View:
United States securities and exchange commission logo
July 22, 2022
Jun Hong Heng
Chief Executive Officer
ECARX Holdings Inc.
16/F, Tower 2, China Eastern Airline Binjiang Center
277 Longlan Road
Xuhui District, Shanghai 200041
People s Republic of China
Re: ECARX Holdings Inc.
Draft Registration
Statement on Form F-4
Submitted June 23,
2023
CIK No. 0001861974
Dear Mr. Heng:
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 S-4 Submitted June 23, 2022
Cover Page
1. Clearly disclose how
you will refer to the holding company and subsidiaries 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.
Jun Hong Heng
FirstName LastNameJun
ECARX Holdings Inc. Hong Heng
Comapany
July NameECARX Holdings Inc.
22, 2022
July 22,
Page 2 2022 Page 2
FirstName LastName
2. Provide a description of how cash is transferred through your
organization and disclose
your intentions to distribute earnings. State whether any transfers,
dividends, or
distributions have been made to date between the holding company and
its subsidiaries, or
to investors, and quantify the amounts where applicable. Also,
disclose here and in the
prospectus summary whether you have cash management policies and
procedures that
dictate how funds are transferred, and if so, describe these policies
and procedures.
Frequently Used Terms, page 6
3. Please revise your definition of China to remove the exclusion of Hong
Kong and Macau
from this definition.
Summary of the Proxy Statement/Prospectus
Permission, Review and Filing Required from the PRC Authorities relating to the
Transactions,
page 29
4. Please disclose the basis for your statement that you do not believe
that the business
combination requires approval from PRC governmental authorities. If
you relied on the
opinion of counsel, you should identify counsel and file a consent. If
you did not rely on
counsel, explain why you did not consult counsel and why you believe
you do not need
any permissions or approvals.
Redemption Rights, page 34
5. We note your disclosure showing the potential impact of redemptions on
the per share
value of the shares owned by non-redeeming shareholders assuming no
redemptions and
maximum redemptions. Please revise your disclosure to show the impact
of interim
redemption levels.
Summary Risk Factors, page 41
6. Please provide a specific cross-reference to the more detailed risk
factor for each China-
based issuer summary risk factor.
Selected Historical Financial Data of ECARX, page 44
7. Please revise ECARX s condensed consolidating schedules depicting
the consolidated
statements of comprehensive loss, consolidated balance sheets, and
consolidated cash
flows on pages 47-52 so that the WFOE, the primary beneficiary of the
VIE, is
disaggregated and transparent.
Risk Factors, page 60
8. Your charter waived the corporate opportunities doctrine. Please
address this potential
conflict of interest and whether it impacted your search for an
acquisition target.
Jun Hong Heng
FirstName LastNameJun
ECARX Holdings Inc. Hong Heng
Comapany
July NameECARX Holdings Inc.
22, 2022
July 22,
Page 3 2022 Page 3
FirstName LastName
Risks Relating to Our Business and Industry
We currently have a concentrated customer base with a limited number of key
customers..., page
63
9. We note that for the year ended December 31, 2021, Geely Holding
accounted for 70.4%
of your total revenues. Please describe the material terms of your
agreements with Geely
Holding and disclose that Geely Holding is a related party.
You may experience difficulties in effecting service of legal process..., page
81
10. Please include a cross-reference to the enforcement of civil
liabilities section of the
prospectus.
Risks Relating to COVA and the Business Combination, page 95
11. We note that you did not obtain a fairness opinion regarding the
business combination.
Please provide risk factor disclosure describing the risks of not
obtaining
a fairness opinion.
Risks Relating to Ownership of Securities of ECARX
Our dual-class voting structure..., page 110
12. Please briefly describe the instances where the Class A and Class B
stockholders will vote
as a separate class.
Certain Prospective Operational and Financial Information, page 151
13. Please revise your disclosure to qualitatively and quantitatively
discuss
all material assumptions underlying the projections. For example,
please quantify
the assumptions underlying vehicle sales volumes and growth and sales
volumes over
time.
ECARX's Management's Discussion and Analysis of Financial Condition and Results
of
Operations
Key Components of Results of Operations
Cost of revenues, page 223
14. Please disclose in detail the types of costs classified within cost of
revenues and advise
us. State, if true, that cost of revenue include outsourced expenses,
payroll and related
costs, including share-based compensation related to performance on
customer contracts,
and expenses associated with the use by these functions of facilities
and equipment, such
as rental and depreciation expenses.
Jun Hong Heng
FirstName LastNameJun
ECARX Holdings Inc. Hong Heng
Comapany
July NameECARX Holdings Inc.
22, 2022
July 22,
Page 4 2022 Page 4
FirstName LastName
Results of Operations
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020, page 227
15. Please provide separate narratives regarding government grants and the
gain on
deconsolidation of a subsidiary which are separately captioned in your
Statements of
Comprehensive Loss.
Unaudited Pro Forma Combined Financial Information
Introduction, page 238
16. Please expand your narrative hereunder to address the VIE
restructuring which is
currently depicted in Adjustments (3)(10) and (3)(C) to the pro forma
condensed
combined financial information. Also, discuss the timing, manner and
form of settlement
of amounts due from the VIE nominee shareholders (included in Amounts
due from
Related Parties).
Description of the Transactions
Consideration, page 240
17. We note each COVA warrant assumed by ECARX "shall continue to have and
be subject
to substantially the same terms and conditions as were applicable to
such warrants prior to
the First Effective Time." Please disclose such same terms and
conditions hereunder and
identify such elements that preclude the instruments from equity
classification.
Ownership, page 240
18. For the avoidance of doubt, please quantify the "Recapitalization
Factor" applicable to
ECARX's Ordinary and Preferred Shares. Clarify whether it is fixed or
subject to change.
19. Please revise to include the shares underlying the strategic
investments within Total
Ordinary Shares Outstanding at Closing since these are not potential
shares but are
deemed issued and outstanding at closing upon your receipt of US$35
million in cash as
premised under Adjustment 3(8) on page 248.
20. Please disclose the shares underlying the converted warrants under
Potential sources of
dilution in the table on page 240.
21. Please clarify whether the shares underlying the RSUs disclosed on
pages F-43 and F-
55 are deemed "outstanding at closing." If not, please present them as
a potential source
of dilution.
Unaudited Pro Forma Combined Balance Sheet, page 242
22. Please revise your pro forma combined financial information on pages
242-245 to present
the VIE restructuring transactions and spin-off adjustments in a
separate column followed
by a subtotal column to present ECARX on a pro forma basis before
giving effect to the
merger with COVA.
Jun Hong Heng
FirstName LastNameJun
ECARX Holdings Inc. Hong Heng
Comapany
July NameECARX Holdings Inc.
22, 2022
July 22,
Page 5 2022 Page 5
FirstName LastName
Notes to Unaudited Pro Forma Condensed Combined Financial Information
3. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
Adjustments to Unaudited Pro Forma Combined Balance Sheet, page 247
23. Refer to Adjustment 3(8). Since it appears Luminar, one of the
strategic investors, may
provide its $15 million investment in cash or an equivalent value in
form of its shares,
please tell us your basis for presumption of cash in your
presentation.
Certain Relationships and Related Party Transactions
ECARX Relationships and Related Party Transactions, page 284
24. We note that Geely Holding and its subsidiaries account for a
substantial portion of your
revenues. Please provide the information required by Item 7.B. of Form
20-F with respect
to your business relationship with Geely Holding and file your
agreements with Geely
Holding as exhibits to your registration statement. Refer to Item
601(b)(10)(ii)(A) of
Regulation S-K.
ECARX Holdings Inc. - Consolidated Statements of Shareholders' Deficit, page
F-7
25. Please include a separate note in the financial statements to provide
information regarding
the transactions underlying the Non-redeemable non-controlling
interests for all periods
presented. We also note that the line item captioned "Contribution
from non-controlling
shareholders" appears to incorrectly reference Note 18 which pertains
to Redeemable non-
controlling interests.
5. Notes receivable, page F-29
26. Please disclose the nature of the transactions that gave rise to the
bank acceptance notes
pledged as collateral to secure the notes payable issued by China
Merchants Bank
( CMB ).
8. Long-term investments
Equity method investments, page F-30
27. Refer to your sale of a 2% equity interest in a PRC subsidiary on
September 1, 2021.
Please identify the subsidiary, the counterparty, and describe any
relationships with the
counterparty. Also, tell us if the price paid for the 2% interest
reflected the payment of a
control premium in the subsidiary. If so, explain why it was
reasonable to rely upon the
value of the 2% interest when determining the fair value of the
remaining 49%.
9. Property and equipment, net, page F-32
28. Please tell us how you determined the amount of depreciation allocated
to cost of
revenues which is significantly less than the depreciation amounts
allocated to other
operating expenses.
Jun Hong Heng
ECARX Holdings Inc.
July 22, 2022
Page 6
17. Mezzanine equity, page F-37
29. Please revise your tabular presentation so that the total number of
preferred shares
outstanding for each preferred stock series is transparent. Additionally,
please make
clear on page F-38 how you valued the Series Angel Preferred series,
reported hereunder
at RMB273,519, and how you accounted for the difference between that
amount and the
fair value of the warrant liabilities as reported in Note 13.
General
30. 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.
31. With a view toward disclosure, please tell us whether your sponsor is, is
controlled by, or
has substantial ties with a non-U.S. person. Please also tell us whether
anyone or any
entity associated with or otherwise involved in the transaction, is, is
controlled by, or has
substantial ties with a non-U.S. person. If so, also include risk factor
disclosure that
addresses how this fact could impact your ability to complete your
initial business
combination. For instance, discuss the risk to investors that you may not
be able to
complete an initial business combination with a U.S. target company
should the
transaction be subject to review by a U.S. government entity, such as the
Committee on
Foreign Investment in the United States (CFIUS), or ultimately
prohibited. Further,
disclose that the time necessary for government review of the transaction
or a decision to
prohibit the transaction could prevent you from completing an initial
business
combination and require you to liquidate. Disclose the consequences of
liquidation to
investors, such as the losses of the investment opportunity in a target
company, any price
appreciation in the combined company, and the warrants, which would
expire worthless.
You may contact Kathryn Jacobson, Senior Staff Accountant, at
202-551-3365 or Robert
Littlepage, Accounting Branch Chief, at 202-551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact Kyle
Wiley, Staff
Attorney, at 202-344-5791 or Jeff Kauten, Staff Attorney, at 202-551-3447 with
any other
questions.
Sincerely,
FirstName LastNameJun Hong Heng
Division of
Corporation Finance
Comapany NameECARX Holdings Inc.
Office of
Technology
July 22, 2022 Page 6
cc: Shu Du
FirstName LastName