November 29, 2018
Handong Cheng
Chief Executive Officer
ChinaNet Online Holdings, Inc.
No. 3 Min Zhuang Road, Building 6
Yu Quan Hui Gu Tuspark, Haidian District
Beijing, PRC 100195
Re: ChinaNet Online Holdings, Inc.
Registration Statement on Form S-3
Filed October 30, 2018
File No. 333-228061
Dear Mr. Cheng:
We have limited our review of your registration statement to those
issues we have
addressed in our 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.
Registration Statement on Form S-3
General
1. You disclose that in January 2018, you announced your expansion into the
blockchain
technology industry and your entry into a strategic relationship with
Wuxi Jingtum
Network Technology ("Jingtum"), a company focused on building blockchain
technologies. Your January 23, 2018 press release reports that you
entered into an
agreement with Jingtum and Ford Tree Beijing Blockchain Technology Co.,
Ltd. "to
establish a new joint venture company . . . to research and develop
blockchain technology
and its applications for [your] blockchain technical and business
units." Further, your
periodic filings disclose that you entered into a contract with an
unrelated entity "to
develop certain blockchain technology based applications" for $4.5
million in February
Handong Cheng
FirstNameOnline Holdings, Inc.
ChinaNet LastNameHandong Cheng
Comapany 29, 2018
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2018 and incorporated Business Opportunity Chain (Beijing) Technology
Development
Co., Ltd., a wholly owned subsidiary, for such purpose in May 2018.
Given the significance of the shift in your business development
strategy, please advise
how you determined that you were not required to report these events
pursuant to Item
1.01 of Form 8-K or file any of the related agreements as exhibits to
your periodic filings.
In light of the foregoing, please advise how you determined that you
are eligible to use
Form S-3. Refer to General Instruction I.A.3 of Form S-3.
2. You disclose that you have not offered or sold any securities pursuant
to General
Instruction I.B.6 during the previous 12 months. It appears, however,
that on January 12,
2018, you offered and sold shares of common stock and warrants to
purchase shares of
common stock for proceeds of $11,072,505.20 pursuant to an effective
Form S-3 (file no.
333-207466). Please revise. Refer to Instruction 7 to General
Instruction I.B.6 of Form S-
3.
3. Please incorporate the Forms 8-K filed on January 11, 2018, January
12, 2018, by
reference. Refer to Item 12(a)(2) of Form S-3.
4. You disclose that you are undertaking the development and deployment
of blockchain
applications to solve trust issues in business cooperation and
services, enhance user
vitality and stickiness, and "shift from an information services
provider to a transaction
services provider for business opportunities." In this regard, recent
press releases report
that you launched a "blockchain-powered marketing and advertising
transaction system"
called the Business Opportunity Social Ecosystem, which includes the
BO!News mobile
application. Please provide a detailed description of the nature and
purpose of your
existing and planned blockchain applications, as well as any inherent
digital assets.
Clarify whether your applications run on a blockchain protocol that is
under your control
and, if so, the risks and challenges related to developing and
maintaining the underlying
blockchain; alternatively, clarify whether they are dependent on
another blockchain that is
fully public and decentralized and, if so, the risks and challenges
related to such reliance
(e.g., the risk that the blockchain will cease to function, slow down
in functionality, or
fork).
5. Please disclose the business risks and challenges related to the
development and
deployment of blockchain technologies, including any known trends or
uncertainties that
are reasonably expected to have a material impact on your results of
operations or
financial condition. In this regard, your June 4, 2018 press release
reports that you will
accept Martingale Bonus Points ("MBPs"), the "utility token"
associated with your
application, as payment for your products and services and that the
MBPs are yet
convertible into "other cryptocurrencies legally allowed in both the
U.S. and China."
You should address the risk that you may be unable to secure active
trading markets for
the MBPs and explain its potential impact. Discuss the volatility,
fragmentation, potential
Handong Cheng
FirstNameOnline Holdings, Inc.
ChinaNet LastNameHandong Cheng
Comapany 29, 2018
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for manipulation, and general lack of regulation of the secondary
markets in which digital
assets trade and the resulting liquidity, valuation, and earnings
challenges. Describe your
storage or custodial practices with respect to the private key(s)
granting access to digital
assets, and explain the risks and challenges related to their
security, such as the threat of a
cybersecurity breach. Finally, clarify whether substantial ownership
of MBPs in markets
outside your principal place of business, such as the U.S., may impact
your ability to
generate revenue from such digital assets.
6. You provide a risk factor in your Form 10-K that addresses the PRC
regulatory risks and
challenges that you may face in the event that "establish [a] separate
legal structure to
initiate an [initial coin offering]" outside your principal place of
business for the purpose
of promoting and developing a project based on blockchain technology.
In light of the
PRC ban on not only initial coin offerings but also trading in
cryptocurrencies, please
clarify how you will ensure that any public offerings and subsequent
trading in digital
assets is compliant with PRC laws and regulations.
You should explain why you believe the MBPs are legally allowed in
China, how they are
distinct from those digital assets that are prohibited, and how they
differ from digital
assets that are specifically intended to serve as a substitute for
fiat currency, such as
bitcoin. Finally, given your application enables users to use MBPs to,
among other things,
crowdfund new business opportunities and initiatives, please clarify
whether you are
subject to any other type of regulatory risk, such as the risk that
you may be deemed a
securities broker in China or elsewhere.
7. Please tell us whether you have conducted or are planning to conduct a
public offering of
MBPs or any other digital assets outside China. If so, describe the
material terms and
characteristics of the digital assets and the process by which the
distribution occurred or
will occur. Further, please advise how you determine whether digital
assets are securities
and what you believe would motivate a person who resides outside your
principal place of
business to participate in an offering of your digital assets or
acquire your digital assets in
the secondary markets. Disclose the risk that the securities laws of
any jurisdiction,
including the U.S. federal and state securities laws, may apply to the
distribution and
subsequent trading of your digital assets; and explain how you will
ensure that you and
any third parties, including any online trading platform on which your
digital assets trade,
are compliant with the securities laws and other regulatory regimes of
any jurisdiction,
such as the U.S. federal and state laws that apply to money services
businesses.
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.
Refer to Rule 461 regarding requests for acceleration. Please allow
adequate time for us
to review any amendment prior to the requested effective date of the
registration statement.
Handong Cheng
ChinaNet Online Holdings, Inc.
November 29, 2018
Page 4
You may contact Bernard Nolan, Attorney-Adviser, at (202) 551-6515 or,
in his
absence, Matthew Crispino, Attorney-Adviser, at (202) 551-3456 with any
questions.
Sincerely,
FirstName LastNameHandong Cheng Division of
Corporation Finance
Office of Information
Technologies
Comapany NameChinaNet Online Holdings, Inc.
and Services
November 29, 2018 Page 4
cc: Tahra Wright
FirstName LastName