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February 18, 2020
In Keuk Kim
Chief Executive Officer
DoubleDown Interactive Co., Ltd.
13F, Gangnam Finance Center
152, Teheran-ro Gangnam-gu
Seoul 06236, Republic of Korea
Re: DoubleDown Interactive Co., Ltd.
Draft Registration Statement on Form F-1
Submitted January 21, 2020
CIK No. 0001799567
Dear Mr. Kim:
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
Cover Page
1. Please identify the entity that will control the company and disclose
the percentage of
voting power that will be held by that entity after the consummation of
the offering.
Our Company, page 1
2. You disclose on page 2 the average time per day spent by an average U.S.
adult on a
smartphone in 2019. Please disclose the amount of time the average U.S.
adult spent on
mobile gaming.
In Keuk Kim
FirstName LastNameIn Keuk Kim
DoubleDown Interactive Co., Ltd.
Comapany NameDoubleDown Interactive Co., Ltd.
February 18, 2020
Page 2
February 18, 2020 Page 2
FirstName LastName
3. Please clarify why you believe your market opportunity includes the
global casual gaming
market when it appears that the games you offer are within the social
casino segment of
casual gaming. Disclose that you currently generate most of your
revenue from the
United States.
Risk Factors
Risks related to our business and industry, page 12
4. Please add a risk factor that addresses the general decline in your
average monthly active
users and your average daily active users.
We rely on a small percentage of our players..., page 12
5. Please provide additional context regarding your statement that you
derive nearly all of
your revenue from a small percentage of your players by disclosing the
amount or
percentage of your revenue derived from these players and the
percentage of your paying
players from which this revenue is derived.
Our DoubleDown Casino game has generated substantially all of our revenue...,
page 13
6. Please disclose the percentage of your revenue generated by your
DoubleDown Casino
game.
Risks related to our relationship with DoubleU Games, page 28
7. Please add risk factor disclosure addressing the following:
Whether you have any agreements governing conflicts of interest
between the
company and DoubleU Games.
Whether a controlling shareholder owes fiduciary duties to a company
and its
minority shareholders under Korean law. In this regard, discuss
how any fiduciary
duties owed by a controlling shareholder may differ under Korean
law from U.S.
corporate law and how that might affect the ability of minority
shareholders or the
company to protect their respective interests.
Our marketing efficiency, page 45
8. For each period presented, please provide comparative data on your
average cost per
installation, or CPI, in the table that contains your payback period.
In this regard, we note
that your payback period fluctuates based on your CPI for a given
period and that you
monitor CPI across marketing channels in real-time.
In addition, disclose the components of installation costs and address
significant changes
in cost behavior to the extent that they have caused fluctuations in
each reported payback
period. Refer to the Commission Guidance on Management's Discussion
and Analysis of
Financial Condition and Results of Operations (Release 33-10751) at
https://www.sec.gov/rules/interp/2020/33-10751.pdf
In Keuk Kim
FirstName LastNameIn Keuk Kim
DoubleDown Interactive Co., Ltd.
Comapany NameDoubleDown Interactive Co., Ltd.
February 18, 2020
Page 3
February 18, 2020 Page 3
FirstName LastName
9. Please disclose your basis for calculating payback period and further
define install period
(if other than each year presented).
10. Additionally, please make clear that your measurement of marketing
efficiency is based
solely on Doubledown Casino, which, as you indicated on page 5,
provides substantially
all of your revenue to date. Qualify your disclosure to address how
the resultant payback
periods from long-standing games can be different from new releases
based on their
respective average installation costs.
Other key performance indiators and non-GAAP metrics and trends, page 46
11. We note the negative trends in your Average MAU and Average DAU for
consecutive
quarters. Considering that these metrics are indicators of the
potential number of paying
players and engagement of your player base, please disclose how such
declines have
impacted current period revenues, whether they are expected to
continue, and whether
declining trends could foretell declining future revenues from paying
players. Further
balance your disclosure by addressing the implications of favorable
ARPDAU trends
resulting from declining average DAU.
Revenue and key performance indicators, page 50
12. On page 12, you indicate that you derive nearly all your revenue from
the sale of virtual
chips to a small percentage of paying players and that the proportion
of revenue from
high-paying players (those who spend more than $500 per month) has
been gradually
rising in recent years. To enable your investors to better understand
the extent of your
revenue concentration, please disclose the proportion of high paying
players in relation to
the total number of paying players overall for each period presented.
Other income and other expenses, page 53
13. Revise to disclose the basis for and the nature of the gains on
foreign currency transaction
and the remeasurements of intercompany items.
Liquidity and capital resources, page 55
14. Please disclose the principal amount of convertible bonds and bonds
with warrants that are
outstanding. File the debt and warrant agreements as exhibits.
Certain relationships and related party transactions
Our relationships with DoubleU Games, page 91
15. Please file the loan agreements with DoubleU Games Co., Ltd. as
exhibits.
16. Please disclose the amounts paid to DoubleU Games Co., Ltd. under the
DoubleU Games
License Agreement for the years ended December 31, 2018 and 2019.
Refer to Item 7.B
of Form 20-F.
In Keuk Kim
FirstName LastNameIn Keuk Kim
DoubleDown Interactive Co., Ltd.
Comapany NameDoubleDown Interactive Co., Ltd.
February 18, 2020
Page 4
February 18, 2020 Page 4
FirstName LastName
Joint investment agreement, page 91
17. Please clarify whether the joint investment agreement between DoubleU
Games and STIC
Special Situation Private Placement Joint Stock Company will continue
unchanged after
the offering. Provide risk factor disclosure of how this agreement
will influence the
company's corporate governance and operations. Disclose in the
prospectus summary that
the agreement gives the parties the right to nominate a majority of
the company's board of
directors. Identify the directors nominated by each party in your
management disclosure.
File the agreement as an exhibit.
18. Please disclose the number and percentage of shares issuable pursuant
to the conversion
of the convertible bonds and exercise of the warrants held by STIC
Special Situation
Private Placement Joint Stock Company.
Consolidated financial statements
Consolidated statement of net income and comprehensive income, page F-3
19. You disclose on the face of the income statement that depreciation and
amortization is
excluded from cost of revenue. To avoid placing undue emphasis on
"cash flow,"
depreciation and amortization should not be positioned in the income
statement in a
manner which results in reporting a figure for income (i.e., Gross
Profit) before
depreciation. Please revise to include applicable depreciation and
amortization in cost of
revenue. In the alternative, please remove the line item captioned
"Gross Profit." Please
revise other presentations of Gross Profit throughout the filing.
Refer to SAB Topic 11B.
Consolidated statement of changes in shareholder's equity, page F-5
20. We note the material gain of $12 million on foreign currency
translation, net of tax within
the column "Accumulated other comprehensive income/(loss)" for the
year ended
December 31, 2018. Please revise to include the disclosures related to
the foreign
currency activity required by ASC 830-45-18 and 20 and 830-30-50-1.
Tell us how you
considered addressing the gain within Management's Discussion and
Analysis.
Note 2: Significant accounting policies
Revenue Recognition, page F-10
21. Please tell us and clarify what the estimated period of time is that
you recognize virtual
currency revenue over the reported periods. In addition, please
explain and clarify what
you mean that for "most apps, revenue is recognized using a user-based
revenue model."
Principal-agent considerations, page F-11
22. Notwithstanding that various third-party platforms collect proceeds
from your customers
and remit an amount to you after deducting a platform fee, you record
revenues on a gross
basis. As stated hereunder, you have determined that you have control
over the content
and functionality of games prior to access by the end-user and
therefore, are the principal
In Keuk Kim
FirstName LastNameIn Keuk Kim
DoubleDown Interactive Co., Ltd.
Comapany NameDoubleDown Interactive Co., Ltd.
February 18, 2020
Page 5
February 18, 2020 Page 5
FirstName LastName
in the arrangement. Addressing the terms of your arrangements with the
third-party
platform providers, tell us your assessment as to how your conclusion
about control aligns
with the principal indicators in ASC 606-10-55-39.
Contract assets, Contract liabilities and other disclosures, page F-12
23. Please disclose the nature of performance obligations specified in
your non-cancellable
contracts governing customer purchases of virtual currency, as well as
your recently
launched subscription model (page 48). Further describe when and how
the respective
performance obligations are satisfied. Refer to ASC 606-10-50-12.
New accounting guidance not yet adopted, page F-13
24. Tell us how you evaluated the impact of adopting Part I (Accounting
for Certain Financial
Instruments with Down Round Features) of ASU 2017-11. In this regard,
we note your
disclosure on page F-16 that the BW warrants have a down round
feature. Additionally,
the conversion price for the CB bonds, similar to the warrant exercise
price, is subject to
an adjustment based on both the magnitude and size and price of new
equity offerings.
Segment information, page F-13
25. Please revise to disclose entity-wide information and information on
geographic areas and
products and services of your operating segment pursuant to ASC
280-10-50-38 through
41.
Note 4: Term loans, convertible bonds, and bonds with warrants
Convertible bonds and bonds with warrants, page F-16
26. Please disclose the numbers of shares into which the CB bonds are
convertible and the
BW warrants are exercisable based on their respective formulas.
Describe how they can
be affected by the magnitude of both the size and price of new equity
financing. Refer to
ASC 505-10-50-7.
Additionally, please explain what you mean by a "low probability of
occurrence" and why
it is a factor for ascribing no value to a down round feature. Refer
to your basis in the
accounting literature.
Bond Warrants , page F-19
27. Revise to disclose the rights and privileges of the bond warrants
pursuant to ASC 505-10-
50-3.
Note 6: Shareholder's equity
Common Stock, page F-19
28. You disclosed that your common stock has no preemptive rights.
However, on page 95,
you made reference to preemptive rights of all stockholders who are
listed on your
In Keuk Kim
DoubleDown Interactive Co., Ltd.
February 18, 2020
Page 6
stockholders register as of the relevant record date. Please clarify the
inconsistencies and
disclose such preemptive rights, if any. Additionally, disclose the
shareholders' privilege
to receive a distribution of free shares (when applicable) as further
indicated on page
95. Please confirm to us that your Note 6. disclosures comply with ASC
505-10-50-3.
General
29. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
30. Please disclose the source of the statement in your prospectus that
DoubleDown Casino
has been in the top 20 grossing mobile games on Apple App Store since
2015.
You may contact Kathryn Jacobson, Senior Staff Accountant, at (202)
551-3365 or Craig
Wilson, Senior Advisor, at (202) 551-3226 if you have questions regarding
comments on the
financial statements and related matters. Please contact Jeff Kauten, Staff
Attorney, at (202)
551-3447 or Kathleen Krebs, Special Counsel, at (202) 551-3350 with any other
questions.
Sincerely,
FirstName LastNameIn Keuk Kim
Division of
Corporation Finance
Comapany NameDoubleDown Interactive Co., Ltd.
Office of
Technology
February 18, 2020 Page 6
cc: Barbara A. Jones, Esq.
FirstName LastName