United States securities and exchange commission logo
July 6, 2023
Mingzhou Sun
Chief Financial Officer
Datasea Inc.
20th Floor, Tower B, Guorui Plaza, 1 Ronghua South Road
Technological Development Zone
Beijing, People s Republic of China 100176
Re: Datasea Inc.
Registration
Statement on Form S-3
Filed June 23, 2023
File No. 333-272889
Dear Mingzhou Sun:
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
Cover Page
1. Please disclose
prominently on the prospectus cover page that you are not a Chinese
operating company but a
Nevada 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, disclose
that these contracts
have not been tested in court. 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.
Your disclosure should
acknowledge that Chinese regulatory authorities could disallow
Mingzhou Sun
FirstName
Datasea Inc.LastNameMingzhou Sun
Comapany
July 6, 2023NameDatasea Inc.
July 6,2 2023 Page 2
Page
FirstName LastName
this structure, which would likely result in a material change in your
operations and/or a
material change in the value of the securities you are registering for
sale, including that it
could cause the value of such securities to significantly decline or
become worthless.
Provide a cross-reference to your detailed discussion of risks facing
the company and the
offering as a result of this structure.
2. Provide 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 these risks 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. Your disclosure
should 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.
Please disclose the
location of your auditor s headquarters and whether and how the
Holding Foreign
Companies Accountable Act, as amended by the Consolidated
Appropriations Act, 2023,
and related regulations will affect your company.. Your prospectus
summary should
address, but not necessarily be limited to, the risks highlighted on
the prospectus cover
page.
3. Clearly disclose how you will refer to the holding company,
subsidiaries, and VIEs when
providing the disclosure throughout the document so that it is clear
to investors which
entity the disclosure is referencing and which subsidiaries or
entities are conducting the
business operations. Refrain from using terms such as we or
our when describing
activities or functions of a VIE. For example, disclose, if true, that
your subsidiaries
and/or the VIE conduct operations in China, that the VIE is
consolidated for accounting
purposes but is not an entity in which you own equity, and that the
holding company does
not conduct operations. Disclose clearly the entity (including the
domicile) in which
investors are purchasing an interest.
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. Provide cross-references to the
condensed consolidating
schedule and the consolidated financial statements.
Prospectus Summary, page 1
5. We note your disclosure that the Nevada holding company controls and
receives the
economic benefits of the VIE s business operations through
contractual agreements
between the VIE and your Wholly Foreign-Owned Enterprise (WFOE) and
that those
agreements are designed to provide your WFOE with the power, rights,
and obligations
Mingzhou Sun
Datasea Inc.
July 6, 2023
Page 3
equivalent in all material respects to those it would possess as the
principal equity holder
of the VIE. We also note your disclosure that the Nevada holding company
is the primary
beneficiary 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 contractual agreements are equivalent to 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 a clear description of the conditions you
have satisfied 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 also
disclose, if true, that the VIE agreements have not been tested in a
court of law.
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.
Please contact Marion Graham, Staff Attorney, at (202) 551-6521 of Jeff
Kauten, Staff
Attorney, at (202) 551-3447 with any questions.
Sincerely,
FirstName LastNameMingzhou Sun
Division of
Corporation Finance
Comapany NameDatasea Inc.
Office of
Technology
July 6, 2023 Page 3
cc: David Manno
FirstName LastName