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United States securities and exchange commission logo
November 22, 2022
Ian Huen
Chief Executive Officer
Aptorum Group Ltd
17 Hanover Square
London W1S 1BN , United Kingdom
Re: Aptorum Group Ltd
Form 20-F for
Fiscal Year Ended December 31, 2021
Filed April 29,
2022
File No. 001-38764
Dear Ian Huen:
We have reviewed your filing 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 these comments 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 our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 20-F for the Fiscal Year Ended December 31, 2021
Part I
Item 3.D. Risk Factors, page 1
1. In your summary of risk
factors, 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. 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 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
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany 22,
November NameAptorum
2022 Group Ltd
November
Page 2 22, 2022 Page 2
FirstName LastName
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 your securities to significantly decline or be
worthless.
2. Revise your risk factors to acknowledge that if the PRC government
determines that the
contractual arrangements constituting part of the VIE structure do not
comply with PRC
regulations, or if these regulations change or are interpreted
differently in the future, your
securities may decline in value or become worthless if the
determinations, changes, or
interpretations result in your inability to assert contractual control
over the assets of your
PRC subsidiaries or the VIEs that conduct all or substantially all of
your operations.
3. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to highlight separately 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 securities. 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 your securities to significantly decline or be
worthless.
4. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China (CAC) 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 securities and to what extent you believe that you
are compliant with
the regulations or policies that have been issued by the CAC to date.
5. Please update your disclosure in the risk factor regarding the Holding
Foreign Companies
Accountable Act on page 37 to reflect that the Commission adopted
rules to implement
the HFCAA and that, pursuant to the HFCAA, the PCAOB has issued its
report notifying
the Commission of its determination that it is unable to inspect or
investigate completely
accounting firms headquartered in mainland China or Hong Kong.
Item 4. Information on the Company
A. History and Development of the Company, page 45
6. At the onset of Item 4, please disclose prominently that you are not a
Chinese operating
company but a Cayman Islands holding company with operations conducted
by your
subsidiaries and through contractual arrangements with variable
interest entities (VIEs)
based in China and that this structure involves unique risks to
investors. If true, disclose
that these contracts have not been tested in court. Explain whether
the VIE structure is
used to provide investors with exposure to foreign investment in
China-based companies
where Chinese law prohibits direct foreign investment in the operating
companies, and
disclose that investors may never hold equity interests in the Chinese
operating company.
Your disclosure should acknowledge that Chinese regulatory authorities
could disallow
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany 22,
November NameAptorum
2022 Group Ltd
November
Page 3 22, 2022 Page 3
FirstName LastName
this structure, which would likely result in a material change in your
operations and/or a
material change in the value of your securities, including that it
could cause the value of
your securities to significantly decline or become worthless. Provide
a cross-reference to
your detailed discussion of risks facing the company as a result of
this structure.
7. We note that the consolidated VIEs constitute a material part of your
consolidated
financial statements. Please provide in tabular form condensed
consolidating schedule -
depicting the financial position, cash flows and results of operations
for the parent, the
consolidated variable interest entities, and any eliminating
adjustments separately - as of
the same dates and for the same periods for which audited consolidated
financial
statements are required. Highlight the financial statement information
related to the
variable interest entity and parent, so an investor may evaluate the
nature of assets held
by, and the operations of, entities apart from the variable interest
entity, which includes
the cash held and transferred among entities. As part of your
revisions, disclose the
jurisdiction in which Libra Sciences Limited is incorporated or
chartered.
B. Business Overview, page 48
8. 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 your securities 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.
9. 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.
10. Please revise your diagram of the company s corporate structure,
identifying the person or
entity that owns the equity in each depicted entity, including voting
and economic rights.
Describe all contracts and arrangements through which you claim to
exercise control that
results in consolidation of the VIEs operations and financial
results into your financial
statements. Identify clearly the entity in which investors are
purchasing their interest and
the entities in which the company s operations are conducted.
Describe the relevant
contractual agreements between the entities and how this type of
corporate structure may
affect investors and the value of their investment, including how and
why the contractual
arrangements may be less effective than direct ownership and that the
company may incur
substantial costs to enforce the terms of the arrangements. Disclose
the uncertainties
regarding the status of the rights of the Cayman Islands holding
company with respect to
its contractual arrangements with the VIEs, its founders and owners,
and the challenges
Ian Huen
Aptorum Group Ltd
November 22, 2022
Page 4
the company may face enforcing these contractual agreements due to
legal uncertainties
and jurisdictional limits.
11. Clearly disclose how you will refer to the holding company,
subsidiaries, and VIEs 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 VIE. For example, disclose, if true, that
your subsidiaries
and/or the VIE conduct operations in China, that the VIE is
consolidated for accounting
purposes but is not an entity in which you possess majority voting
power, and that the
holding company does not conduct operations.
12. Please revise your disclosure here to state that you are the primary
beneficiary of the VIEs
for accounting purposes. Please also disclose, if true, that the VIE
agreements have not
been tested in a court of law.
13. 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 securities 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.
14. 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.
FirstName LastNameIan Huen
Describe any restrictions and limitations on your ability to distribute
earnings from the
Comapany NameAptorum
company, including Group Ltd
your subsidiaries and/or the consolidated VIEs, to
the parent company
and 22,
November U.S.2022
investors
Page as
4 well as the ability to settle amounts owed under
the VIE agreements.
FirstName LastName
Ian Huen
FirstName LastNameIan Huen
Aptorum Group Ltd
Comapany 22,
November NameAptorum
2022 Group Ltd
November
Page 5 22, 2022 Page 5
FirstName LastName
Operating and Financial Review and Prospects
Results of Operations
Results of Operations for the Years ended December 31, 2021 and 2020
Research and development expenses, page 92
15. We note you disclose research and development expenses by type of
expense. Please
expand your disclosure in future filings to provide the costs incurred
during each period
presented for each of your key research and development programs. If
you do not track
your research and development costs by program, please disclose that
fact, and explain
why you do not maintain and evaluate research and development costs by
program.
Provide proposed disclosure with your response.
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.
You may contact Tracie Mariner at 202-551-3744 or Kevin Vaughn at
202-551-3494 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Daniel Crawford at 202-551-7767 or Laura Crotty at 202-551-7614 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Life
Sciences
cc: Louis Taubman, Esq.