SEC Company Response from AgEagle Aerial Systems Inc. (UAVS) (CIK 0000008504) (UAVS) — Dec 29, 2017
AgEagle Aerial Systems Inc. (UAVS) (CIK 0000008504)
Date: Dec. 29, 2017 · CIK: 0000008504 · Accession: 0001144204-17-065866
AI Filing Summary & Sentiment
File numbers found in text: 333-221717
Referenced dates: December 19, 2017
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CORRESP
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filename1.htm
December 29, 2017
VIA SEC EDGAR
Division of Corporation Finance
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attn:
Laura Nicholson Special Counsel Office of Transportation and Leisure
Tonya K. Aldave
Re:
EnerJex Resources, Inc.
Amendment No. 1 Registration Statement on Form S-4 Filed
November 30, 2017
File No. 333-221717
Dear Ms. Nicholson:
On behalf of EnerJex
Resources, Inc. (the “Company”), we are writing in response to the comments of the staff of the Commission (the
“Staff”) on the S-4 filing as transmitted by a letter dated December 19, 2017 (the “Comment Letter”)
to Louis G. Schott, Interim Chief Executive Officer of the Company. The answers set forth herein refer to each of the Staff’s
comments by number. This letter sets forth the Company’s proposed disclosures and responses to the Comment Letter. For your
convenience, we have restated the comments from the Comment Letter below, followed by the Company’s responses. An amended
filing to the S-4 Filing (the “Amended S-4 Filing”) reflecting changes in response to your comments is being
filed today via the Commission’s EDGAR system.
General
1. Please include
a preliminary proxy card with your next amendment. Refer to Exchange Act Rule 14a-6.
Response: We
have included a preliminary proxy card per the Staff’s request.
2. Please revise
to clarify whether you are registering the offer and sale of EnerJex Resources, Inc. common stock to the AgEagle Aerial Systems,
Inc. shareholders in connection with the merger. We note your disclosure on page 12 that shares to be received by AgEagle shareholders
will not be registered and are restricted. On page 119, however, you state that you have filed a registration statement on Form
S-4 to register certain merger consideration that you will issue to AgEagle’s shareholders in the merger. If you are not
registering such transaction, please clarify in your response why you are using Form S-4 in connection with the transactions identified
in your calculation of fee table. Refer to General Instruction A.1 of Form S-4.
Response: We
have revised the disclosure on page 119 to delete the reference to registering certain shares to the AgEagle shareholders.
The shares we are
registering relate to the dividends to be issued to the holders of EnerJex’s Series A Preferred Stock, as well as the shares
of common stock to be issued to such holders upon the conversion of such preferred stock. The issuance of these securities and
the amendment of the company’s Certificate of Designation is conditioned upon approval of the Series A Preferred Stockholders
and is an integral condition to closing the merger. We contend that the registration on Form S-4 is appropriate, as this involves
effectively a reclassification of Series A Preferred Stock into EnerJex common stock effective only on and as a condition to the
consummation of the merger. This will be set forth in the Certificate of Designation for the Series A Preferred Stock.
3. Please include
information required by Item 5 of Schedule 14A for AgEagle Aerial Systems, Inc. In addition, please disclose information required
by Item 402 of Regulation S-K for the surviving company. Refer to Item 18 of Form S-4.
Response: We
have included information required by Item 5 of Schedule 14A for AgEagle and the information required by Item 402 of Regulation
S-K for the combined company.
4. Please provide
us with copies of the “board books” and any other materials prepared by your financial advisor. Such materials should
include all presentations made by the financial advisors.
Response: Per discussion with Senior Counsel at the Commission on December 28, 2017, we
have sent to the Staff via overnight courier all board books and other materials prepared by EnerJex’s financial advisors.
5. Your description
of the EnerJex proposals in your table of contents does not appear to be consistent with the proposals described in the notice
to shareholders on page 3. Please revise or advise.
Response: We
have revised the table of contents to be consistent with the notice to shareholders.
6. We note your
disclosure that the relative post-merger ownership percentages described on page 19 do not include shares of common stock that
may be issued in connection with the conversion of your Series B Preferred Stock and Series C Preferred Stock, and also do not
include any additional shares which may be issued in connection with your closing obligation to provide up to $4 million in new
working capital and the elimination of all liabilities currently on your balance sheet. Please describe the relevant post-merger
ownership percentages on a fully diluted basis. In addition, please address how the exchange agreement with Agribotix will impact
these relative ownership percentages.
Response: We have revised the disclosure throughout the filing to provide the relevant post-merger ownership percentages
on a fully diluted basis. The Agribotix exchange agreement will not affect the relative ownership percentages, as it will only
dilute current AgEagle shareholders on a pre-merger closing basis. Additional disclosure has been added to address this.
7. We note your
disclosure that the merger agreement contains certain termination rights. Please briefly describe the termination rights.
Response: We
have revised the disclosure to describe the termination rights.
8. Please explain
how “a minimum of $4 million in new equity capital” has “pre-money valuation of between $16 million and $25 million.”
In addition, please explain how you plan to use the proceeds from the private placement.
Response: We have added disclosure
with respect to the amount and valuation of the $4 million funding, and the use of proceeds thereof. The pre-money valuation previously
described related to a price range in which the investor could invest its capital; however, since this term and others are yet
to be finalized, we have removed that confusing language.
9. We note that
you have provided the selected historical financial data of EnerJex Resources, Inc. on page 23. Please revise to also disclose
the selected historical financial data of AgEagle Aerial Systems, Inc., as required by Part 1A. Item 3(d) of Form S-4. Also, please
revise the pro forma information on page 24 to be consistent with the revised supplemental pro forma financial statements.
Response: We have
added selected historical financial data for AgEagle, and revised disclosure to make the pro-forma information consistent.
10. Please disclose
in this section the amount of the Series A Preferred Stock accrued dividend and additional number of shares you expect to issue
in satisfaction of this accrued dividend.
Response: We
have revised the disclosure to include the amount of accrued dividends and the amount of shares required to satisfy the accrued
dividend obligation.
11. Please
include risk factor disclosure regarding the going concern issues identified in the auditor’s reports for EnerJex and AgEagle.
Response: We
have added a risk factor about the going concern issues.
12. Please
disclose the percentage of stock that current officers and directors of EnerJex and current officers and directors of AgEagle will
own following the merger, respectively.
Response: We have
added the relevant ownership percentage information.
13. We note
your disclosure that you were required to submit a plan to NYSE American of the actions you intend to take to regain compliance
with the listing standards. Please disclose whether the exchange accepted your plan and what steps you are required to take to
regain compliance. Similarly, revise your disclosure on page 67.
Response: We
have updated the NYSE American disclosure in accordance with the Staff’s comment. The NYSE informed the Company on December
22, 2017 that it had accepted its plan of compliance, which the Company must complete by April 19, 2019.
14. We note
your disclosure here that after the merger Mr. Chilcott will own approximately 49% of EnerJex common stock. We also note your disclosure
on page 116 that Mr. Chilcott will own 56.4% of the EnerJex common stock. Please revise for consistency or advise.
Response: We have
revised Mr. Chilcott’s ownership percentages to make consistent, or to provide explanation of why ownership percentages are
different based on the calculation presented.
15. Please
revise this section to discuss in greater detail how and when AgEagle was identified as a potential transaction partner and which
party initiated discussions. Please clarify why the board determined to pursue the AgEagle transaction instead of the other alternatives
referenced in this section.
Response: We
have revised the background section in accordance with the Staff’s comment.
16. Please
describe how the parties arrived at the amount and type of merger consideration. In addition, please disclose the dates and participants
of important meetings related to the merger.
Response: We
have revised the merger background information in accordance with the Staff’s comments.
17. Please
refer to the second paragraph on page 44, including your reference to “discussions about a possible acquisition by merger
of a privately held company that operates an agricultural drone business and in which an affiliate of the holder of the Company’s
Series B Preferred Stock introduced and has an interest.” If such privately held company was AgEagle, please disclose the
affiliate of the holder of your Series B Preferred Stock who has an interest in AgEagle and introduced the parties.
Response: We
have revised this section to list the name requested.
18. Please
disclose the calculations that resulted in the Net Asset Value of EnerJex and AgEagle of 11.7% and 88.3%, respectively.
Response: We
have revised the disclosure to include the calculations used by Northland to arrive at the Net Asset Value of EnerJex and AgEagle.
19. If applicable,
please quantify any fees payable to Northland and its affiliates relating to any material relationship that existed in the last
two years between Northland and its affiliates and AgEagle and its affiliates. Refer to Item 1015(b)(4) of Regulation M-A.
Response: We
have revised the appropriate disclosure in accordance with the Staff’s comments.
20. We note
your disclosure here that you “may dispose of [your] principal assets.” On page 51, however, you state that at the
time of closing of the merger, “all consolidated assets of EnerJex will have been disposed of and the corresponding debt
and liabilities shall have either been extinguished or assigned to a third party.” We also note that your financial advisors
assumed in their valuation analysis that you will be a shell company at the time of the merger. Please revise your disclosure here
for consistency or advise.
Response: We
have revised the appropriate disclosure for consistency in accordance with the Staff’s comments.
21. We note
your reference to related party loans totaling $55,000 on pages 89 and 90. If required, please disclose these related party loans
in this section. Refer to Item 404 of Regulation S-K.
Response: We have revised the appropriate disclosure
in accordance with the Staff’s comments.
22. Please
disclose in this section the unsecured loan in the principal amount of $150,000 from an affiliate referenced on page 70.
Response: We
have revised the disclosure to include the $150,000 unsecured loan.
23. Please
disclose the agreement with Camber Energy, Inc. referenced on page 155. Refer to Item 404 of Regulation S-K.
Response: We
have revised the appropriate disclosure in accordance with the Staff’s comments.
24. Please
revise to clarify whether customers purchase FarmLens directly from Agribotix or through AgEagle.
Response: We
have revised the disclosure in accordance with the Staff’s comments.
25. We note
your discussion of the decrease in revenues for the nine months ended September 30, 2017, and your statement that due to the uncertainty
of new regulations from the FAA that were released, the launch of AgEagle’s sales of UAVs by Raven was delayed past the growing
season, resulting in lower sales. If you are referring to the FAA rules that went into effect in August 2016, please clarify how
this impacted sales in 2017.
Response: We have revised
the appropriate disclosure in accordance with the Staff’s comments.
26. We note
that this section includes several statements inapplicable to this merger transaction. For example, on page 91 you refer to “offering
circular,” and on page 92 you reference “units being offered in this offering.” You also state that “[you]
are currently pursuing this offering, in which [you] anticipate raising additional capital through the sale of [your] securities.”
Please revise.
Response: We have revised
the disclosure in accordance with the Staff’s comments.
27. We note
your disclosure regarding an exclusive worldwide distribution agreement with Raven. On page 37, however, you refer to a non-exclusive
distribution agreement with Raven. Please revise throughout your filing for consistency. We also note your statement that to maintain
its exclusivity as a distributor, Raven is expected to attain certain sales thresholds. Please disclose these thresholds, or tell
us why they are not material.
Response: We have revised the disclosure
in accordance with the Staff’s comments. The thresholds are no longer material as the agreement has been made non-exclusive
by agreement of the parties.
28. Please
revise here and throughout your filing (including the notice to shareholders on page 3) to clarify the matters for which you are
seeking shareholder approval under Proposal 1. For example, clarify whether you are seeking shareholder approval of the merger
agreement, and if not, whether such approval is required. Please also clarify the “transactions contemplated” by the
merger for which you seek approval as described under Proposal 1 in the notice to shareholders on page 3.
Response: We
have revised the information on proposal 1 in accordance with the Staff’s comment.
29. Similarly,
you describe Proposal 1 as seeking approval of “the issuance of shares to be issued in connection with a private placement
offering (which offering is a condition to closing of the Merger.)” In the notice to shareholders on page 3, you reference
seeking approval of “the issuance of EnerJex securities in connection with a private placement offering.” Please clarify
the EnerJex securities issuances for which you are seeking shareholder approval, and provide all information required by Item 11
and Item 13 of Schedule 14A.
Response: We
have revised the disclosure to indicate we are seeking approval for the issuance of common stock to the AgEagle stockholders and
issuance of securities on the private placement. The terms of the private placement have not been agreed to and we have disclosed
the terms as they are known to date. With respect to the reference to Item 11 and Item 13 of Schedule 14A, we believe such information
is contained in the S-4/Proposal as drafted.
30. Please
disclose the Exchange Ratio in this section, in the questions and answers on page 10, and on page 54 under “Merger Consideration.”
In addition, please explain how “any changes in the number of shares of outstanding capital stock of either EnerJex or AgEagle,
such as the awards to AgEagle advisor prior to the completion of the Merger,” would result in a change in the Exchange Ratio.
Response: We
have revised the disclosure to include the Exchange Ratio in