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Mail Stop 4561
April 30, 2018
Lei Li
Chief Executive Officer
Qtech, Ltd.
11/F, Block 3, Xing Chuang Technology Center
Shen Jiang Road 5005
Pudong New Area, Shanghai, 200120
People's Republic of China
Re: Qtech, Ltd.
Amendment No. 1 to Draft Registration Statement on Form F-1
Submitted April 17, 2018
CIK No. 0001733298
Dear Mr. Li:
We have reviewed your amended 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.
Overview, page 1
1. We note your response to prior comment 3 where you state that "the
Company's user
acquisition cost is lower than the cost it believes it would have
incurred for relying on
online advertising to acquire users." (emphasis added) Each statement or
assertion of
opinion or belief must be clearly characterized as such. Please revise
your disclosure
accordingly.
Lei Li
Qtech, Ltd
April 30, 2018
Page 2
Risk Factors
Our current dependence on a limited number of customers...", page 19
2. We note your response to prior comment 9. We are unable to agree with
your analysis
that your agreement with your largest customer, a third-party
advertising platform, which
contributed 44% of your net revenue for the year ended December 31, 2017
is not one
upon which the company is substantially dependent within the meaning of
Item
601(b)(10) of Regulation S-K. Accordingly, please file the relevant
agreement(s) as an
exhibit to the registrant statement and/or supplementally provide us
with the revenue for
the customer as a percentage of net revenues for the three months ended
March 31, 2018.
Additionally, we note your disclosure on page 75 where you state that
you acquired an
advertising agent in February 2018. With respect to your largest
customer and Shanghai
Dianguan, please revise to provide the information required by Items
4.B.6, 5.A. and 5.D
of Form 20-F, including a discussion of material terms of related
agreements. Finally,
please consider identifying, here and on page F-36, your three largest
customers that
account for a significant percentage of your net revenues and/or
accounts receivable, as
applicable.
We rely on contractual arrangements with our consolidated VIE..., page 35
3. We note that the VIE agreements contain provisions for the resolution of
disputes
through arbitration pursuant to PRC laws. Please expand your disclosure
to discuss the
impact, if any, of these provisions on shareholders' rights to pursue
claims under the
Unite States federal securities laws.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies, Judgments and Estimates
Share-based Compensation and Valuation of Our Ordinary Shares, page 82
4. We note your responses to prior comments 12 and 13. We may have
additional
comments when you update your filing for the fair value of ordinary
shares in a
subsequent submission.
Results of Operations, page 88
5. We note your response to prior comment 14. Please revise to provide
price and volume
disclosures such as the number of paid clicks or impressions and average
cost per click or
per thousand views for each period presented, and include an analysis of
any trends or
uncertainties. We refer you to Part I, Items 5A and 5D of Form 20-F and
Section III.B of
SEC Release 33-8350.
Lei Li
Qtech, Ltd
April 30, 2018
Page 3
Industry Overview
Description of American Depositary Shares, page 152
6. We note from your risk factor disclosure on page 54 that the deposit
agreement contains a
provision that permits the depositary to elect to resolve any dispute
under the deposit
agreement through arbitration. Please expand the description of the ADSs
to clarify
whether, and if so how, this provision affects the rights of your ADS
holders to pursue
claims under United States federal securities laws.
Note 19. Subsequent events, page F-46
7. We note your response to prior comment 24. Please revise to clarify
whether you will
recognize US$128.4 million as compensation expense during the quarter in
which this
offering is completed. In this respect, we note from your disclosures
that prior to the end
of the vesting periods, all the remaining restricted shares shall vest
immediately and no
longer constitute restricted shares upon a Deemed Liquidation Event or
IPO.
8. We note your response to prior comment 25. Please explain in greater
detail the terms
and conditions associated with the cooperation agreement. In this
regard, tell us how
long the cooperation agreement will remain in effect and describe the
payment terms
associated with the service fee. Clarify the portion of your response
that indicates the
investor will charge you on a cost per time basis.
You may contact Morgan Youngwood, Staff Accountant, at (202) 551-3479 or
Stephen
Krikorian, Accounting Branch Chief, at (202) 551-3488 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Matthew Derby,
Attorney-Advisor, at (202) 551-3334 or me at (202) 551-3673 with any other
questions.
Sincerely,
/s/ Folake Ayoola
Folake Ayoola
Special Counsel
Office of
Information
Technologies and
Services
cc: Chris Lin, Esq.
Simpson Thacher & Bartlett LLP