SEC Comment Letter for CLPS Inc (CLPS) (CIK 0001724542) (CLPS) — Feb 16, 2018
CLPS Inc (CLPS) (CIK 0001724542)
Date: Feb. 16, 2018 · CIK: 0001724542 · Accession: 0000000000-18-005500
AI Filing Summary & Sentiment
Reasoning
Referenced dates: January 4, 2018
Letter
Mail Stop 4561 February 16 , 2018 Raymond Ming Hui Lin Chief Executive Officer CLPS Incorporation c/o 2nd Floor, Building 18, Shanghai Pudong Software Park 498 Guoshoujing Road, Pudong, Shanghai 201203 People’s Republic of China
Re: CLPS Incorporation Amendment No. 1 to Draft Registration Statement on Form F -1 Submitted January 19, 2018 CIK No. 0001724542
Dear Mr. Lin:
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. References to prior comments refer to our comment letter dated January 4, 2018.
Facing Page
1. Further to prior comment 1, please advise why you have checked the box that your offering will be made on a delayed or continuous based pursuant to Rule 415.
Prospectus Summary
General
2. We note the list of risks and uncertainties relating to your company and business identified at the bottom of page 6. Please insert an appropriate heading to this subsection,
Raymond Ming Hui Lin CLPS Incorporation February 16 , 2018 Page 2
to distinguish it from the subsection above captioned “Our Competitive Strengths .” In addition, please expand the bullet point regarding your “reliance on a relatively small number of major clients” to reflect that a single customer accounted for 38.6% and 59.2% of your total revenue for fiscal years 2017 and 2016, respectively. We note in this regard your response to prior comment 21 stating that you believe that for the foreseeable future you will continue to derive a significant portion of your revenues from a small number of major clients.
Our Business
Corporate History and Background, page 53
3. We note your responses to prior comments 19 and 31 regarding your reorganization transactions in 2017. On page 54, you provide a diagram of ChinaLink Professional Services, Co. Ltd (“CLPS Shanghai”) as it existed prior to your reorgan ization transactions in 2017. Your current organization structure is provided on page 7 of your prospectus showing CLPS Shanghai as a wholly -owned subsidiary of CLPS Inc. through several holding companies, Qinheng Co. Ltd (“Qinheng”), Shanghai Qincheng Information Technology Co., Ltd. (“CLPS QC (WOFE)”), and Qiner Co. Ltd. (“Qiner”). Please revise to describe the transactions that resulted in Qinheng, CLPS QC (WOFE), and Qiner, and CLPS Inc. ultimately, acquiring CLPS Shanghai. Your narrative discussion on pages 53 and 54 omits the October 31, 2017 and No vember 2, 2017 equity transfers, briefly discuss ed on pages 40 and 81 , which resulted in CLPS QC (WOFE) and Qiner owning CLPS Shanghai and CLPS Inc. owning Qiner. Your revised disclosure should provide a more detailed description of the November 2, 2017 equity transfer s and all of the material terms of the three Share Purchase Agreements entered in to in August 2017 and briefly mentioned on page 54. In addition, please consider including a diagram of your current organizational structure at the end of this section to add clarity and include headings for both diagrams to clarify which is your historical structure and which is your current structure.
4. We note your response to prior comment 20 regarding the operations of your wholly owned subsidiaries and equity interests. Your revised disclosure indicates whether each entity provides both consulting and solutions or only consulting. Please expand your disclosure to provide more detail about the nature of the consulting or solutions each entity provides. To the extent possible, clarify if and how the operations of each entity differ from one another.
Solution Services, page 58
5. We note that your technology solutions include products based on blockchain technology. Please provide us with a detailed explanation of these blockchain -related solutions, in particular the loyalty rewards solution based on blockchain technology that you have developed and implemented at several Chinese banks.
Raymond Ming Hui Lin CLPS Incorporation February 16 , 2018 Page 3
Government Regul ation, page 70
6. We note your response to prior comment 9 regarding your lack of qualification certificates from the Ministry of Industry and Information Technology for companies that engage in systems integration . Please revise your disclosure in this sec tion to clarify , as stated in your response, that you do not maintain such certificates and do not engage in the system s integration business. Further, please clarify in an appropriate place in the filing the differences between the system s integration bu siness that requires qualification by MIIT and your services that you describe as “system design, planning and integration based on customers’ specific needs,” on page 47. In addition, we note your statement on page 24 that companies “planning to set up information systems may only retain systems integration companies with appropriate qualification certificates;” please clarify whether any systems integration companies you have retained possess the appropriate certificates.
Related Party Transactions, pa ge 81
7. We note your response to prior comment 28 regarding your related party transactions from the fiscal year ended June 30, 2015. Please further revise your disclosure to provide a descript ion of the material terms of any agreements related to the amou nts due from Mr. Yang and Mr. Lin, $353,011 and $1,094,367, respectively , as of June 30, 2015. If these were advances or loans, please clarify.
Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F -14
8. We note from your response to prior comment 38 that you use the best estimate of selling prices of the solution development services and PCS (and specific service if applicable) as the basis of revenue allocation. Please clarify if any of your arrangements are within the scope of ASC 985 -605. If so, explain how you considered the guidance in ASC 985 - 605 to allocate fair value to the various elements in these arra ngements. We refer you to ASC 985 -605-25-6 and 25 -9.
Raymond Ming Hui Lin CLPS Incorporation February 16 , 2018 Page 4
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 stateme nts and related matters. Please contact Edwin Kim, Staff Attorney, at (202) 551 -3297 or me at (202) 551 -3483 with any other questions.
Sincerely,
/s/ Stephen Krikorian for
Show Raw Text
Mail Stop 4561
February 16 , 2018
Raymond Ming Hui Lin
Chief Executive Officer
CLPS Incorporation
c/o 2nd Floor, Building 18, Shanghai Pudong Software Park
498 Guoshoujing Road, Pudong, Shanghai 201203
People’s Republic of China
Re: CLPS Incorporation
Amendment No. 1 to
Draft Registration Statement on Form F -1
Submitted January 19, 2018
CIK No. 0001724542
Dear Mr. Lin:
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. References to prior comments refer to our comment letter dated January 4, 2018.
Facing Page
1. Further to prior comment 1, please advise why you have checked the box that your
offering will be made on a delayed or continuous based pursuant to Rule 415.
Prospectus Summary
General
2. We note the list of risks and uncertainties relating to your company and business
identified at the bottom of page 6. Please insert an appropriate heading to this subsection,
Raymond Ming Hui Lin
CLPS Incorporation
February 16 , 2018
Page 2
to distinguish it from the subsection above captioned “Our Competitive Strengths .” In
addition, please expand the bullet point regarding your “reliance on a relatively small
number of major clients” to reflect that a single customer accounted for 38.6% and 59.2%
of your total revenue for fiscal years 2017 and 2016, respectively. We note in this regard
your response to prior comment 21 stating that you believe that for the foreseeable future
you will continue to derive a significant portion of your revenues from a small number of
major clients.
Our Business
Corporate History and Background, page 53
3. We note your responses to prior comments 19 and 31 regarding your reorganization
transactions in 2017. On page 54, you provide a diagram of ChinaLink Professional
Services, Co. Ltd (“CLPS Shanghai”) as it existed prior to your reorgan ization
transactions in 2017. Your current organization structure is provided on page 7 of your
prospectus showing CLPS Shanghai as a wholly -owned subsidiary of CLPS Inc. through
several holding companies, Qinheng Co. Ltd (“Qinheng”), Shanghai Qincheng
Information Technology Co., Ltd. (“CLPS QC (WOFE)”), and Qiner Co. Ltd. (“Qiner”).
Please revise to describe the transactions that resulted in Qinheng, CLPS QC (WOFE),
and Qiner, and CLPS Inc. ultimately, acquiring CLPS Shanghai. Your narrative
discussion on pages 53 and 54 omits the October 31, 2017 and No vember 2, 2017 equity
transfers, briefly discuss ed on pages 40 and 81 , which resulted in CLPS QC (WOFE) and
Qiner owning CLPS Shanghai and CLPS Inc. owning Qiner. Your revised disclosure
should provide a more detailed description of the November 2, 2017 equity transfer s and
all of the material terms of the three Share Purchase Agreements entered in to in August
2017 and briefly mentioned on page 54. In addition, please consider including a diagram
of your current organizational structure at the end of this section to add clarity and
include headings for both diagrams to clarify which is your historical structure and which
is your current structure.
4. We note your response to prior comment 20 regarding the operations of your wholly
owned subsidiaries and equity interests. Your revised disclosure indicates whether each
entity provides both consulting and solutions or only consulting. Please expand your
disclosure to provide more detail about the nature of the consulting or solutions each
entity provides. To the extent possible, clarify if and how the operations of each entity
differ from one another.
Solution Services, page 58
5. We note that your technology solutions include products based on blockchain technology.
Please provide us with a detailed explanation of these blockchain -related solutions, in
particular the loyalty rewards solution based on blockchain technology that you have
developed and implemented at several Chinese banks.
Raymond Ming Hui Lin
CLPS Incorporation
February 16 , 2018
Page 3
Government Regul ation, page 70
6. We note your response to prior comment 9 regarding your lack of qualification
certificates from the Ministry of Industry and Information Technology for companies that
engage in systems integration . Please revise your disclosure in this sec tion to clarify , as
stated in your response, that you do not maintain such certificates and do not engage in
the system s integration business. Further, please clarify in an appropriate place in the
filing the differences between the system s integration bu siness that requires qualification
by MIIT and your services that you describe as “system design, planning and integration
based on customers’ specific needs,” on page 47. In addition, we note your statement on
page 24 that companies “planning to set up information systems may only retain systems
integration companies with appropriate qualification certificates;” please clarify whether
any systems integration companies you have retained possess the appropriate certificates.
Related Party Transactions, pa ge 81
7. We note your response to prior comment 28 regarding your related party transactions
from the fiscal year ended June 30, 2015. Please further revise your disclosure to provide
a descript ion of the material terms of any agreements related to the amou nts due from Mr.
Yang and Mr. Lin, $353,011 and $1,094,367, respectively , as of June 30, 2015. If these
were advances or loans, please clarify.
Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F -14
8. We note from your response to prior comment 38 that you use the best estimate of selling
prices of the solution development services and PCS (and specific service if applicable)
as the basis of revenue allocation. Please clarify if any of your arrangements are within
the scope of ASC 985 -605. If so, explain how you considered the guidance in ASC 985 -
605 to allocate fair value to the various elements in these arra ngements. We refer you to
ASC 985 -605-25-6 and 25 -9.
Raymond Ming Hui Lin
CLPS Incorporation
February 16 , 2018
Page 4
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 stateme nts and related matters. Please contact Edwin Kim, Staff
Attorney, at (202) 551 -3297 or me at (202) 551 -3483 with any other questions.
Sincerely,
/s/ Stephen Krikorian for
Katherine Wray
Attorney -Advisor
Office of Information
Technologies and Services
cc: F. Alec Orudjev, Esq.
Schiff Hardin LLP