SecProbe.io

CORRESP
1
filename1.htm

June 5, 2024

VIA EDGAR AND EMAIL

U.S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

    Attn:

    Erin Donahue

    Charles Eastman

    Ernest Greene

    Evan Ewing

    Re:

    Gauzy Ltd.

    Amendment No. 2 to Registration Statement on Form F-1

    Filed May 29, 2024

    File No. 333-278675

Dear Ms. Donahue:

On behalf of Gauzy Ltd. (CIK No. 0001781446) (the
“Company”), we are writing to submit the Company’s responses to the comments of the staff (the “Staff”)
of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) dated June 5,
2024, relating to the above referenced Amendment No. 2 to Registration Statement on Form F-1 (File No. 333-278675) filed by the Company
on May 29, 2024.

Concurrent with the submission of this letter,
the Company is filing via EDGAR Amendment No. 3 to its Registration Statement on Form F-1 (the “Registration Statement”),
which reflects the Company’s responses to the comments received by the Staff and certain updated information.

For ease of review, we have set forth below each
of the numbered comments of your letter and the Company’s responses thereto. Capitalized terms used herein but not defined herein
have the meanings given to such terms in the Registration Statement.

Amendment No. 2 to Form F-1 filed May 29, 2024

Use of Proceeds, page 70

1. We
note subsequent event footnotes (b) and (e) on page F-21. Please revise the registration statement to clarify if the Second Earn-Out
payment has been paid and revise the use of proceeds section, as applicable, to disclose the estimated net amount of the proceeds broken
down into each principal intended use thereof.

Response: In response to the Staff’s comment, the Company
has revised its disclosure on page 23 and page 70 of the Registration Statement.

Capitalization, page 73

    2.
    Please revise to clearly explain each component of the adjustments made to your pro forma columns. For example, explain each figure used to arrive at the 57,038 Long-term debt, including current portion and accumulated interest in the Pro Forma As Adjusted column.

Response: In response to the Staff’s comment, the Company
has revised its disclosure on pages 72 to 74 of the Registration Statement.

Management’s Discussion and Analysis of Financial Condition and
Results of Operations

Key Business Metrics and Non-GAAP Financial Measures, page 79

    3.

    In regard to certain non-GAAP financial measures you present,
we note the following:

 ● You present and discuss EBITDA, Adjusted EBITDA, Adjusted
EBITDA Margin and Free Cash Flows for multiple periods in a Non-GAAP Financial Measure section before you disclose and discuss GAAP results
of operations;

 ● You present Adjusted EBITDA Margin here and on page 26
but do not present the most directly comparable GAAP measure, Loss for the Period as a % of revenue, with equal or greater prominence;
and

 ● You present Adjusted EBITDA on pages 80 and 81 but do
not provide a direct reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, Net Income.   Please revise
your filing to disclose and discuss GAAP results of operations before you present and discuss non-GAAP financial measures. For each non-GAAP
financial measure you present, revise to present the most directly comparable GAAP measure with equal or greater prominence. In addition,
provide a direct reconciliation from Net Loss to Adjusted EBITDA. Refer to Item 10(e)(1)(i)(A) and (B) of Regulation S-K and Questions
102.10 and 103.02 of the Division of Corporation Finance’s Compliance & Disclosure Interpretations on Non-GAAP Financial Measures.

Response: In response to the Staff’s comment, the Company
has revised its disclosure on page 78 and pages 86 to 89 of the Registration Statement. The Company also respectfully notes that it has included a direct reconciliation from Net Loss to Adjusted EBITDA only on an aggregate
basis and that it has removed reconciliations on a per segment basis.

Note 4 - Operating Segments and Geographical Information, page F-43

    4.
    We note on page F-13 that your segments structure has been updated and the architecture segment and the automotive segment were presented separately as of January 2024. Please tell us what consideration you gave to revising your segment footnote in the annual audited financial statements to reflect the new reportable segments. Refer to ASC 280-10- 50-34.

Response: In response to the
Staff’s comment, the Company respectfully advises the Staff that it has assessed the quantitative and qualitative factors
related to the segment change and concluded that the reorganization did not have a material effect on the Company’s
consolidated financial statements as of or for the year ended December 31, 2023. Specifically, the automotive segment’s
revenues and gross profits for the year ended December 31, 2023 were not material, representing less than 2.5% of the
Company’s total revenue and less than 1% of total segment gross profit, respectively. As such, the Company believes it is
unnecessary to recast the 2023 comparative-period segment information as defined by ASC 280-10-50-34 as it believes financial
statement users will be able to adequately assess the trends in the financial position and operating results of the affected
segments even though the comparative-period segment disclosures were not recast for this immaterial change.

Share Based Compensation, page F-71

    5.
    We note your disclosure of 344,182 options granted in 2023 with a weighted-average exercise price of 0.063 and a weighted-average grant-date fair value price of 10.80. Please explain to us how you determined the fair value of the common stock underlying your 2023 equity issuances, as well as your 2024 equity issuances and the reasons for the differences between those valuations of your common stock leading up to the estimated $18/share IPO offering price. In your response, please also address your considerations for the May 2024, options granted to employees to purchase 554,330 ordinary shares at an exercise price of 0.23 NIS per share as disclosed on page F-21 and F-78. Tell us the weighted-average grant-date fair value price of the May 2024 grant and disclose total unrecognized compensation cost related to that grant.

Response: The Company respectfully submits
to the Staff the below additional information to assist in its review of the Company’s determination of the fair value of the ordinary
shares underlying its outstanding equity awards granted in 2023 and its proposed 2024 issuance and the reasons for the discrepancies
between the previous valuations of the Company’s ordinary shares leading up to the proposed initial public offering (the “IPO”)
and the estimated offering price for the Company’s ordinary shares in the IPO.

    2

The Company respectfully advises the Staff that
it currently expects the offering price in the IPO to be $18 per share, which is the midpoint of the price range set forth on the cover
page of the Registration Statement. On May 28, 2024, the Company implemented a share split of all of its issued ordinary shares which
resulted in a 4.390914-for-1 share split of the Company’s ordinary shares (the “Share Split”).

The table below sets forth information regarding
the options granted by the Company during 2023:

Grant date

    Type
    Total
  Options
  Granted
    Fair Market
  Value
  Per ordinary Share*
  ($)

    7/13/2023
    Options
      323,566
    $ 10.90

    12/28/2023
    Options
      20,616
    $ 10.49

 * For purposes of this letter, we have presented all per share
amounts after giving effect to the Share Split to be consistent with the current presentation in the Registration Statement.

Given the absence of a public market for the Company’s
ordinary shares during 2023, the Company’s board of directors (the “Board”), with the assistance of a third-party
valuation specialist on a contemporaneous basis, estimated the fair value of the Company’s ordinary shares at the time each share-based
compensation award was granted by the Company, taking into account the Board’s then-current assessment of numerous objective and
subjective factors to determine the best estimate of fair value of the Company’s ordinary shares.

The valuations performed in 2023 were performed
in accordance with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company
Equity Securities Issued as Compensation (the “Practice Aid”), which prescribes several valuation approaches for determining
the value of an enterprise and various methodologies for allocating the value of an enterprise to its capital structure and, specifically,
its ordinary shares. The Company believes that this methodology, when applied, provides the most reasonable basis for the valuation of
its ordinary shares because the Company did not identify any single event that occurred between the 2023 grant dates and the valuation
of the Company’s ordinary shares that would have caused a material change in fair value of the Company’s ordinary shares for
those 2023 grants.

In accordance with the Practice Aid, the Company
used a hybrid model in order to reflect two scenarios: (1) an initial public offering event and (2) other liquidation events. The value
in an initial public offering event scenario was based on the fair value of the Company’s business based on management’s estimation.
The value in other liquidation events scenarios was generally based on the Company’s enterprise value, which was the aggregate fair
value of the Company’s reporting units for the purpose of its impairment tests. The Company’s enterprise value was estimated
using the income approach. The income approach estimates the fair value of a company based on the present value of the company’s
future estimated cash flows and its terminal value beyond the forecast period. These future cash flows, including the cash flows beyond
the forecast period for the residual value, are discounted to their present values using an appropriate discount rate to reflect the risks
inherent in the company achieving these estimated cash flows. This is referred to as the discounted cash flow (“DCF”)
methodology.

For each of the various scenarios, the equity
value was estimated and the rights and preferences for preferred shareholder class were considered to allocate appropriate equity value
to ordinary shares accordingly. The resulting value of the ordinary shares was then multiplied by an estimated probability for each scenario.
The probability and timing of each scenario were based on discussions with management, the information known to the Company at the time
and expectations as to the timing and likely prospects of future event scenarios. Once the estimated per share value of the ordinary
shares was derived from the hybrid model, a discount for a lack of marketability (“DLOM”) was then applied to account
for the Company’s securities not being publicly traded. The DLOM was determined using a calculation of average strike put option
approach suggested by Finnerty for a period until the applicable initial public offering or liquidation event.

    3

For the initial public offering scenario, the
Company used the PWERM to allocate value before applying a DLOM. For the Liquidation Event Scenario, the Company used an OPM model to
estimate the value of the Company’s various share classes, assuming an initial public offering event does not occur.

2023 Grants

The Company obtained an independent
third-party valuation of its ordinary shares as of December 31, 2023 (the “2023 Valuation”). The
estimated probability of an initial public offering event used in the 2023 Valuation was 25%. The probability of other liquidation events
was 75% during that period based on market conditions at that time and the overall lack of steps in furtherance of an initial public
offering taken by the Company during the majority of 2023. The expected timeline to complete an initial public offering scenario was
nine months, and the expected timeline for other liquidation events was two years. Expected value at an initial public offering event
was approximately $525 million, whereas expected value at a liquidation event ranged between $152-159 million – that is, management
attributed the other liquidation scenarios a lower outcome but a higher probability.

While the Company’s ultimate equity value
in its IPO is expected to be lower than estimated in its 2023 Valuation analyses, it is still higher than the value under the other liquidation
events scenario. Thus, the Company views the increase in probability for an IPO as the main driver for the increase in its share price.

Preliminary Price Range

The Company supplementally advises the Staff
that, on May 27, 2024, representatives of Barclays Capital Inc. on behalf of the underwriters (collectively, the “Representative”),
recommended a preliminary price range of $17.00 to $19.00 per ordinary share (“Preliminary Price Range”), with a midpoint
of $18.00 per ordinary share (the “Preliminary IPO Price”). The Preliminary Price Range was derived after giving effect
to the Share Split that the Company effected. The Preliminary Price Range was not
derived using a formal determination of fair value but was derived using a combination of valuation methodologies, including, among other
methodologies:

 - a
                                            comparison of comparable company valuations and valuation increases at the time of their
                                            respective initial public offerings;

 - a
                                            comparison of public companies at a similar stage of development and market penetration;

 - feedback
                                            from prospective investors as a result of testing-the-waters meetings; and

 - current
                                            market conditions and discussions with the Representative, based on the current market environment
                                            and the supply and demand for such investment opportunities in the marketplace.

Comparison
of Preliminary Price Range and Historical Estimated Fair Value Per Ordinary Share

For the equity awards proposed to be granted
in May 2024, there are a number of factors that account for the increase in the Preliminary Price Range over the applicable grant date
fair value used as an input for determining share-based compensation expense for equity awards granted in 2023. The Company believes
that the differences in value reflected between the estimated fair values of its ordinary shares described in this letter and the Preliminary
Price Range is the result of the following key factors, among others:

 ● The
                                            Preliminary Price Range does not take into account the current lack of liquidity for the
                                            Company’s ordinary shares and assumes a successful IPO with no weighting attributed
                                            to any other outcome for the Company’s business, such as remaining a privately held
                                            company or being sold in a private M&A transaction.

 ● As
is typical for initial public offerings, the Preliminary Price Range was not derived using a formal determination of fair value, but
was determined as a result of discussions among representatives of the Company’s management, Board, and the underwriters. Conversely,
the Company’s valuation methodologies, which are both commonly accepted and applied in the valuation community and are consistent
with generally accepted methods and guidance, reflect the potential for alternative liquidity events occurring at different future dates,
which inherently decreases the estimated fair value per share due to