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United States securities and exchange commission logo
May 15, 2024
Jianping Kong
Chief Executive Officer
Nano Labs Ltd
China Yuangu Hanggang Technology Building
509 Qianjiang Road, Shangcheng District
Hangzhou, Zhejiang , 310000
People s Republic of China
Re: Nano Labs Ltd
Annual Report on
Form 20-F for the fiscal year ended December 31, 2023
Filed April 8, 2024
File No. 001-41426
Dear Jianping Kong:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments.
Please respond to this letter 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 a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to this letter, we may have additional comments.
Annual Report on Form 20-F for the FIscal Year Ended December 31, 2023
Introduction, page ii
1. Please disclose
prominently within this section that you are not a Chinese operating
company but a Cayman
Islands holding company with operations conducted by your
subsidiaries in China.
Disclose whether or not you have any contractual arrangements
with a variable
interest entity (VIE) based in China or whether you indirectly have a
consolidating indirect
majority ownership interest in the PRC-based subsidiaries. To the
extent you have a VIE
structure please expand your disclosures accordingly to describe
the unique risks to
investors involved with this structure. Also disclose that you have not
been or expect to be
identified by the Commission under the HFCAA, including the
impact of being
identified as a Commission-Identified Issuer. We note certain of these
disclosures have been
included within Risk Factors, under the sub-heading Risks Related
to Conducting Business
in China beginning on page 37. Please ensure to provide cross-
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references of more detailed disclosure to the respective risk factor.
2. The Sample Letters to China-Based Companies seek specific disclosure
relating to the risk
that the PRC government may intervene in or influence your operations
at any time, or
may exert control over operations of your business, which could result
in a material
change in your operations and/or the value of the securities you are
registering for
sale. We remind you that, pursuant to federal securities rules, the
term control
(including the terms controlling, controlled by, and
under common control with ) as
defined in Securities Act Rule 405 means the possession, direct or
indirect, of the power
to direct or cause the direction of the management and policies of a
person, whether
through the ownership of voting securities, by contract, or otherwise.
The Sample Letters
also seek specific disclosures relating to uncertainties regarding the
enforcement of laws
and that the rules and regulations in China can change quickly with
little advance
notice. We do not believe that your disclosure conveys the same risk.
For example, and
without limitation, we note your disclosure that [y]our business,
prospects, financial
condition and results of operations may be influenced to a significant
degree by political,
economic and social conditions in China, "The PRC government has
significant
oversight and discretion over the conduct of our business and may
intervene with or
influence our operations as the government deems appropriate to
further regulatory,
political and societal goals," and disclosure contained in your risk
factor on page 40 titled
"Uncertainties in the interpretation and enforcement of PRC laws and
regulations could
limit the legal protections available to you and us." Please revise
your cover page,
summary, and risk factor disclosure relating to legal and operational
risks associated with
operating in China and PRC regulations for consistency with the Sample
Letters.
Key Information, page 1
3. Notwithstanding the disclosures made in the Risk Factors sub-heading
Risks Related to
Conducting Business in China, please address the following prominently
within Key
Information separate from the Risk Factors, and provide a
cross-reference to the specific
sub-risk factor for more details:
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
investigate completely your auditor, and that as a result an
exchange may determine
to delist your securities. Disclose whether your auditor is
subject to the
determinations announced by the PCAOB on December 16, 2021.
At the onset of Item 3, disclose the risks that your corporate
structure and being based
in or 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
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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 the securities you are registering for sale.
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.
Disclose each permission or approval that you, your
subsidiaries, or the VIEs are
required to obtain from Chinese authorities to operate your
business and to offer the
securities being registered to foreign investors. State whether
you, your subsidiaries,
or VIEs are covered by permissions requirements from the China
Securities
Regulatory Commission (CSRC), Cyberspace Administration of China
(CAC) or any
other governmental agency that is required to approve the VIE s
operations, and state
affirmatively whether you have received all requisite permissions
or approvals and
whether any permissions or approvals have been denied. Please
also describe the
consequences to you and your investors if you, your subsidiaries,
or the VIEs: (i) do
not receive or maintain such permissions or approvals, (ii)
inadvertently conclude
that such permissions or approvals are not required, or (iii)
applicable laws,
regulations, or interpretations change and you are required to
obtain such permissions
or approvals in the future.
At the onset of Item 3, provide a clear description of how cash
is transferred through
your organization. Disclose your intentions to distribute
earnings or settle amounts
owed under the VIE agreements. Quantify any cash flows and
transfers of other
assets by type that have occurred between the holding company,
its subsidiaries, and
the consolidated VIEs, and direction of transfer. Quantify any
dividends or
distributions that a subsidiary or consolidated VIE 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 and/or the
consolidated
VIEs, to the parent company and U.S. investors as well as the
ability to settle
amounts owed under the VIE agreements.
Jianping Kong
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Ltd
Comapany
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4. We note your Risk Factor disclosure on page 52 that substantially all
of your current
officers and directors are nationals and residents of countries other
than the United States.
Please provide a separate Enforceability section, to disclose the
difficulty of bringing
actions and enforcing judgments against these individuals. Reference
is made to our
disclosure previously provided in the Form F-1 Registration Statement,
file number 333-
266825, declared effective by the Staff on September 27, 2022.
Controls and Procedures
DIsclosure Controls and Procedures, page 134
5. Refer to the first paragraph. Please disclose whether based on that
evaluation, your chief
executive officer and chief financial officer concluded that, as of
December 31, 2023,
your disclosure controls and procedures ("DCP") were also determined
to be not effective
due to the material weakness identified in your internal control over
financial reporting
("ICFR"). We note your current disclosure implies that DCP were not
impacted,
notwithstanding the ineffectiveness of your ICFR, and that you do not
provide a
conclusion regarding the effectiveness of DCP. Reference is made to
Item 307 of
Regulation S-K. To the extent that ICFR has been determined to be
ineffective due to the
material weakness identified, we would expect your DCP also to be
ineffective due to the
overlap of controls. Further, in the second paragraph, please clarify
if you had more than
one material weakness, as we note disclosure in Risk Factors on page
27, MD&A-ICFR
on page 95, and in your Management's Report on Internal Control over
Financial
Reporting on page 134, that only one material weakness had been
identified, whereas your
current disclosure refers to material weaknesses. Please revise.
Management's Annual Report on Internal Control over Financial Reporting, page
134
6. Please address the following:
In the paragraphs where you refer to management, please expand
to disclose if your
management includes the participation of your chief executive
officer and chief
financial officer.
Under the heading of Internal Control over Financial Reporting
on page 135, please
expand to include within this section your implementation and
remediation plans to
address the material weakness identified. We note such discussion
instead is provided
under the heading, Change in Internal Control over Financial
Reporting, with an
expanded discussion in MD&A-ICFR on page 96, which expanded
discussion should
also be included herein.
Under the heading of Change in Internal Control over Financial
Reporting, please
Jianping Kong
Nano Labs Ltd
May 15, 2024
Page 5
revise to disclose if there were any change in your internal
control over financial
reporting ("ICFR") identified in connection with your evaluation
of ICFR, other than
those discussed above relating to the material weakness, that
occurred during your
fourth fiscal quarter (i.e., quarter ended December 31, 2023)
that has materially
affected, or is reasonably likely to materially affect, your
internal control over
financial reporting. See Item 308(c) of Regulation S-K.
Please revise your Exhibit 12.1 and 12.2 Certifications to
include the disclosure
language required by paragraph 4(b) pursuant to the Instructions
to Item 19 of Form
20-F as pertaining to Exhibit 12, paragraph 4(b). In this regard,
we note your
currently filed Exhibit 12.1 and 12.2 Certifications discloses at
paragraph
4(b), [Reserved]. Given that this is your second annual report on
Form 20-F after
your initial public offering, you are required to comply with
disclosure requirements
of Item 308(a) of Regulation S-K, whereby the Exhibit 12.1 and
12.2 Certifications
should include the disclosures for paragraph 4(b).
Please file an amendment to your December 31, 2023 annual
report on Form 20-F, in
its entirety, to reflect the revisions as noted to your
disclosure controls and
procedures and internal control over financial reporting. Your
amended filing should
also include updated Exhibit 12 and Exhibit 13 Certifications
accordingly. We refer
you to the following Staff Compliance & Disclosure
Interpretations ("C&DIs"): (i)
Exchange Act Rules, C&DI No. 161.01, and (ii) Regulation S-K,
C&DI No. 246.12.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Please contact Beverly Singleton at 202-551-3328 or Kevin Woody at
202-551-3629 with
any questions.
FirstName LastNameJianping Kong Sincerely,
Comapany NameNano Labs Ltd
Division of
Corporation Finance
May 15, 2024 Page 5 Office of
Manufacturing
FirstName LastName