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United States securities and exchange commission logo
January 27, 2022
Xiaofeng Gao
Co-Chief Executive Officer
Skillful Craftsman Education Technology Ltd
Floor 4, Building 1, No. 311, Yanxin Road
Huishan District, Wuxi
Jiangsu Province 214000
Re: Skillful Craftsman
Education Technology Ltd
Amendment No. 2 to
Registration Statement on Form F-3
Filed on December
22, 2021
File No. 333-259498
Dear Mr. Gao:
We have reviewed your amended 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 amending your registration
statement and providing the
requested information. 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 any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Unless we note
otherwise, our references to prior comments are to comments in our
November 17, 2021 letter.
Amendment No. 2 to Registration Statement on Form F-3 filed December 22,
2021
Cover Page, page 1
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 and
through contractual arrangements with a variable interest entity
(VIE) based in China
and that this structure involves unique risks to investors. If true,
please disclose, as you
do on page 5, that these contracts have not been tested in court.
As a related matter, we
also note your disclosure that [t]he company that investors will
own may never have a
direct ownership interest in the businesses that are conducted by
Xiaofeng Gao
FirstName LastNameXiaofeng Gao
Skillful Craftsman Education Technology Ltd
Comapany
January 27,NameSkillful
2022 Craftsman Education Technology Ltd
January
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FirstName LastName
our VIE and its subsidiary. Please also 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.
2. We note your response to comment 1, as well as your revised disclosure
that "[a]ll
references to we, us, our, or similar terms used in
this prospectus refer to Skillful
Craftsman Education Technology Limited, a Cayman Islands exempted
company,
including its wholly-owned subsidiaries, and, in the context of
describing our operations
and consolidated financial information, our variable interest entity
in China, including
Wuxi Kingway Technology Co., Ltd., or Wuxi Wangdao, and its
subsidiary, Shenzhen
Qianhai Jisen Information Technology Ltd." Please refrain from using
terms such as
"we" or "our" when describing activities or functions of the VIE. In
this regard, where you
disclose that the VIE is consolidated for accounting purposes, please
also disclose, if true,
that the VIE is not an entity in which you own equity and that the
holding company does
not own operations. Disclose clearly the entity (including the
domicile) in which investors
are purchasing an interest.
3. We note your response to comment 2 as well as your revised disclosure
quantifying "cash
flows" between the holding company, its subsidiaries and VIE. Please
also provide a
description of how cash is transferred through your organization and
your intentions to
settle amounts owed under the VIE agreements. State whether any
transfers have been
made to date between the holding company, its subsidiaries and
consolidated VIE, or to
investors, and quantify the amounts where applicable. In this regard,
we note that you
have discussed dividends and distributions only. Please also provide
cross-references to
the condensed consolidating schedule and the consolidated financial
statements.
4. We note your response to our prior comment 3 as well as your
disclosure that you "rely on
contractual arrangements among [y]our PRC subsidiary, [y]our VIE and
the VIE s
nominee shareholders to control the business operations of [y]our VIE
and its subsidiary,"
"[you] control and receive the economic benefits of the business
operations of [y]our
VIE...," and "[t]he VIE Agreements are designed to provide [y]our
subsidiary with the
power, rights, and obligations, including absolute control rights and
the rights to the assets
property and revenue of the VIE." However, neither the investors in
the holding company
nor the holding company itself have an equity ownership in, direct
foreign investment in,
or control of, through such ownership or investment, the VIE.
Accordingly, please refrain
from implying that the VIE agreement is equivalent to an equity
ownership in the business
of the VIE. Any references to control or benefits that accrue to you
because of the VIE
should be limited to and clearly describe the conditions you met for
consolidation of the
VIE under U.S. GAAP. Additionally, your disclosure should clarify that
you are the
primary beneficiary of the VIE for accounting purposes. Please make
conforming changes
throughout your registration statement. Please also tell us how the
VIE structure may
provide "absolute" rights in light of the uncertainty regarding these
contractual
agreements, as you disclose throughout your filing.
Xiaofeng Gao
FirstName LastNameXiaofeng Gao
Skillful Craftsman Education Technology Ltd
Comapany
January 27,NameSkillful
2022 Craftsman Education Technology Ltd
January
Page 3 27, 2022 Page 3
FirstName LastName
5. We note that you provided 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 the risks discussed
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. In this regard, we only note your disclosure
that [a] significant
part of our revenues are generated by the VIE. An event that results
in the deconsolidation
of the VIEs would have a material effect on our operations and result
in the value of the
securities diminish substantially or even become worthless.
Your disclosure should also 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. In this
regard, we note that your response to comment 5 indicates that the
revised disclosure is
included on pages 11 to 14 rather than on the cover page. Please
discuss here how these
risks relate to China's recent statements and regulatory actions,
similar to your discussion
on page 3. Please also 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.
Prospectus Summary, page 2
6. We reissue comment 6, as it appears that you have not revised the
disclosure in the
prospectus summary to provide the disclosure requested by the comment
in this section. In
this regard, we note your revised disclosure beginning on page 22.
7. We note your revised disclosure in response to comment 7 and reissue
the comment.
Disclose each permission or approval that you, your subsidiaries, or
VIEs are required to
obtain from Chinese authorities to operate your business and to offer
the securities being
registered 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 of 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. In this regard, we only note disclosure that "the
approval of the CSRC
or other PRC government authorities may be required in connection with
our offshore
offerings under PRC law..." 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
Xiaofeng Gao
FirstName LastNameXiaofeng Gao
Skillful Craftsman Education Technology Ltd
Comapany
January 27,NameSkillful
2022 Craftsman Education Technology Ltd
January
Page 4 27, 2022 Page 4
FirstName LastName
are required to obtain such permissions or approvals in the future.
For example, expand
your disclosure of the "sanctions [that could be] imposed by the CSRC
or other PRC
government authorities."
8. Disclose in your prospectus summary that trading in your securities
may be prohibited
under the Holding Foreign Companies Accountable Act if the PCAOB
determines that it
cannot inspect or investigate completely your auditor, and that as a
result an exchange
may determine to delist your securities. Disclosure whether your
auditor is subject to the
determinations announced by the PCAOB on December 16, 2021.
Transfer of Cash to and from Our VIE, page 5
9. We note your quantification of "[t]he cash flows that have occurred
between [y]our PRC
subsidiary and [y]our VIE, and between [y]our Cayman Islands holding
company and
[y]our VIE." Please clarify if the cash flows include all
distributions and transfers made to
date.
Summary of Risk Factors, page 7
10. We note your response to our prior comment 8 as well as your revised
disclosure. For
each summary risk identified here, please provide a cross-reference to
the more
detailed discussion of these risks in the prospectus. In this regard,
we are unable to locate
in your risk factor section a discussion of the risks arising from the
legal system in China,
including risks and uncertainties regarding how regulations in China
can change quickly
with little advance notice. Please also revise your summary of risk
factors 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 significant
liquidity risks and cross-reference to the more detailed discussion of
this risk in your
prospectus.
Please also revise to more specifically discuss 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. In this regard, we only note your disclosure
regarding the risks that
the "Chinese government may intervene or influence our operations at
any time, or may
exert more control over offerings conducted overseas and/or foreign
investment in China-
based issuers."
Risk Factors, page 11
11. 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, the
securities you are registering may decline in value or become
worthless if the
determinations, changes, or interpretations result in your inability
to assert contractual
Xiaofeng Gao
Skillful Craftsman Education Technology Ltd
January 27, 2022
Page 5
control over the assets of your PRC subsidiaries or the VIEs that
conduct all or
substantially all of your operations.
Our business is subject to various evolving PRC laws and regulations regarding
data privacy,...,
page 11
12. We note your response and revised disclosure to comment 11 and reissue
the comment in
part. 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 offering and to what extent you believe
that you are
compliant with the regulations or policies that have been issued by
the CAC to date. In
doing so, please address the applicability of new regulations that
will go into effect on
February 15 that will require internet platform operators holding data
of more than 1
million users to undergo a network security review. In this regard, we
only note your
revised disclosure on page 11 that "[you] could be subject to severe
penalties or be forced
to relinquish our interests in those operations."
The PRC government's significant oversight over our business operation could
result in a
material adverse change in our operations..., page 12
13. We note your disclosure regarding the PRC government's "significant
oversight and
authority to exert influence." Please revise to also highlight 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 the
securities you are registering.
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.
We could be delisted if it is determined that the Public Company Accounting
Oversight Board is
unable to inspect or investigate our auditor, page 12
14. We note your your disclosure about the Holding Foreign Companies
Accountable Act.
Please expand your risk factors to disclose that the United States
Senate has passed the
Accelerating Holding Foreign Companies Accountable Act, which, if
enacted, would
decrease the number of non-inspection years from three years to
two years, and thus,
would reduce the time before your securities may be prohibited from
trading or delisted.
Update your disclosure to reflect that the Commission adopted rules to
implement the
FirstName LastNameXiaofeng Gao
HFCAA and that, pursuant to the HFCAA, the PCAOB has issued its report
notifying the
Comapany NameSkillful
Commission of its Craftsman Education
determination that it isTechnology Ltd or
investigate completely
unable to inspect
Januaryaccounting firms5headquartered in mainland China or Hong Kong.
27, 2022 Page
FirstName LastName
Xiaofeng Gao
FirstName LastNameXiaofeng Gao
Skillful Craftsman Education Technology Ltd
Comapany
January 27,NameSkillful
2022 Craftsman Education Technology Ltd
January
Page 6 27, 2022 Page 6
FirstName LastName
If the PRC government determines that the contractual arrangements constituting
part of our VIE
structure..., page 13
15. We note your revised disclosure regarding the "December 5th Reply." To
ensure balanced
disclosure, where you discuss the "December 5th Reply," please clarify
the uncertainty
regarding the legal system in China, including the enforcement of laws
and that rules and
regulations in China can change quickly with little advance notice.
You may contact Scott Anderegg at 202-551-3342 or Jenifer L pez Molina
at 202-551-
3792 with any questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services