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United States securities and exchange commission logo
November 16, 2022
Li Peng Leck
Executive Chairwoman and Executive Director
Davis Commodities Limited
10 Bukit Batok Crescent
#10-01, The Spire
Singapore 658079
Re: Davis Commodities
Limited
Draft Registration
Statement on Form F-1
Submitted October
21, 2022
CIK No. 0001949478
Dear Li Peng Leck:
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 Submitted October 21, 2022
Risk Factors
Risks related to Our Business and Industry
Import or export restrictions by other countries... , page 9
1. You mention the impact
of actions by the Indian government, however, it is not clear how
these actions impacted
you and to what extent your business is dependent upon exports
from India. Please
revise to elaborate.
Li Peng Leck
FirstName LastNameLi Peng Leck
Davis Commodities Limited
Comapany 16,
November NameDavis
2022 Commodities Limited
November
Page 2 16, 2022 Page 2
FirstName LastName
The COVID-19 pandemic has affected, and could continue to affect, the global
economy as a
whole..., page 11
2. We note your existing disclosure regarding the impact of COVID-19.
However, please
disclose (1) whether your business segments, products, lines of
service, projects, or
operations are materially impacted by the pandemic related lockdowns
in China and (2)
the impact of consumer demand declines in China. In addition, discuss
any steps you are
taking to mitigate adverse impacts to your business.
Fluctuation in the exchange rate between the US$ and foreign currencies may
have an adverse
effect on our business, page 12
3. We note that you disclose your exposure to the fluctuation in the
"US$, S$ and ."
However, we note that many of your clients and producers are located
in jurisdictions that
use currencies other than the US$, S$ or , for example, you
disclose on page 41 that you
acquire raw sugar from India and on page 75 you disclose that you sell
sugar in China. In
contrast, we do not see any disclosure suggesting any material
exposure to jurisdictions
that use the euro. If true, please update this risk factor to reflect
your exposure to
currencies material to your business to help investors better assess
the risk.
We rely heavily on our existing brands..., page 14
4. Revise to disclose the amount of revenues that are generated through
your exclusive
distributorship with the Thai Roong Ruang Sugar Group and Tong Seng
Produce Pte.
Ltd. in order to better understand how these arrangements impact your
operations. State, if
true, that you have no commitment from any customer to purchase a
certain amount of
your products, even under these exclusive or established
distributorships.
Risks Related to this Offering and the Trading Market, page 19
5. We note in this section your risk factor titled "The laws of the
Cayman Islands may not
provide our shareholders with benefits comparable to those provided to
shareholders of
corporations incorporated in the United States." Please also include a
risk factor
addressing that the Cayman Islands is now on the Financial Action Task
Force, so called,
"grey list" of anti-money laundering jurisdictions as well as the
European Commission's
list of anti-money laundering "high-risk third countries."
Industry Data and Forecasts, page 30
6. We note reference that this prospectus contains data related to the
beauty and health
products industry. Please advise.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
40
7. Please include a description, including the amounts invested, of the
company's principal
Li Peng Leck
FirstName LastNameLi Peng Leck
Davis Commodities Limited
Comapany 16,
November NameDavis
2022 Commodities Limited
November
Page 3 16, 2022 Page 3
FirstName LastName
capital expenditures and divestitures since the beginning of your last
two financial years to
the date of this registration statement. Refer to Item 4.A.5 of Form
20-F, incorporated by
Item 4.A. of Form F-1.
8. Please disclose information concerning the principal capital
expenditures and divestitures
currently in progress, including the distribution of these investments
geographically and
the method of financing. Refer to Item 4.A.6 of Form 20-F,
incorporated by Item 4.a of
Form F-1.
Key Factors that Affect Operating Results, page 41
9. We note that the pricing of commodity products affects your business,
financial condition,
results of operations, and cash flows. Please discuss recent trends in
commodity prices for
sugar, rice, and fats and oils for the periods presented. Refer to
Item 5.D of the Form 20-
F.
10. We note you have provided a breakdown of total revenues by category or
activity.
However, please also provide a breakdown of total revenues by
geographic market. Refer
to Item 4.B.2 of Form 20-F, incorporated by Item 4.a of Form F-1.
Results of Operations, page 45
11. Please expand your discussion to describe the extent to which changes
in results of
operations are attributable to changes in prices or changes in the
volume or amount of
products being sold. Additionally, in this regard we note per page 12
that you minimize
commodity price risks by selling products on a cost-plus basis or by
hedging prices of
products through futures contracts on the commodity exchanges. Please
discuss the impact
of these efforts on cost of revenue and gross profit. Refer to Item
5.A of Form 20-F.
12. Please revise your discussions to quantify the reasons underlying
material changes within
a line item, including where material changes offset one another.
Refer to Item 5 of Form
20-F.
13. Please explain why revenue from oil and fat products decreased 81.9%
for the six months
ended June 30, 2022 as compared to the six months ended June 30, 2021.
Refer to Item 5
of Form 20-F.
14. Please include a discussion of results of operations on a segment
basis. Refer to Item 5 of
Form 20-F.
Liquidity and Capital Resources, page 53
15. Revise to discuss the terms of any available sources of liquidity,
such as the secured fixed
rate bank loan you discuss in your financial statements. State your
ability to generate and
obtain adequate amounts of cash to meet your requirements and plans
for cash in the
short-term and separately in the long-term. Refer to Item 5.B. of Form
20-F.
Li Peng Leck
FirstName LastNameLi Peng Leck
Davis Commodities Limited
Comapany 16,
November NameDavis
2022 Commodities Limited
November
Page 4 16, 2022 Page 4
FirstName LastName
Cash Flows for the Six Months Ended June 30, 2022 Compared to the Six Months
Ended June
30, 2021, page 53
16. Your disclosure appears to emphasize how net cash provided by
operating activities was
derived for each period presented, and refers to non-cash items that
do not impact
cash. Pursuant to Item 5.B of Form 20-F your discussion should be an
analysis of material
changes that affected operating cash between comparable periods and
should discuss the
key drivers or factors responsible for changes in your operating,
investing and financing
cash flows during the periods presented in your financial statements.
Please revise your
disclosure accordingly.
Critical Accounting Policies and Estimates, page 59
17. Your disclosure appears to be a summary of your significant accounting
policies rather
than disclosure of your critical accounting estimates. Critical
accounting estimates are
those estimates made in accordance with generally accepted accounting
principles that
involve a significant level of estimation uncertainty and have had or
are reasonably likely
to have a material impact on your financial condition or results of
operations. Your
disclosure should provide qualitative and quantitative information
necessary to understand
the estimation uncertainty and the impact the critical accounting
estimate has had or is
reasonably likely to have on your financial condition or results of
operations and should
include why each critical accounting estimate is subject to
uncertainty and how much each
estimate and/or assumption has changed over a relevant period, and the
sensitivity of the
reported amount to the methods, assumptions and estimates underlying
its
calculation. Please revise your disclosure accordingly. Refer to Item
5.E of Form 20-F.
Concentrations and Risks
Inflation, page 65
18. We note your disclosure indicating that inflation has not had a
material adverse effect on
your business. However, we also note your disclosure on page 43 where
you disclose that
the price fluctuations of the commodities you trade may affect your
profitability. Please
update your disclosure, if true, if recent inflationary pressures have
materially impacted
your operations or the prices in the products your trade.
Business, page 72
19. Please disclose the important events in the development of the
company's business,
namely please disclose clearly the establishment, merger or
consolidation of the
significant subsidiaries of your business. As one example only, we
note that a number of
your management team members also have roles with the wholly owned
subsidiary
"Maxwell (Asia)" and that you have reorganized to create a holding
company structure.
Refer to Item 4.A.4 of Form 20-F, incorporated by Item 4.a of Form
F-1.
20. Please include a description of the marketing channels you use,
including, if true, an
Li Peng Leck
Davis Commodities Limited
November 16, 2022
Page 5
explanation of any special sales methods, such as installment sales.
Refer to Item 4.B.5 of
Form 20-F, incorporated by Item 4.A of Form F-1.
21. Please provide a summary of information regarding the extent to which
you are
dependent, if at all, on patents or licenses, commercial or financial
contracts or new
manufacturing processes, where such factors are material to your
profitability. For
example, we note that on pages F-48 and F-49 you provide a chart of
customers and
suppliers who account for more than 10% of your revenue. Refer to Item
4.B.6 of Form
20-F, incorporated by Item 4.a of Form F-1.
Regulations, page 84
22. Given that you distribute your products to jurisdictions other than
Singapore, revise this
discussion to elaborate upon any material regulations applicable to
you that pertain to such
jurisdictions. Refer to Item 4.B.8. of Form 20-F.
Principal Shareholders, page 93
23. Revise to clarify whether the 50% ownership you reference in footnotes
(2) and (3) held
by Ms. Leck Li Peng constitutes a controlling interest in Davis & KT
Holdings Pte. Ltd. If
not, disclose with whom she shares control over such entity.
Related Party Transactions, page 94
24. Clarify when the convertible loan granted to Carfax Commodities (Asia)
Pte. Ltd. comes
due and the nature of the events that would trigger a conversion.
Material Income Tax Consideration
United States Federal Income Taxation, page 110
25. We note your disclaimer contains a reference to ADSs, but there is no
reference to ADSs
elsewhere in the registration statement. Please align this disclosure
with the rest of the
registration statement.
Report of Independent Registered Public Accounting Firm, page F-2
FirstName LastNameLi Peng Leck
26. Please make arrangements with your auditor for them to revise their
reports here and on
Comapany
pageNameDavis Commodities
F-26 to comply Limited
with the requirements of Article 2 of Regulation
S-X, including the
date of the reports.
November 16, 2022 Page 5
FirstName LastName
Li Peng Leck
FirstName LastNameLi Peng Leck
Davis Commodities Limited
Comapany 16,
November NameDavis
2022 Commodities Limited
November
Page 6 16, 2022 Page 6
FirstName LastName
Notes to Financial Statements
Note1. Organization and Principal Activities
Reorganization, page F-7
27. Your table on page F-8 presents Maxwill Pte. Ltd. as dormant but you
disclose
that Maxwill Pte. Ltd. wholly owns Maxwill (Asia) Pte. Ltd., LP Grace
Pte. Ltd. and
Maxwill Foodlink Pte. Ltd., which are your operating companies. Please
make any
necessary corrections here and on page F-32.
Note 2. Summary of Significant Accounting Policies
(n) Revenue recognition, page F-12
28. You disclose that you are an asset light business and utilize a
network of third-party
commodity suppliers and logistics service providers to distribute
sugar, rice, and oil and
fat products from suppliers to customers and also arrange for
customers insurance and
security coverage, including cargo insurance for the commodities, and
engage third-party
service providers for services such as warehouse handling and storage.
Please tell us your
consideration of ASU 606-10-55-36 as to whether the nature of your
promise is
a performance obligation to provide the specified goods or services
itself (that is, as a
principal) or to arrange for those goods or services to be provided by
the other party (that
is, as an agent). In addition, tell us your consideration of ASU
606-10-55-37 which states
that an entity does not necessarily control a specified good if the
entity obtains legal title
to that good only momentarily before legal title is transferred to a
customer.
29. We note that your main business activities include value-added
services such as
warehouse handling and storage and logistics services. Please disclose
your revenue
recognition policy for these services. Additionally, please tell us
the amount of revenue
generated from these services for each of the periods presented.
30. Please tell us the amount of revenue recognized from the rental of
investment property for
each period presented.
Note 14. Revenues By Product, page F-19
31. Please provide the disclosure required by ASC 280-10-50-41(a), noting
that if revenue
attributed to an individual foreign country is material, those
revenues should be disclosed
separately.
Note 21. Subsequent Events, page F-25
32. Please provide the date here and on page F-49 through which you have
assessed all
material subsequent events that require disclosure in your
consolidated financial
statements.
Li Peng Leck
FirstName LastNameLi Peng Leck
Davis Commodities Limited
Comapany 16,
November NameDavis
2022 Commodities Limited
November
Page 7 16, 2022 Page 7
FirstName LastName
General
33. 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 our behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications. Please contact the staff
member associated
with the review of this filing to discuss how to submit the materials,
if any, to us for our
review.
34. Please file the Thai Roong Ruang Sugar Group and the Tong Seng Produce
Pte.
Ltd. exclusive distributorship agreements as exhibits. See Item 8(a)
of Form F-1 and Item
601(b)(10) of Regulation S-K.
You may contact Patrick Kuhn at 202-551-3308 or Theresa Brillant at
202-551-3307 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Nicholas Nalbantian at 202-551-7470 or Mara Ransom at 202-551-3264 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade
& Services
cc: Ying Li