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September 5, 2019
Xiaofeng Gao
Chief Executive Officer
Skillful Craftsman Education Technology Ltd
Floor 4, Building 1, No. 311, Yanxin Road
Huishan District, Wuxi
Jiangsu Province, PRC 214000
Re: Skillful Craftsman Education Technology Ltd
Draft Registration Statement on Form F-1
Submitted August 13, 2019
CIK No. 0001782309
Dear Mr. Gao:
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
Cover Page
1. Revise to include the "Commission legend" on the outside front cover
page of the
prospectus in accordance with Item 501(b)(7) of Regulation S-K.
Ordinary Shares, page 2
2. Where you state that you will not complete this offering unless your
shares are listed on
the Nasdaq, clarify your intentions not to move forward with the
offering until you receive
approval for listing from the Nasdaq.
Xiaofeng Gao
FirstName LastNameXiaofeng Gao
Skillful Craftsman Education Technology Ltd
Comapany 5, 2019
September NameSkillful Craftsman Education Technology Ltd
September 5, 2019 Page 2
Page 2
FirstName LastName
Prospectus Summary, page 5
3. Highlight the restrictions imposed by PRC law on foreign ownership of
companies
engaged in online value-added telecommunications business and disclose
that as a result
of these restrictions you do not directly own any substantive
operations in China.
Highlight that if your PRC VIE and its shareholders fail to perform
their obligations under
the contractual arrangements, you could be limited in your ability to
enforce the
contractual arrangements that give you effective control, and if you
are unable to maintain
effective control, you would not be able to continue to consolidate
the VIE's financial
results with your financial results. State the percentage of revenues
in your consolidated
financial statements that is derived from your VIE. Disclose that you
rely on dividends
and other distributions paid to you by your PRC subsidiary, which in
turn depends on the
service fees paid to your PRC subsidiary from your VIE. Confirm that
you do not have
unfettered access to either your PRC subsidiary's or VIE's revenues
due to PRC legal
restrictions on the payment of dividends by PRC companies, foreign
exchange control
restrictions, and the restrictions on foreign investment, among
others.
Corporate Structure, page 7
4. Revise to add a diagram reflecting the anticipated post-offering
ownership structure of the
Company, including the respective ownership percentages of purchasers
of shares in this
offering. Also revise your corporate structure diagram and related
narrative disclosure to
clarify that Wuxi Kingway and Wuxi Wandao are one and the same.
Risk Factors
Risks Related to Our Business and Industry
If we are not able to continue to attract students to register on our training
platforms, our
business...will be...adversely affected, page 13
5. Expand your disclosure here to also address the difficulties you face
in converting non-
paying registered members to fee-paying members. In that respect, we
note that your fee-
paying members constitute approximately 4.5% of total registered
members as of March
31, 2019 and your disclosure that the majority of your revenue is
derived from fees paid
by your members.
Risks Related to Doing Business in China
PRC regulation on loans to, and direct investment in, PRC entities by offshore
holding
companies...may prevent us from using the proceeds..., page 26
6. You disclose a series of regulatory restrictions and limitations with
respect to providing
funding to your PRC subsidiary through loans or capital contributions
(e.g., your PRC
subsidiary may not procure loans which exceed the difference between
its total investment
amount and registered capital). Quantify the extent to which you may
make loans or
capital contributions to your PRC subsidiaries based upon the
applicable PRC restrictions.
Xiaofeng Gao
Skillful Craftsman Education Technology Ltd
September 5, 2019
Page 3
Use of Proceeds, page 47
7. In light of the statutory limits and required regulatory approvals
with respect to your
ability to make loans and capital contributions to your PRC subsidiary
and VIE, please
quantify the amount of loans or capital contributions you anticipate
being able to make to
your PRC subsidiary following this offering. Also disclose, if true,
that you expect the
IPO proceeds to be used in the PRC in the form of RMB and, therefore,
your VIE will
need to convert any capital contributions or loans from U.S. dollars
to RMB.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Factors Affecting Our Results of Operation, page 54
8. Disclose the potential impact of your plan to expand your offering of
virtual experimental
training programs on your ability to manage costs and operating
expenses effectively.
9. Please tell us whether management uses any key performance indicators,
including non-
financial performance indicators to manage the business. To the extent
management uses
key performance indicators that would be material to investors, please
include these
disclosures in the prospectus.
Results of Operations
Year Ended March 31, 2019 as Compared to Year Ended March 31, 2018
Revenue, page 57
10. We note your disclosure that your access to target member groups
increased as a result of
your cooperation agreements, which in turn resulted in your revenue
increasing. Quantify
the impact of these cooperation agreements with respect to your
results of operations.
Liquidity and Capital Resources, page 58
11. We note your disclosure on page F-18 which states, "Substantially all
of the Group's
operating activities are transacted in RMB, which is not freely
convertible into foreign
currencies." Please provide disclosure in your liquidity section
regarding where your
current cash balance is located and your ability to repatriate the
cash outside of the PRC.
Business
Our Strengths, page 67
12. Explain the benefits of owning and operating your own cloud computing
system as
opposed to using a third party. For example, explain how operating and
managing your
FirstName LastNameXiaofeng Gao with expanding the scope of your training
programs. Any
own cloud-based system helps
Comapany NameSkillful Craftsmanmanaging your own platform should also be
addressed in the
related risks associated with Education Technology Ltd
September 5, 2019section.
risk factors Page 3
FirstName LastName
Xiaofeng Gao
FirstName LastNameXiaofeng Gao
Skillful Craftsman Education Technology Ltd
Comapany 5, 2019
September NameSkillful Craftsman Education Technology Ltd
September 5, 2019 Page 4
Page 4
FirstName LastName
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income, page F-4
13. Please round earnings per share to the nearest cent in order to not
imply a greater degree
of precision than actually exists. Please make similar revisions to
the per share
information disclosed elsewhere within your filing such as in your
Dilution disclosure and
in the Summary Consolidated Financial and Operating Data.
14. We note in the disclosure of your corporate structure on page 7 you
hold a 60% ownership
in Xiaofeng Gao and a 40% ownership in Lugang Hua. Please explain to
us why you
have not attributed any profits to non-controlling interests in your
income statement.
1. Organization and basis of financial statements, page F-7
15. On page 91 you state that, "we operate our relevant business through
contractual
arrangements among Craftsman Wuxi, our PRC subsidiary, Wuxi Wangdao,
our variable
interest entity, and the shareholders of Wuxi Wangdao." However, your
financial
statements never refer to "Craftsman Wuxi" or "Wuxi Wangdao." Please
revise to provide
consistent names of companies throughout your filing.
16. We note your statement on page F-8 that, "The Nominee Shareholders
also agreed that,
unless the contractual obligations as defined in the Equity Interest
Pledge Agreements are
fully performed by them or the secured debts under the Equity Interest
Pledge Agreements
are paid in full (whichever later), they will not dispose of the
pledged equity interests or
create or allow any encumbrance on the pledged equity interests." You
then state, "The
Equity Interest Pledge Agreements will remain binding until Kingway
discharge all their
obligations under the Exclusive Business Corporation Agreements at the
expiration of the
Exclusive Business Corporation Agreements." Please clarify and
disclose the termination
rights of the WFOE. Explain why the Nominee Shareholders or Kingway,
the VIE, have
any termination rights if the WFOE has control of the VIE.
17. Please clarify in your consolidation policy disclosure your specific
policies with respect
to Xiaofeng Gao and Lugang Hua, and advise us accordingly.
6. Property and equipment, net, page F-20
18. You state that, "Server development in process represented the advance
payment made to
a third party." Please clarify this statement and explain why this is
classified in property
plant and equipment versus prepayments.
Xiaofeng Gao
FirstName LastNameXiaofeng Gao
Skillful Craftsman Education Technology Ltd
Comapany 5, 2019
September NameSkillful Craftsman Education Technology Ltd
Page 5
September 5, 2019 Page 5
FirstName LastName
15. Commitments and Contingencies, page F-25
19. We note your statement on page 74 that, "Our current principal
executive offices are
located at our headquarters in Wuxi, Jiangsu Province, comprising
1,219 square meters, at
Floor 4, Building 1, No. 311, Yanxin Road, Huishan District, Wuxi,
Jiangsu Province,
PRC. This facility currently accommodates our management headquarters,
research and
development and general and administrative activities. We rent this
facility from an
unaffiliated third party for a monthly rent of RMB 526,660
(approximately $78,215). The
lease will expire on December 31, 2019 and we do not anticipate any
issue renewing such
lease." However, on page F-25 you state, "On March 31, 2019, the Group
had no future
minimum payments under non-cancelable operating leases." Please revise
accordingly.
General
20. 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 your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
21. We note references to third-party research reports by iResearch,
Tencent Research
Institution, and Ipsos Group S.A. in the prospectus. Tell us whether
you commissioned
any of these reports. Additionally, please provide us with copies of
the materials
supporting these third-party statements, clearly cross-referencing a
statement with the
underlying factual support.
You may contact Inessa Kessman, Senior Staff Accountant, at (202)
551-3371 or Robert
S. Littlepage, Accountant Branch Chief, at (202) 551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact Joshua
Shainess,
Attorney-Adviser, at (202) 551-7951 or Celeste M. Murphy, Legal Branch Chief,
at (202) 551-
3257 with any other questions.
Sincerely,
Division of
Corporation Finance
Office of
Telecommunications