Correspondence 0001640334-23-000715 from JAAG Enterprises Ltd. (JAGL) (CIK 0001951051)
JAAG Enterprises Ltd. (JAGL) (CIK 0001951051)
Date: April 27, 2023 · CIK: 0001951051 · Accession: 0001640334-23-000715
AI Filing Summary & Sentiment
File numbers found in text: 333-267995
Referenced dates: January 16, 2023, November 21, 2022
Letter
jaag_corresp.htm
JONES & HALEY, P.C.
ATTORNEYS AT LAW
750 HAMMOND DRIVE, SUITE 100, BUILDING 12
ATLANTA, GEORGIA 30328
RICHARD W. JONES
email: jones@corplaw.net
www.corplaw.net
Telephone 770-804-0500
Facsimile 770-804-8004
April 14, 2023
United States Securities and Exchange Commission
Division of Corporate Finance
Office of Manufacturing
100 F Street, N.E.
Washington, DC 20549
Attn: Eranga Dian and Asia Timmons-Pierce
Re:
Jaag Enterprises Ltd. (the “Company”)
Registration Statement on Form S-1
Filed October 25, 2022
[File No. 333-267995]
[J&H File No. 4024.00]
Ladies and Gentlemen:
By letter dated November 21, 2022, the staff (the "Staff") of the Securities and Exchange Commission ("Commission") provided JAAG Enterprises Ltd. (the "Company") with comments to the Company’s Registration Statement on Form S-1, filed on October 25, 2022, (the "First Comment Letter"). The Company filed its response to the First Comment Letter on January 18, 2023, at which time it filed an amendment to its registration statement on Form S-1A. Subsequently, on February 8, 2023, the SEC submitted its second comment letter and the Company in connection with this filing (“Second Comment Letter”). This letter contains the Company’s responses to the Staff’s Second Comment Letter. The numbered responses and the headings set forth below correspond to the numbered comments and headings in the Staff's Second Comment Letter and include references to the comments in the Staff's First comment letter (the "First Comment Letter").
Concurrently with the delivery of this letter, the Company is filing via EDGAR Amendment No. 2 to the Form S-1 setting forth an amended Registration Statement, reflecting changes made in response to the Staff's comments. A copy of the amended Registration Statement, marked to show changes, is enclosed with this letter for your convenience and reference.
In addition to the changes made in response to the Staff's comments, the amended Registration Statement reflects some corrections or clarifications to selected passages of the original Registration Statement. In this regard, please note that the interim financial statements have been updated from the fiscal period ending September 30, 2022 to the fiscal period ending December 31, 2022. The MD&A section has been revised accordingly.
United States and Securities Commission April 14, 2023
Page 2 of 11
Amendment No. 1 to Registration Statement on Form S-1
General
Staff Comment:
1. Please note that the Sample Letter to China-Based Companies (December 20, 2021) indicates that a China-based issuer is a company based in, or with a majority of its operation in China or Hong Kong. Please note that our comments referencing the PRC and/or China apply to your operations in Hong Kong. Many of the comments contained in this letter have numerous components. To facilitate the staff's analysis of your disclosure, your response letter should separate each comment and component and reproduce the disclosure and the specific location in your filing where you believe the SEC's concern is addressed. Please also note that the headings in this comment letter and comments.
Response:
We have reviewed the Sample Letter referenced above and would note that the first sentence of the introduction in the Sample Letter states that a “China Based Company is one that is based in a or which has the majority of its operations in the PRC.” The Registrant is not based in the PRC and the majority of its operations are not in the PRC. We see no reference in the Sample Letter to companies with operations in Hong Kong. Please instructs us where this definition is broadened to include Hong Kong companies. We could not find it.
As instructed in this response letter we have endeavored to separate each comment and component and reference the specific location in the filing where we believe the Commission's concern is addressed.
Cover Page
Staff Comment:
2. We note your responses to prior comments 1-4. We re-issued those comments, please provide requested disclosure on your cover page.
Prior Comment #1
Please disclose prominently on the prospectus cover page that you are not a Chinese operating company but a Cayman Islands holding company with operations conducted by your subsidiaries based in China and that this structure involves unique risks to investors. If true, disclose that these contracts have not been tested in court. Provide a cross-reference to your detailed discussion of risks facing the company and the offering as a result of this structure.
Response:
We again note that the comment provided in the First Comment Letter as noted above is factually incorrect. The Company is not a Cayman Island holding company. As stated in the response letter dated January 16, 2023 (the "First Response Letter"), the word "Cayman Island" does not appear in the Registration Statement. The Company was formed under the laws of the State of Nevada. It is a holding company and its wholly-owned subsidiary is JAAG Uniform Limited, a corporation organized under the laws of Hong Kong.
United States and Securities Commission April 14, 2023
Page 3 of 11
To address the Staff’s Comment, the following paragraph has been added to the cover page of the Registration Statement at the bottom of the cover page (page 3):
The Company is not a Chinese operating company, but was formed under the laws of the State of Nevada and is a holding company, with a wholly owned subsidiary, JAAG Uniform Limited. Our subsidiary is a corporation formed under the laws of Hong Kong. The Company's business is primarily carried out in Hong Kong through its operating subsidiary. For a detailed description of the unique risks facing the Company and the holders of our common stock associated with our operations in Hong Kong and our operations in this holding company structure, please refer to “Risk Factors - Risk Factors Relating to Doing Business in Hong Kong.”
Staff Comment:
Provide a cross-reference to your detailed discussion of risks facing the company and the offering as a result of this structure.
Response:
The new entry above has a cross reference and Amendment #2 to the Registration Statement ("Amendment #2") includes the following paragraph on the bottom of the cover page on page 3, which contains a cross-reference to the detailed discussion of risks facing the Company and the Offering as a result of this corporate structure.
In light of the recent statements and regulatory actions by the PRC government, such as those related to Hong Kong, data security, and anti-monopoly concerns, the Company may be subject to the risks of uncertainty of any future actions of the PRC government. These actions could result in a material change in our operations, including our ability to carry on our current business or accept foreign investments, and the action could have an adverse change in value to our common stock. The Company may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the Chinese Securities Regulatory Commission, if the Company fail to comply with such rules and regulations, which could adversely affect the ability of the Company’s securities to continue to trade on OTC Markets, which may cause the value of our securities to significantly decline or become worthless. For a detailed description of the risks facing the Company and the offering associated with our operations in Hong Kong, please refer to the discussion under the heading “Risk Factors - Risk Factors Relating to Doing Business in Hong Kong.”
Prior Comment #2
Provide prominent disclosure about the legal and operational risks associated with being based in or 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 and/or the value of the securities you are registering for sale 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, have or may impact the company’s ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange. Please disclose whether your auditor is subject to the determinations announced by the PCAOB on December 16, 2021 and whether and how the Holding Foreign Companies Accountable Act and related regulations will affect your company. Your prospectus summary should address, but not necessarily be limited to, the risks highlighted on the prospectus cover page.
United States and Securities Commission April 14, 2023
Page 4 of 11
Response re operations in China:
Amendment #1 to the Registration Statement ("Amendment #1") included the following paragraph on the cover page, which provides prominent disclosure about the legal and operational risks associated with being based in or having the majority of the Company’s operations in China. This disclosure includes a cross-reference to the detailed discussion of risks facing the Company as a result of its corporate structure. This disclosure has been revised and updated on the cover page (page 3), which contains the following discussion:
In light of the recent statements and regulatory actions by the PRC government, such as those related to Hong Kong, data security, and anti-monopoly concerns, the Company may be subject to the risks of uncertainty of any future actions of the PRC government in this regard, which may result in a material change in our operations, including our ability to carry on our current business or accept foreign investments, and the resulting adverse change in value to our common stock. The Company may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the Chinese Securities Regulatory Commission, if the Company fails to comply with such rules and regulations, which could adversely affect the ability of the Company’s securities to continue to trade on the Over-the-Counter Bulletin Board, and which may cause the value of our securities to significantly decline in value or to become worthless. These factors could create legal and operational risks, as a result of the Company’s operations being located primarily in Hong Kong, and these risks are discussed more specifically in our Risk Factors Section under the heading “Risk Factors Relating to Doing Business in Hong Kong.”
Response re our Auditor and the HFCAA:
Also, we have added the following paragraph about our auditor and the HFCAA to the bottom of the cover page on page 3.
Our auditor is located in Hong Kong and China, jurisdictions where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities. Therefore, our auditor is subject to the statements announced by the PCAOB on December 16, 2021. The PCAOB currently does not have free access to inspect the work of our auditor. The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspection. The audits could be disallowed and the Company’s stock could be delisted if it is unable to meet the PCAOB inspection request established by the Holding Foreign Companies Accountable Act (“HFCAA”).
United States and Securities Commission April 14, 2023
Page 5 of 11
Prior Comments re Risking in Summary
Your prospectus summary should address, but not necessarily be limited to, the risks highlighted on the prospectus cover page.
Response:
In addition to the Risk Factors discussed on our prospectus cover page, as more specifically addressed above the Risk Factors discussed in the prospectus summary has been updated to include the following: (page 10):
Risk Factors Relating to Doing Business in Hong Kong
Recently, the PRC initiated a series of regulatory actions and statements to regulate business operations in certain areas in China with little or no advance notice, including a cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using the variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Currently, the Company and its operating subsidiary are not subject to these rules. In the future, the Company may be subject to PRC laws and regulations related to our current business operations and any changes in such laws and regulations and interpretations may impair our ability to operate profitably, which could result in a material negative impact on our operations and/or the value of the securities the Company is registering for sale.
The business of our Subsidiary generates and processes personal data, and the Company is required to comply with PRC laws and regulations relating to cyber security. These laws and regulations could create unexpected costs, subject our Subsidiary to enforcement actions for compliance failures, or restrict portions of our business or cause us to change our data practices or business model.
The Company may be liable for improper use or appropriation of personal information provided directly or indirectly by its customers or end users.
The M&A Rules of the PRC and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.
The Group faces the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the Hong Kong and the profitability of such business.
The business of the Company’s subsidiary has been affected by and future operations may continue to be adversely affected by epidemics and pandemics, such as the recent COVID-19 outbreak.
Because the headquarters of the Group are located outside of the U.S. and its products will be sold outside of the U.S., the Group is subject to the risks of doing business internationally, including periodic foreign economic downturns and political instability, which may adversely affect JAAG Uniform sales and cost of doing business in those regions of the world.
United States and Securities Commission April 14, 2023
Page 6 of 11
Because the Group headquarters are located outside of the U.S., U.S. investors may experience difficulties in attempting to effect service of process and in enforcing a judgment pursuant to U.S. federal securities law.
Because the Company’s officers and directors are not residents of the United States, it may be difficult for U.S. investors to enforce any judgment liabilities against them.
The Company must comply with the Foreign Corrupt Practices Act.
Fluctuation in the value of foreign currency may have a material adverse effect on your investment.
Prior Comment #3
Clearly disclose how you will refer to the holding company, subsidiaries, and other entities 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. Refrain from using terms such as “we” or “our” when describing activities or functions of a subsidiary or other entity. For example, disclose, if true, that your subsidiaries and/or other entities conduct operations in China, that the other entity is consolidated for accounting purposes but is not an entity in which you own equity, and that the holding comp
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CORRESP
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filename1.htm
jaag_corresp.htm
JONES & HALEY, P.C.
ATTORNEYS AT LAW
750 HAMMOND DRIVE, SUITE 100, BUILDING 12
ATLANTA, GEORGIA 30328
RICHARD W. JONES
email: jones@corplaw.net
www.corplaw.net
Telephone 770-804-0500
Facsimile 770-804-8004
April 14, 2023
United States Securities and Exchange Commission
Division of Corporate Finance
Office of Manufacturing
100 F Street, N.E.
Washington, DC 20549
Attn: Eranga Dian and Asia Timmons-Pierce
Re:
Jaag Enterprises Ltd. (the “Company”)
Registration Statement on Form S-1
Filed October 25, 2022
[File No. 333-267995]
[J&H File No. 4024.00]
Ladies and Gentlemen:
By letter dated November 21, 2022, the staff (the "Staff") of the Securities and Exchange Commission ("Commission") provided JAAG Enterprises Ltd. (the "Company") with comments to the Company’s Registration Statement on Form S-1, filed on October 25, 2022, (the "First Comment Letter"). The Company filed its response to the First Comment Letter on January 18, 2023, at which time it filed an amendment to its registration statement on Form S-1A. Subsequently, on February 8, 2023, the SEC submitted its second comment letter and the Company in connection with this filing (“Second Comment Letter”). This letter contains the Company’s responses to the Staff’s Second Comment Letter. The numbered responses and the headings set forth below correspond to the numbered comments and headings in the Staff's Second Comment Letter and include references to the comments in the Staff's First comment letter (the "First Comment Letter").
Concurrently with the delivery of this letter, the Company is filing via EDGAR Amendment No. 2 to the Form S-1 setting forth an amended Registration Statement, reflecting changes made in response to the Staff's comments. A copy of the amended Registration Statement, marked to show changes, is enclosed with this letter for your convenience and reference.
In addition to the changes made in response to the Staff's comments, the amended Registration Statement reflects some corrections or clarifications to selected passages of the original Registration Statement. In this regard, please note that the interim financial statements have been updated from the fiscal period ending September 30, 2022 to the fiscal period ending December 31, 2022. The MD&A section has been revised accordingly.
United States and Securities Commission April 14, 2023
Page 2 of 11
Amendment No. 1 to Registration Statement on Form S-1
General
Staff Comment:
1. Please note that the Sample Letter to China-Based Companies (December 20, 2021) indicates that a China-based issuer is a company based in, or with a majority of its operation in China or Hong Kong. Please note that our comments referencing the PRC and/or China apply to your operations in Hong Kong. Many of the comments contained in this letter have numerous components. To facilitate the staff's analysis of your disclosure, your response letter should separate each comment and component and reproduce the disclosure and the specific location in your filing where you believe the SEC's concern is addressed. Please also note that the headings in this comment letter and comments.
Response:
We have reviewed the Sample Letter referenced above and would note that the first sentence of the introduction in the Sample Letter states that a “China Based Company is one that is based in a or which has the majority of its operations in the PRC.” The Registrant is not based in the PRC and the majority of its operations are not in the PRC. We see no reference in the Sample Letter to companies with operations in Hong Kong. Please instructs us where this definition is broadened to include Hong Kong companies. We could not find it.
As instructed in this response letter we have endeavored to separate each comment and component and reference the specific location in the filing where we believe the Commission's concern is addressed.
Cover Page
Staff Comment:
2. We note your responses to prior comments 1-4. We re-issued those comments, please provide requested disclosure on your cover page.
Prior Comment #1
Please disclose prominently on the prospectus cover page that you are not a Chinese operating company but a Cayman Islands holding company with operations conducted by your subsidiaries based in China and that this structure involves unique risks to investors. If true, disclose that these contracts have not been tested in court. Provide a cross-reference to your detailed discussion of risks facing the company and the offering as a result of this structure.
Response:
We again note that the comment provided in the First Comment Letter as noted above is factually incorrect. The Company is not a Cayman Island holding company. As stated in the response letter dated January 16, 2023 (the "First Response Letter"), the word "Cayman Island" does not appear in the Registration Statement. The Company was formed under the laws of the State of Nevada. It is a holding company and its wholly-owned subsidiary is JAAG Uniform Limited, a corporation organized under the laws of Hong Kong.
United States and Securities Commission April 14, 2023
Page 3 of 11
To address the Staff’s Comment, the following paragraph has been added to the cover page of the Registration Statement at the bottom of the cover page (page 3):
The Company is not a Chinese operating company, but was formed under the laws of the State of Nevada and is a holding company, with a wholly owned subsidiary, JAAG Uniform Limited. Our subsidiary is a corporation formed under the laws of Hong Kong. The Company's business is primarily carried out in Hong Kong through its operating subsidiary. For a detailed description of the unique risks facing the Company and the holders of our common stock associated with our operations in Hong Kong and our operations in this holding company structure, please refer to “Risk Factors - Risk Factors Relating to Doing Business in Hong Kong.”
Staff Comment:
Provide a cross-reference to your detailed discussion of risks facing the company and the offering as a result of this structure.
Response:
The new entry above has a cross reference and Amendment #2 to the Registration Statement ("Amendment #2") includes the following paragraph on the bottom of the cover page on page 3, which contains a cross-reference to the detailed discussion of risks facing the Company and the Offering as a result of this corporate structure.
In light of the recent statements and regulatory actions by the PRC government, such as those related to Hong Kong, data security, and anti-monopoly concerns, the Company may be subject to the risks of uncertainty of any future actions of the PRC government. These actions could result in a material change in our operations, including our ability to carry on our current business or accept foreign investments, and the action could have an adverse change in value to our common stock. The Company may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the Chinese Securities Regulatory Commission, if the Company fail to comply with such rules and regulations, which could adversely affect the ability of the Company’s securities to continue to trade on OTC Markets, which may cause the value of our securities to significantly decline or become worthless. For a detailed description of the risks facing the Company and the offering associated with our operations in Hong Kong, please refer to the discussion under the heading “Risk Factors - Risk Factors Relating to Doing Business in Hong Kong.”
Prior Comment #2
Provide prominent disclosure about the legal and operational risks associated with being based in or 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 and/or the value of the securities you are registering for sale 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, have or may impact the company’s ability to conduct its business, accept foreign investments, or list on a U.S. or other foreign exchange. Please disclose whether your auditor is subject to the determinations announced by the PCAOB on December 16, 2021 and whether and how the Holding Foreign Companies Accountable Act and related regulations will affect your company. Your prospectus summary should address, but not necessarily be limited to, the risks highlighted on the prospectus cover page.
United States and Securities Commission April 14, 2023
Page 4 of 11
Response re operations in China:
Amendment #1 to the Registration Statement ("Amendment #1") included the following paragraph on the cover page, which provides prominent disclosure about the legal and operational risks associated with being based in or having the majority of the Company’s operations in China. This disclosure includes a cross-reference to the detailed discussion of risks facing the Company as a result of its corporate structure. This disclosure has been revised and updated on the cover page (page 3), which contains the following discussion:
In light of the recent statements and regulatory actions by the PRC government, such as those related to Hong Kong, data security, and anti-monopoly concerns, the Company may be subject to the risks of uncertainty of any future actions of the PRC government in this regard, which may result in a material change in our operations, including our ability to carry on our current business or accept foreign investments, and the resulting adverse change in value to our common stock. The Company may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the Chinese Securities Regulatory Commission, if the Company fails to comply with such rules and regulations, which could adversely affect the ability of the Company’s securities to continue to trade on the Over-the-Counter Bulletin Board, and which may cause the value of our securities to significantly decline in value or to become worthless. These factors could create legal and operational risks, as a result of the Company’s operations being located primarily in Hong Kong, and these risks are discussed more specifically in our Risk Factors Section under the heading “Risk Factors Relating to Doing Business in Hong Kong.”
Response re our Auditor and the HFCAA:
Also, we have added the following paragraph about our auditor and the HFCAA to the bottom of the cover page on page 3.
Our auditor is located in Hong Kong and China, jurisdictions where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities. Therefore, our auditor is subject to the statements announced by the PCAOB on December 16, 2021. The PCAOB currently does not have free access to inspect the work of our auditor. The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspection. The audits could be disallowed and the Company’s stock could be delisted if it is unable to meet the PCAOB inspection request established by the Holding Foreign Companies Accountable Act (“HFCAA”).
United States and Securities Commission April 14, 2023
Page 5 of 11
Prior Comments re Risking in Summary
Your prospectus summary should address, but not necessarily be limited to, the risks highlighted on the prospectus cover page.
Response:
In addition to the Risk Factors discussed on our prospectus cover page, as more specifically addressed above the Risk Factors discussed in the prospectus summary has been updated to include the following: (page 10):
Risk Factors Relating to Doing Business in Hong Kong
Recently, the PRC initiated a series of regulatory actions and statements to regulate business operations in certain areas in China with little or no advance notice, including a cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using the variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Currently, the Company and its operating subsidiary are not subject to these rules. In the future, the Company may be subject to PRC laws and regulations related to our current business operations and any changes in such laws and regulations and interpretations may impair our ability to operate profitably, which could result in a material negative impact on our operations and/or the value of the securities the Company is registering for sale.
The business of our Subsidiary generates and processes personal data, and the Company is required to comply with PRC laws and regulations relating to cyber security. These laws and regulations could create unexpected costs, subject our Subsidiary to enforcement actions for compliance failures, or restrict portions of our business or cause us to change our data practices or business model.
The Company may be liable for improper use or appropriation of personal information provided directly or indirectly by its customers or end users.
The M&A Rules of the PRC and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.
The Group faces the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the Hong Kong and the profitability of such business.
The business of the Company’s subsidiary has been affected by and future operations may continue to be adversely affected by epidemics and pandemics, such as the recent COVID-19 outbreak.
Because the headquarters of the Group are located outside of the U.S. and its products will be sold outside of the U.S., the Group is subject to the risks of doing business internationally, including periodic foreign economic downturns and political instability, which may adversely affect JAAG Uniform sales and cost of doing business in those regions of the world.
United States and Securities Commission April 14, 2023
Page 6 of 11
Because the Group headquarters are located outside of the U.S., U.S. investors may experience difficulties in attempting to effect service of process and in enforcing a judgment pursuant to U.S. federal securities law.
Because the Company’s officers and directors are not residents of the United States, it may be difficult for U.S. investors to enforce any judgment liabilities against them.
The Company must comply with the Foreign Corrupt Practices Act.
Fluctuation in the value of foreign currency may have a material adverse effect on your investment.
Prior Comment #3
Clearly disclose how you will refer to the holding company, subsidiaries, and other entities 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. Refrain from using terms such as “we” or “our” when describing activities or functions of a subsidiary or other entity. For example, disclose, if true, that your subsidiaries and/or other entities conduct operations in China, that the other entity is consolidated for accounting purposes but is not an entity in which you own equity, and that the holding comp