United States securities and exchange commission logo
July 23, 2020
Peng Dai
Chief Executive Officer
iHuman Inc.
K2, North America International Business Park
No. 108 Beiyuan Road
Chaoyang District, Beijing 100012
People's Republic of China
Re: iHuman Inc.
Draft Registration
Statement on Form F-1
Submitted June 26,
2020
CIK No. 0001814423
Dear Mr. Dai:
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 filed June 26, 2020
Prospectus Summary, page 1
1. We note your disclosure
that you are No. 1 in terms of paying users among online
childhood edutainment
providers in China and No. 1 in terms of MAUs among online
childhood edutainment
providers in China. In an appropriate place in your summary,
please provide context
for these performance metrics by discuss how you use these
metrics to mange your
business as you described in your MD&A discussion.
Peng Dai
FirstName LastNamePeng Dai
iHuman Inc.
Comapany
July NameiHuman Inc.
23, 2020
July 23,
Page 2 2020 Page 2
FirstName LastName
2. We note that according to your risk factor on page 31, "We will be a
'controlled
company'... " Please disclose in your summary that you are a
controlled company and
whether you intend to rely on any exemptions as a controlled company.
Industry Overview, page 2
3. We note your use of projections for the China's childhood edutainment
products market
for 2024, such as the 2024 total revenue of China's complementary
childhood education
market, the 2024 content-based complementary childhood education
market, the
2024 penetration rate of China's content-based complementary childhood
education, and
the 2024 total revenue of China's childhood edutainment products
market. If these figures
are based on projections provided in the Frost & Sullivan report
please cite this report. If
these figures are based on other source(s) please cite the other
source(s). If the figures
are based upon management s belief, please indicate that this is the
case and include an
explanation for the basis of such belief.
Conventions that Apply to this Prospectus, page 6
4. Elaborate upon your definition of "Perfect World Group" to explain how
it is affiliated
with you. Please do the same with "Hongen Education," as you state
elsewhere that it is
also affiliated with you.
Risk Factors
If our security measures are breached or failed and result in unauthorized
disclosure or
unintended leakage of data,..., page 20
5. Please tell us whether you have experienced any material disruptions,
outages,
cyberattacks, attempts to breach your systems, or other similar
incidents. If so, please
disclose such incidents, including the cost and impact of such
incidents. Please also
disclose the nature of the board s role in overseeing the company
s cybersecurity risk
management.
We may encounter potential conflict of interests in competition with our
affiliates..., page 25
6. Please enhance this risk factor to specify the positions that Messrs.
Chi serve in your
affiliates, and make similar revisions under "Management," as
applicable. Also, revise to
specifically state that, at least with respect to Mr. Michael Yufeng
Chi, he will likely face
conflicts of interest as the Chairman of the Board of you and your
affiliate.
Management's Discussion and Analysis
Key Factors Affecting Our Results of Operations, page 75
7. Disclose the number of your active users, with a view to understanding
the conversion
potential into paying users.
Peng Dai
FirstName LastNamePeng Dai
iHuman Inc.
Comapany
July NameiHuman Inc.
23, 2020
July 23,
Page 3 2020 Page 3
FirstName LastName
8. Where you discuss the ability to manage your costs and expenses
effectively, please
elaborate upon this discussion in light of the fact that your research
and development
expenses as well as your general and administrative expenses have
increased in recent
years at rates in excess of your increases in revenue and acknowledge
your stated intent to
continue to incur such expenses. Provide readers with additional
insight into how you
intend to balance your intent to continue to incur those costs against
any intent you may
have to reduce your overall losses.
Key Components of Results of Operations, page 77
9. You refer to your offline and online revenues throughout your
prospectus. Clarify
whether your offline and online revenues are the equivalent of your
"Learning materials
and devices" and "Learning services" revenue categories, respectively.
If not, define your
offline and online revenues.
Critical Accounting Policies, Judgments and Estimates
Fair value of our ordinary shares, page 89
10. Please disclose that your estimates will not be necessary to determine
the fair value of new
awards once the underlying shares begin trading.
Business, page 103
11. In an appropriate place in your discussion, please disclose that a
single app, iHuman
Chinese, represents 80% of total learning service revenues. In doing
so, discuss your
intent to diversify your revenues by drawing paying users to other
apps or increase paying
users of your iHuman app or both, as applicable, and the challenges in
doing so.
Regulation, page 125
12. Please revise to discuss the effects of the various regulations that
you describe here on
your business with a view to understanding how the regulations are
applicable to you.
Management, page 142
13. Your signature page suggests that you intend to appoint a new
individual as your principal
financial officer. If true, please update this section to provide the
required information
about this individual, when available. If you do not intend to appoint
a new individual,
please enhance your risk factor and MD&A disclosure that discusses
your material
weakness relating to your lack of sufficient accounting and financial
reporting personnel
to specifically acknowledge that you have not retained a chief
financial officer, if true.
Peng Dai
FirstName LastNamePeng Dai
iHuman Inc.
Comapany
July NameiHuman Inc.
23, 2020
July 23,
Page 4 2020 Page 4
FirstName LastName
Note 1. Organization, Consolidation and Principal Activities
Restructuring
Onshore Restructuring, page F-9
14. Please tell us your consideration of including an English translation
of the act-in-concert
agreement as an exhibit. We also note from your disclosure that the
difference between
the cash consideration and the net book value of the acquired net
assets has been
accounted for as a distribution; however, please tell us why is was
necessary to record the
distribution in both of the years ended December 31, 2019 and 2018.
Offshore Restructuring, page F-10
15. We note your disclosure that you retroactively presented the ordinary
shares related to the
historical equity transactions of Tianjin Hongen of 215,053,763;
however, it appears only
160,000,000 shares were presented on a retroactive basis in the
statements of changes in
shareholders deficit. Please advice or revise.
Revenue recognition, page F-17
16. Please tell us your consideration of disclosing how you allocate the
transaction price when
you have multiple performance obligations in a contract. Refer to ASC
606-10-50-20c.
Note 2. Summary of Significant Accounting Policies
Recent accounting pronouncements, page F-22
17. Please revise the effective date of ASU 2016-02. It appears this ASU
is effective for
fiscal years beginning after December 15, 2018, including interim
periods within those
fiscal years for a public business entity. For all other entities, the
amendments in
the Update are effective for fiscal years beginning after December 15,
2019, and interim
periods within fiscal years beginning after December 15, 2020.
Note 11. Contingently Redeemable Ordinary Shares , page F-30
18. Please tell us how the RMB 40,000 related to the December 6, 2019
issuance of shares is
reflected in the financial statements as of December 31, 2019.
19. Please disclose the specific date through which the shares are subject
to redemption.
Note 12. Share-Based Payments, page F-32
20. Based on your disclosure of the fair value of the awards granted of
RMB 6.67 per share, it
does not appear you recognized all of the share-based compensation
expense for the
number of fully vested shares issued noted in the first paragraph on
page F-34. Please
advise or revise.
Peng Dai
FirstName LastNamePeng Dai
iHuman Inc.
Comapany
July NameiHuman Inc.
23, 2020
July 23,
Page 5 2020 Page 5
FirstName LastName
Note 14. Unaudited Pro Forma Net Loss Per Share, page F-35
21. Please tell us your consideration of including the share-based
compensation expense
related to the options that will become exercisable upon closing your
IPO in your pro
forma net loss per share calculation.
Note 19. Condensed Financial Information of the Parent, page F-39
22. Please tell us why you excluded net cash provided by operating
activities for the years
presented.
You may contact Tony Watson at 202-551-3318 or Lyn Shenk at 202-551-3380
if you
have questions regarding comments on the financial statements and related
matters. Please
contact Scott Anderegg at 202-551-3342 or Mara Ransom at 202-551-3264 with any
other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services