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United States securities and exchange commission logo
September 21, 2021
Nangeng Zhang
Chairman and Chief Executive Officer
Canaan Inc.
1-2/F, QianFang Science Building C
Building No. 27, Zhongguancun Software Park (Phase I)
No. 8 Dongbeiwang West Road
Haidian District, Beijing, 100193
People s Republic of China
Re: Canaan Inc.
Form 20-F for the
Fiscal Year Ended December 31, 2020
File No. 001-39127
Dear Mr. Zhang:
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, 2020
ITEM 3. Key Information, page 1
1. Please revise to
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 and Hong Kong.
Your disclosure should make clear whether these risks could
result in a material
change in your operations and/or the value of your ADSs 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, has or may impact the company s ability to conduct its
business, accept
foreign investments, or list on an U.S. or other foreign exchange.
Nangeng Zhang
FirstName
Canaan Inc.LastNameNangeng Zhang
Comapany 21,
September NameCanaan
2021 Inc.
September
Page 2 21, 2021 Page 2
FirstName LastName
2. Please revise to clearly disclose how you will refer to the holding
company and
subsidiaries 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. Disclose clearly the entity
(including the domicile) in
which investors are purchasing their interest.
3. Please revise to provide a clear description of how cash is
transferred through your
organization. Disclose your intentions to distribute earnings or
settle any amounts owed.
Quantify any cash flows and transfers of other assets by type that
have occurred between
the holding company and its subsidiaries, and direction of transfer.
Quantify any
dividends or distributions that a subsidiary 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. 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 your businesses, including subsidiaries, to
the parent company
and U.S. investors.
ITEM 3.D. Risk Factors, page 6
4. Please revise your Risk Factor Summary to 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 filing. 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
your ADSs. 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.
5. Please revise your risk factors to acknowledge that if the PRC
government determines that
your offshore corporate structure does not comply with PRC
regulations, or if these
regulations change or are interpreted differently in the future, your
shares may decline in
value or become worthless if you are unable to assert your contractual
control rights over
the assets of your PRC subsidiaries that conduct all or substantially
all of your operations.
6. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to separately highlight the risk that the
Chinese government
may intervene or influence your operations at any time, which could
result in a material
Nangeng Zhang
FirstName
Canaan Inc.LastNameNangeng Zhang
Comapany 21,
September NameCanaan
2021 Inc.
September
Page 3 21, 2021 Page 3
FirstName LastName
change in your operations and/or the value of your ADSs. 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 such
securities to significantly decline or be worthless.
7. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China 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 to
what extent you believe that you are compliant with the regulations or
policies that have
been issued by the CAC to date.
Exhibits 12.1 and 12.2, page 108
8. The lead-in of the fourth paragraph omits the reference to internal
control over financial
reporting. Since this is your second annual report on Form 20-F, you
are required to
provide this language in your certification. Please amend your Form
20-F to provide
currently dated certifications that include the required language.
Refer to Instruction 12 to
the Form 20-F Exhibits.
Consolidated Financial Statements
Statement of Cash Flows, page F-7
9. We note the significant write-downs of obsolete inventory and of
prepayments to third-
party suppliers disclosed in Notes 6 and 7 for 2018 and 2019. As we
note no adjustments
to your net income (loss) for these items on page F-7, please explain
to us how you
considered and reflected these items in your reconciliation of net
income (loss) to net cash
(used in) provided by operating activities in each reported period.
Refer to the guidance in
ASC 230-10-45-28 through 45-32.
2. Principal Accounting Policies
(p) Contract liabilities, page F-14
10. Please tell us the reason for the significant change in this account
during the period.
Additionally, pursuant to ASC 606-10-50-10, revise this note in future
filings
to explain the reasons for the significant change in contract
liabilities during the reported
periods.
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.
Nangeng Zhang
Canaan Inc.
September 21, 2021
Page 4
You may contact Dale Welcome, Staff Accountant, at 202-551-3865 or
Martin James,
Senior Advisor, at 202-551-3671 if you have any questions.
FirstName LastNameNangeng Zhang Sincerely,
Comapany NameCanaan Inc.
Division of Corporation
Finance
September 21, 2021 Page 4 Office of Manufacturing
FirstName LastName