure on page II-3 indicates that you
issued 992,513
ordinary shares to Shanghai Jinglin Jinghui Equity Investment Center
on this same date
for the US $ equivalent of RMB 30,000,000. However, we note that
neither of these
transactions have been disclosed in the "Subsequent Events" footnote
to your audited
financial statements. Please revise the notes to your financial
statements to disclose the
nature and significant terms of these transactions in the notes to
your financial statements.
Alternatively, please explain why you do not believe this is required.
General
FirstName LastNameKerry Xuefeng Chen
19. We note various statements throughout your filing that use the word
"massive" to describe
Comapany NameAiHuiShou
the magnitude International
of various items, suchCo.
as Ltd.
data, demand and sales. Please
use more precise
language to convey
April 13, 2021 Page 5 the size of the item, quantifying the size if
possible.
FirstName LastName
Kerry Xuefeng Chen
FirstName
AiHuiShouLastNameKerry
International Co.Xuefeng
Ltd. Chen
Comapany
April NameAiHuiShou International Co. Ltd.
13, 2021
April 613, 2021 Page 6
Page
FirstName LastName
You may contact Scott Stringer at (202) 551-3272 or Linda Cvrkel at
(202) 551-3813 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Cara Wirth at (202) 551-7127 or Dietrich King at (202) 551-8071 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Z. Julie Gao