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United States securities and exchange commission logo
October 28, 2022
Peng Li
Chairman and Chief Executive Officer
QuantaSing Group Ltd
Room 710, 5/F, Building No. 1
Zone No. 1, Ronghe Road
Chaoyang District, Beijing 100102
People s Republic of China
Re: QuantaSing Group
Ltd
Draft Registration
Statement on Form F-1
Submitted September
29, 2022
CIK No. 0001932770
Dear Peng Li:
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. We note your disclosure
on the prospectus cover page that you will be a controlled
company following the
offering. Please disclose, if true, that Mr. Peng Li will have the
ability to determine
all matters requiring approval by stockholders.
2. We note your disclosure
in the sixth paragraph that QuantaSing Group Limited is a
Cayman Islands holding
company with no substantive operations and that you carry out
[y]our business in
China through [y]our wholly-owned PRC subsidiary ( WFOE ) and its
Peng Li
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QuantaSingLastNamePeng Li
Group Ltd
Comapany
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2022 Group Ltd
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contractual arrangements, commonly known as the VIE structure.
Please revise to
expressly state that you are not a Chinese operating company, as
disclosed on page 95. In
addition, 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.
3. Please revise to more clearly disclose that if the Accelerating
Holding Foreign Companies
Accountable Act is enacted, it would decrease the period of time in
which your ADSs may
be prohibited from trading or delisted from three years to two years.
4. Provide a description of how cash is transferred through your
organization and disclose
your intentions to distribute earnings or settle amounts owed under
the VIE agreements.
State whether any transfers, dividends, or distributions have been
made to date between
the holding company, its subsidiaries, and consolidated VIEs, or to
investors, and quantify
the amounts where applicable and provide cross-references to the
condensed consolidating
schedule and the consolidated financial statements. In addition,
discuss whether there are
limitations on your ability to transfer cash between you, your
subsidiaries, the
consolidated VIEs or investors. Provide a cross-reference to your
discussion of this issue
in your summary, summary risk factors, and risk factors sections, as
well.
5. Please amend your disclosure here and in the summary risk factors and
risk factors
sections to state that, to the extent cash or assets in the business
is in the PRC/Hong Kong
or a PRC/Hong Kong entity, the funds or assets may not be available to
fund operations or
for other use outside of the PRC/Hong Kong due to interventions in or
the imposition of
restrictions and limitations on the ability of you, your subsidiaries,
or the consolidated
VIEs by the PRC government to transfer cash or assets. On the cover
page, provide cross-
references to these other discussions.
6. To the extent you have cash management policies that dictate how funds
are transferred
between you, your subsidiaries, the consolidated VIEs or investors,
summarize the
policies on your cover page and in the prospectus summary, and
disclose the source of
such policies (e.g., whether they are contractual in nature, pursuant
to regulations, etc.);
alternatively, state on the cover page and in the prospectus summary
that you have no
such cash management policies that dictate how funds are transferred.
Provide a cross-
reference on the cover page to the discussion of this issue in the
prospectus summary.
Prospectus Summary
Who We Are, page 1
7. Please revise the fourth paragraph to also discuss and disclose your
net income or losses
for the referenced periods.
Corporate History and Structure, page 3
8. We note your disclosure about your corporate structure that involves a
VIE based in
Peng Li
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China. Describe all contracts and arrangements through which you claim
to have
economic rights and exercise control that results in consolidation of
the VIE s operations
and financial results into your financial statements. Identify clearly
the entity in which
investors are purchasing their interest and the entity(ies) 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
VIE, its founders and owners, and the challenges the company may face
enforcing these
contractual agreements due to legal uncertainties and jurisdictional
limits.
Risks and Challenges
Risks related to our corporate structure, page 5
9. We note your summary of risks related to your corporate structure
describing risks arising
from the legal system in China. Please expand your disclosure to
discuss risks 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
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. In addition,
provide a specific cross-reference (title and page number) to the
relevant individual
detailed risk factor for each of the principal risks and challenges
provided.
Cash and asset flows through our organization, page 8
10. We note your disclosure about how cash is transferred through your
organization and
capital contribution amounts as of June 30, 2021 and 2022. Please
expand to disclose your
intentions to distribute earnings or settle amounts owed under the VIE
agreements.
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 and
limitations on your
ability to distribute earnings from the company to the parent company
and U.S. investors
as well as the ability to settle amounts owed under the VIE
agreements. Provide cross-
references to the condensed consolidating schedule and the
consolidated financial
statements.
Peng Li
QuantaSing Group Ltd
October 28, 2022
Page 4
Regulatory Permissions and Licenses for Our Operations in China and This
Offering, page 10
11. Please refer to the first paragraph. We note that you do not appear to
have relied upon an
opinion of counsel with respect to your conclusions that you do not
need any
additional permissions and approvals to operate your business. If
true, state as much and
explain why such an opinion was not obtained. Additionally, we note
your disclosure that
"[a]s of the date of this prospectus, our WFOE and the affiliated
entities have obtained the
licenses, permits and registrations from the PRC government
authorities that are material
for our business operations in China." The disclosure here should not
be qualified by
materiality. Please make appropriate revisions to your disclosure.
12. Please refer to the second paragraph. We note your disclosure that
"[you]... have applied
for and completed a cybersecurity review for this offering and listing
pursuant to the
Cybersecurity Review Measures." Please revise to discuss in greater
detail your
application and when approval was granted. Additionally, we note that
this disclosure
tends to contradict the subsequent disclosure in the remaining
paragraph. Please
reconcile. Additionally, to the extent a cybersecurity review is not
necessary, please
revise to discuss how you came to that conclusion, why that is the
case, and the basis on
which you have made that determination.
13. Please refer to the second paragraph. Please revise to provide the
name of the
PRC counsel who provided advice regarding your permissions and
approvals requirement
conclusions and file such counsel s consent as an exhibit to the
registration statement.
14. We note your disclosure that you are covered by permissions
requirements from the
CSRC and CAC, and that you have not been requested to obtain or denied
any
permissions by any Chinese authority. Please revise to state whether
you are covered by
permissions requirements from any other governmental agency that is
required to approve
the VIE's operations; and whether the VIEs are covered by permissions
requirements from
the CSRC or CAC. 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.
Implications of Being a Controlled Company, page 12
15. We note your disclosure that you are permitted to elect not to comply
with certain
corporate governance requirements. Please revise to clarify those that
you intend to
FirstName LastNamePeng Li
voluntarily follow and those you do not, so that it is clear to what
extent you intend to take
Comapany NameQuantaSing
advantage Group
of the "foreign Ltd issuer" and "controlled company"
exceptions available
private
Octoberto28,
you. Make
2022 Pageconforming
4 disclosures throughout the prospectus, as
appropriate.
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Peng Li
FirstName
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Group Ltd
Comapany
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2022 Group Ltd
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Conventions that Apply to this Prospectus, page 13
16. We note your disclosure that your reference to China or the PRC
excludes Taiwan, Hong
Kong, and Macau. Please clarify that the legal and operational
risks associated with
operating in China also apply to operations in Hong Kong/Macau/Taiwan.
In addition, to
the extent material, discuss the applicable laws and regulations in
Hong
Kong/Macau/Taiwan, as applicable, as well as the related risks and
consequences. To the
extent material, please also consider making conforming changes in
your Regulation
section on page 150 to address regulations in Hong Kong/Macau/Taiwan
that may affect
your business operations.
Risk Factors, page 27
17. Your risk factor disclosure on page 41 regarding global systemic
economic and financial
crisis including concerns over the rising level of inflation in major
industrial countries;
and on page 48 regarding increases in labor costs, inflation and
implementation of stricter
labor laws in the PRC, indicates that you may have had or believe that
there is a potential
risk that inflation may impact your business. Please expand to
identify the principal
factors contributing to the inflationary pressures the company has
experienced and clarify
the resulting impact to the company.
The Chinese government has significant authority to exert influence on the
China operations of
an of shore holding company..., page 56
18. Given the Chinese government s significant oversight and discretion
over the conduct of
your business, please revise to discuss 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.
Recent greater oversight by the CAC over data security..., page 58
19. Please revise your disclosure to explain to what extent you believe
that you are compliant
with the regulations or policies that have been issued by the CAC to
date.
Use of Proceeds, page 85
20. Please revise to disclose, if true, that you expect the proceeds to be
used in China in the
form of RMB and that you will need to convert any capital
contributions or loans from
U.S. dollars to RMB.
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Enforceability of Civil Liabilities, page 92
21. We note your disclosure related to the Enforceability challenges
of bringing actions and
enforcing judgments or liabilities against most of your directors and
officers who are
nationals or residents of jurisdictions other than the United States.
If such directors and
officers are located in the PRC or Hong Kong, state as much and
identify the relevant
individuals.
Management s Discussion and Analysis of Financial Condition and Results of
Operations
Key Factors Affecting Results of Operations
Specific factors affecting results of operations, page 99
22. We note per page 135 that you have launched 19 series of personal
interest courses,
including financial literacy courses and other trending personal
interest courses. Please
tell us your consideration of including the number of free
introductory courses and
premium courses being offered for each period presented.
Revenues from individual online learning services, page 109
23. Please quantify the extent to which the 47.1% (or $110 million)
increase in revenues from
financial literacy courses are due to changes in the average price of
premium financial
literacy classes and the increase in the market demand for your online
financial literacy
courses. Refer to Item 5.A.1 of Form 20-F as referenced from Item 4 of
Form F-1.
Results of Operations
Fiscal year ended June 30, 2022 compared to fiscal year ended June 30, 2021
Revenue from enterprise services, page 110
24. Please quantify the key factors which contributed to the 28.6%
increase in enterprise
services revenue. Refer to Item 5.A.1 of Form 20-F as referenced from
Item 4(a) of Form
F-1.
Liquidity and Capital Resources, page 113
25. We note your disclosure in the Business section that you are in the
process of developing
technical and operating services to enterprises interested in
developing their proprietary
online learning platform services. Please include a discussion here of
management s
planned capital expenditures or any known trends relating to your
enterprise-related
expenditures. Additionally, revise to clarify your expected costs in
order to complete and
commercialize the development. Refer to Item 5.B of Form 20-F.
Industry Overview, page 124
26. Your statement that [t]he information presented in this section has
been derived from an
industry report commissioned by us and that [n]either we nor any other
party involved in
Peng Li
QuantaSing Group Ltd
October 28, 2022
Page 7
this offering has independently verified such information, and neither
we nor any other
party involved in this offering makes any representation as to the
accuracy or
completeness of such information appears to disclaim responsibility
with respect to the
commissioned third-party information. Under the federal securities
laws, the company is
responsible for all information contained within its registration
statement and should not
include language that suggests otherwise. Therefore, please either
delete this disclosure or
revise to state that you are responsible for such information.
Notes to Consolidated Financial Statements
Note 2. Summary of significant accounting policies
(q) Revenue recognition
(ii) Enterprise services, page F-28
27. We note per page 41 that you generally calculate and collect service
fees for marketing
services based on the quality and quantity of the leads generated
and/or amount of
services offered. Please explain in more detail how these fees are
determined, including
how the quality and quantity of the leads impacts the amount.
(r) Cost of revenues, page F-30
28. Please tell us whether the costs incurred to create free introductory
courses are included in
cost of revenues or sales and marketing expenses and the basis for
your determination.
(aa) Recently issued accounting pronouncements, page F-33
29. We note that you have disclosed when recently issued accounting
standards are effective
for public business entities and all other entities. Please disclose
the date on which you
will adopt each recently issued standard. See SAB Topic 11:M.
Note 19: Disposal of Baichuan, page F-55
30. Please tell us your basis for recognizing the disposal of Beijing
ChangYou Star Network
Technology Co., Ltd., a subsidiary of VIE 1, as a capital transaction.
General
31. 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
FirstName LastNamePeng Li
not they retain copies of the communications. Please contact the staff
member associated
Comapany
withNameQuantaSing
the review of this Group Ltd
filing to discuss how to submit the materials,
if any, to us for our
Octoberreview.
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Peng Li
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Group Ltd
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2022 Group Ltd
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You may contact Robert Shapiro at 202-551-3273 or Theresa Brillant at
202-551-3307 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Jennie Beysolow at 202-551-8108 or Donald Field at 202-551-3680 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services
cc: Dan Ouyang, Esq.