View:
United States securities and exchange commission logo
August 13, 2021
Yifan Li
Chief Executive Officer
Hesai Group
9th Floor, Building L2-B
1588 Zhuguang Road, Qingpu District
Shanghai 201702
People s Republic of China
Re: Hesai Group
Draft Registration
Statement on Form F-1
Submitted July 2,
2021
CIK No. 0001861737
Dear Dr. 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
Cover Page
1. Please revise the
prospectus cover page to disclose the percentage ownership and voting
power held by your
officers, directors and principal stockholders as well as a brief
discussion of the
respective voting rights of your Class A and Class B ordinary shares.
2. Provide prominent
disclosure about the legal and operational risks associated with being
based in and having the
majority of the company s operations in China. Your disclosure
should make clear
whether these risks could result in a material change in your operations
Yifan Li
FirstName LastNameYifan Li
Hesai Group
Comapany
August 13, NameHesai
2021 Group
August
Page 2 13, 2021 Page 2
FirstName LastName
and/or the value of your ADSs or 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. Your disclosure
should address how
recent statements and regulatory actions by China s government, such
as those related to
the use of variable interest entities and data security or
anti-monopoly concerns, has or
may impact the company s ability to conduct its business, accept
foreign investments, or
list on an U.S. or other foreign exchange. Your prospectus summary
should address, but
not necessarily be limited to, the risks highlighted on the prospectus
cover page.
Prospectus Summary, page 1
3. Disclose each permission that you or your subsidiaries are required to
obtain from Chinese
authorities to operate and issue these securities to foreign
investors. State whether you
or your subsidiaries are covered by permissions requirements from the
CSRC, CAC or
any other entity that is required to approve of the company's
operations, and state
affirmatively whether you have received all requisite permissions and
whether any
permissions have been denied.
4. Disclose 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. If the PCAOB has been or is currently unable to inspect
your auditor, revise
your disclosure to so state.
Our Innovative Approach to TX/RX Design, page 4
5. Please disclose the period over which you have shipped over 10,000
units of LiDAR.
Risks Related to Doing Business in China, page 9
6. In your summary of risk factors, disclose the risks that being based
in and having the
majority of the company s operations in China poses to investors. In
particular, describe
the significant regulatory, liquidity, and enforcement risks with
cross-references to the
more detailed discussion of these risks in the prospectus. For
example, specifically
discuss risks arising from the legal system in China, including risks
and uncertainties
regarding the enforcement of laws and that rules and regulations in
China can change
quickly with little advance notice; and 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 ADSs.
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.
Yifan Li
FirstName LastNameYifan Li
Hesai Group
Comapany
August 13, NameHesai
2021 Group
August
Page 3 13, 2021 Page 3
FirstName LastName
Summary Consolidated Financial Data, page 15
7. Your disclosure on page F-25 indicates that as of December 31, 2020,
14,710,802
ordinary shares and the corresponding unrecognized share-based
compensation of RMB
39,205 will be amortized over the service periods of the award when
the IPO is probable.
Please clarify the amount that will be recognized immediately upon the
effectiveness of
your IPO. Tell us what consideration you gave to presenting pro forma
Net Loss Per
Share including this compensation expense as well as the compensation
expense related to
your 2020 option incentive plan that will be recognized upon the
effectiveness of your
IPO, described on page F-25. Please also disclose the unrecognized
compensation
expense related to these awards that will be recognized in future
periods upon satisfaction
of the service condition.
Risk Factors
We generate a substantial portion of our revenue..., page 34
8. Please identify the customer that accounted for more than 10% of your
revenues for the
years ended December 31, 2019 and 2020 and describe the material terms
of
this agreement including the term and any material termination
provisions. Also, quantify
the number of products that generate a substantial portion of your
revenues.
Risks Related to Doing Business in China, page 41
9. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to separately highlight the risk that the
Chinese government
may intervene or influence your operations at any time, which could
result in a material
change in your operations and/or the value of your ADSs. Also, given
recent statements
by the Chinese government indicating an intent to exert more oversight
and control over
offerings that are conducted overseas and/or foreign investment in
China-based issuers,
acknowledge the risk that any such action 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.
10. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China over data security, particularly for companies seeking to list
on a foreign exchange,
please revise your disclosure to explain how this oversight impacts
your business and your
offering and to what extent you believe that you are compliant with
the regulations or
policies that have been issued by the CAC to date.
Capitalization, page 63
11. Please clarify if this presentation reflects the reorganization that
you completed in 2021
and the other financing transactions described on page 150. If not,
tell us how you
considered including the pro forma effects of these transactions in
this presentation.
Yifan Li
FirstName LastNameYifan Li
Hesai Group
Comapany
August 13, NameHesai
2021 Group
August
Page 4 13, 2021 Page 4
FirstName LastName
Please also tell us how you considered including pro forma financial
statements to reflect
these transactions.
Key Factors Affecting Our Results of Operations, page 71
12. Tell us whether management uses any metrics such as expansion or
retention rates to
measure your ability to retain and grow existing customers. If so,
please revise to include
a quantified discussion of such measures and discuss any significant
fluctuations. Also,
disclose the number of your customers for the periods presented. Refer
to SEC Release
No. 33-10751.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 71
13. You disclose that you recognized revenue on over 3,500 shipped LiDAR
units in the first
half of 2021 as compared to approximately 700 shipped units in the
first half of 2020.
Please clarify why you include this information when you don t
include any other
financial information for the first half of 2021 and the correlation
with revenue, gross
margin and operating income for the period is not understood.
Impact of the COVID-19 Pandemic, page 73
14. Please provide a balanced discussion of the impacts of the COVID-19
pandemic,
including any positive impacts on your operating results for the
periods presented, and any
uncertainties with maintaining these trends. In this regard, your
disclosure on page 77
indicates that your revenue increased in 2020, in part, due to the
increased sales of laser-
based oxygen sensors for ventilators to hospitals as a result of the
COVID-19 pandemic.
Key Components of Results of Operations
Cost of Revenues, page 74
15. Your disclosure on page F-32 states that under a settlement agreement
you agreed to pay a
one-off settlement and royalty fee of RMB 160,098. Please clarify the
portion of this
settlement attributable to royalty fees related to 2020 and 2019
sales, if any, and how you
considered including these amounts in cost of sales.
16. Your disclosure on page F-32 states that under the settlement
agreement you agreed to pay
a variable annual royalty fee through 2030 based on a tiered
percentage of sales, subject to
a minimum amount each year. Please describe the percentages applicable
to your tiered
sales and the minimum amount payable annually.
Business
Our Strengths, page 102
17. We note that you have entered into cooperation agreements with Li
Auto, Lotus, and
Baidu Netcom Science Technology Co., among others. Please revise to
provide a
Yifan Li
FirstName LastNameYifan Li
Hesai Group
Comapany
August 13, NameHesai
2021 Group
August
Page 5 13, 2021 Page 5
FirstName LastName
discussion of the material terms of your cooperation agreements,
including the term and
any material termination provisions.
Regulation
Regulations Relating to Foreign Investment
Foreign Investment Industrial Policy, page 121
18. You disclose that any industry not listed in the Negative List 2020 is
a permitted industry
and generally open to foreign investment unless specifically
prohibited or restricted by
PRC laws and regulations. Please clarify whether you consider the
industry in which you
operate to be excluded from the Negative List 2020 and not otherwise
restricted to foreign
investment by PRC laws regulations. Disclose the factors you
considered in making this
determination, whether there are any uncertainties with respect to
this determination and
the related impacts.
Related Party Transactions
Other Related Party Transactions, page 141
19. Please describe the material terms of the business cooperation
agreement with Beijing
Baidu Netcom Science Technology Co., Ltd. Refer to Item 7.B. of Form
20-F.
Shareholders Agreement, page 141
20. We note that in May 2021 you entered into a series of agreements with
certain investors
that provided "...registration rights, information and inspection
rights, right of first refusal,
preemptive rights, rights to appoint directors, and anti-dilution
rights, and contains
provisions governing our board of directors and other corporate
governance matters."
Please describe each of these agreements and identify the related
parties that are parties to
these agreements and the basis on which they are related parties.
Refer to Item 7.B. of
Form 20-F.
Consolidated Financial Statements - Hesai Technology Co., Ltd.
Notes to Consolidated Financial Statements, page F-7
21. Tell us how you considered providing a reconciliation of the changes
in your warranty
liability for each period presented, including the information
required by ASC 460-10-50-
8.
22. We note your disclosure on page 86 that your wholly foreign-owned
subsidiaries in China
are permitted to pay dividends to you only out of their retained
earnings, if any, as
determined in accordance with PRC accounting standards and
regulations. Please disclose
the nature of any restrictions on the ability of your subsidiaries to
transfer funds to you
through intercompany loans, advances or cash dividends. Disclose the
dollar amount of
restricted net assets as of the end of the most recent fiscal year.
Refer to Rule 4-08(e)(3) of
Regulation S-X. Please also tell us how you considered including
parent-only financial
statements. Refer to Rule 5-04 of Regulation S-X.
Yifan Li
Hesai Group
August 13, 2021
Page 6
12. Redeemable Preferred Equity, page F-19
23. Clarify whether the original terms of your redeemable preferred equity
included
conversion options and whether the conversion that took place on August
1, 2020 was
consistent with these terms. Otherwise, tell us how you considered
whether this
conversion represented a modification or extinguishment. Tell us the
authoritative
accounting literature upon which you relied in accounting for the
conversion.
16. Share Based Compensation, page F-25
24. When your preliminary IPO price is known, please provide us with a
breakdown of all
equity awards granted from six month before the date of this letter and
leading up to the
preliminary pricing of your IPO. This breakdown should list grants in
chronological order
including the fair value of the underlying common stock used to value
such awards as
determined by your board of directors. Please reconcile and explain the
differences
between the fair values of the underlying equity interest determined on
each grant date,
including the difference between the most recent grant date fair value
and the midpoint of
your offering range. In addition, your disclosure should fully describe
the assumptions
utilized at the IPO valuation date that are significantly different than
those used in the
most recent valuation.
General
25. 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 communication.
You may contact Laura Veator, Senior Staff Accountant, at (202) 551-3716
or Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Matthew Derby, Staff
Attorney, at (202) 551-3334 or Jeff Kauten, Staff Attorney, at (202) 551-3447
with any other
questions.
Sincerely,
FirstName LastNameYifan Li
Division of
Corporation Finance
Comapany NameHesai Group
Office of
Technology
August 13, 2021 Page 6
cc: Z. Julie Gao, Esq.
FirstName LastName