Correspondence 0001654954-23-001290 from Royalty Management Holding Corp (RMCO)
Royalty Management Holding Corp
Date: Feb. 3, 2023 · CIK: 0001843656 · Accession: 0001654954-23-001290
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-268817
Referenced dates: January 12, 2023
Letter
Division of Corporation Finance Office of Real Estate and Construction American Acquisition Opportunity Inc. Registration Statement on Form S-4 Filed December 15, 2022 File No. 333-268817
Dear Mr. Holt and Mr. Gabor:
On behalf of our client, American Acquisition Opportunity Inc., a Delaware corporation (the “Company”), we submit to the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”) this letter setting forth the Company’s response to the comments contained in the Staff’s letter dated January 12, 2023 (the “Comment Letter”) regarding the Company’s Registration Statement on Form S-4 (the “Registration Statement”). Concurrent herewith, we are filing Amendment No. 1 to the Registration Statement reflecting the changes set forth below (the “Amended Registration Statement”). For ease of reference, we have reproduced the comments below in bold with our response following each comment.
Cover Page
1.
Please revise to disclose the post-business combination voting power of the sponsor and its affiliates.
RESPONSE: The Cover Page has been revised in accordance with the Staff’s comment as follows:
Assuming no redemptions of American Acquisition Opportunity Class A Common Stock, the sponsor and these affiliated parties would control 63.2% of the Combined Company. If the maximum number of shares are redeemed, these parties would control 66.5% of the Combined Company.
2.
Please tell us whether you will be deemed a “controlled company” as defined by the market on which you intend to list and, if so, whether you intend to rely on any exemptions as a controlled company. If applicable, please disclose on the prospectus cover page and in the prospectus summary that you are a controlled company, and include a risk factor that discusses the effect, risks and uncertainties of being designated a controlled company.
RESPONSE: The Company hereby informs the Staff that it will not be a “controlled company” as such term is defined by Nasdaq rules at there will not be any individual, group or company that has more than 50% of its voting power. The officers of the Company are not acting together as a group.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 2
Questions and Answers About the Business Combination, page 5
3.
Please add a question and answer that highlights the business combination consideration, including the relative equity ownership percentage split and any contingency consideration. Also, please include the post transaction equity value of the combined company and the value of equity to be issued to the Royalty shareholders.
RESPONSE: The existing Q&A entitled “What equity stake will current American Acquisition Opportunity’s stockholders and Royalty’s stockholders have in the Combined Company after the Closing?” on page 11 of Amendment No. 1 shows the relative equity ownership percentage split under various scenarios. The Company has also expanded the existing Q&A entitled “What are the possible sources and extent of dilution that holders of public shares who elect not to redeem their public shares will experience in connection with the Business Combination” on page 11 of Amendment No. 1 in response to the Staff’s Comment.
4.
Revise your disclosure to show the potential impact of redemptions on the per share value of the shares owned by non-redeeming shareholders by including a sensitivity analysis showing a range of redemption scenarios, including minimum, maximum and interim redemption levels.
RESPONSE: The Q&A entitled “What are the possible sources and extent of dilution that holders of public shares who elect not to redeem their public shares will experience in connection with the Business Combination” has been expanded on page 13 of Amendment No. 1 in response to the Staff’s comment.
5.
We note that certain shareholders agreed to waive their redemption rights. Please describe any consideration provided in exchange for this agreement.
RESPONSE: For the information of the Staff, in connection with the Company’s initial public offering, holders of our founders shares (Class B common stock) and directors and executive officers entered into a letter agreement with the Company and the underwriter for the Company’s initial public offering in which they agreed that they would not seek any redemption rights with respect to those shares. No consideration was given to those individuals for this agreement. The Company had previously entered into forward purchase agreements in connection with a meeting held in March 2022 to approve an amendment to extend the period of time in which it may complete an initial business combination. These agreements are no longer in effect.
6.
It appears that underwriting fees remain constant and are not adjusted based on redemptions. Revise your disclosure to disclose the effective underwriting fee on a percentage basis for shares at each redemption level presented in your sensitivity analysis related to dilution.
RESPONSE: Page 15 of Amendment No. 1 has been revised to add a Q&A showing the effective underwriting fee at each redemption scenario. For the Staff’s information, the underwriter in the Company’s IPO has agreed to take shares of stock in lieu of the deferred underwriting fee.
7.
Please revise your disclosures here, and elsewhere as appropriate, to quantify the number of shares that will have registration rights following the consummation of the Business Combination.
RESPONSE: Pages 26, 40, 61 and 76 in Amendment No. 1 have been revised in accordance with the Staff’s comment.
Q.
Did the American Acquisition Opportunity Board obtain a third-party valuation or fairness opinion..?, page 8
8.
Please revise to make clear, if true, that the independent third party valuation report did not pass upon the fairness of the business combination to the company's public stockholders. In this regard, we note your statement that "[t]he American Acquisition Board’s assessment [that the Business Combination was in the best interest of American Acquisition Opportunity’s stockholders] was subsequently confirmed by the independent third party valuation report," which suggests the report opined as to the fairness of the business combination.
RESPONSE: The Q&A has been revised in accordance with the Staff’s comment.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 3
Q.
What interests do American Acquisition Opportunity's current officers and directors have in the Business Combination?, page 11
9.
Please revise to clarify your statement that "two officers and three directors have ownership interests in and one officer and director positions with Royalty." Please also revise to make clear that Mr. Sauve, a director of the company, is the chief executive officer and chairman of Royalty Management Corporation and is anticipated to continue as chief executive officer and chairman of the combined company following the closing; and that Messrs. Ehlebracht and Hasler, directors of the company, are anticipated to continue as directors of the combined company following the closing.
RESPONSE: Pages 26, 40, 61 and 76 of Amendment No. 1 and elsewhere in the document have been clarified in accordance with the Staff’s comment.
Summary of the Proxy Statement/Prospectus, page 18
10.
Please revise the summary disclosure concerning Royalty to highlight the going concern determinations.
RESPONSE: The Summary has been revised in accordance with the Staff’s comment.
Interests of Certain Persons in the Business Combination, page 23
11.
Please quantify the aggregate dollar amount and describe the nature of what the sponsor and its affiliates have at risk that depends on completion of a business combination. Include the current value of securities held, loans extended, fees due, and out-of-pocket expenses for which the sponsor and its affiliates are awaiting reimbursement. Provide similar disclosure for the company’s officers and directors.
RESPONSE: Pages 26, 40, 61 and 76 and elsewhere in Amendment No. 1 where the Interests of Certain Persons are discussed have been revised in accordance with the Staff’s comment.
12.
Please revise here, and elsewhere as appropriate, to specify Mr. Sauve's interest in the business combination as a director of the company, chief executive officer and chairman of Royalty, and anticipated continuation as chief executive officer and chairman of the combined company following the closing.
RESPONSE: Pages 26, 40, 61 and 76 and elsewhere in Amendment No. 1 have been revised in accordance with the Staff’s comment.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 4
Summary of Risk Factors, page 24
13.
Please expand your disclosure in the risk factors section to address in detail each bulleted summary risk factor on page 24. As a non-exclusive example only, we note your summary risk factor regarding holdings in the mining industry. However, it does not appear that this risk is addressed in the risk factors section.
RESPONSE: Both the Summary of Risk Factors on page 27 of Amendment No. 1 and the Risk Factors have been revised in accordance with the Staff’s comment.
Risk Factors, page 28
14.
Please revise to address the risk that, because Royalty is a related party, there was a conflict of interest in determining whether Royalty was appropriate for your initial business combination.
RESPONSE: The Risk Factor on page 40 has been revised in accordance with the Staff’s comment.
15.
Please revise to address the risk that, because the company amended its charter to remove the requirement that a fairness opinion be obtained for a business combination with an affiliated entity, public stockholders are relying on the judgement of the board to determine whether the transaction is fair to the company from a financial point of view.
RESPONSE: The Risk Factor has been revised on page 41 of Amendment No. 1 in response to the Staff’s comment.
16.
We note your page 68 disclosure that the company amended its charter to remove the requirement that redemptions only be permitted if there would be at least $5,000,001 in net tangible assets after redemptions. Please revise your risk factors to clearly discuss the impact that the trust falling below $5,000,001 would have upon your listing on Nasdaq and discuss the consideration given to this possibility in your determination that this provision is no longer needed. Please provide clear disclosure that removal of this provision could result in your securities falling within the definition of penny stock and clearly discuss the risk to the company and investors if your securities were to fall within the definition of penny stock.
RESPONSE: A new Risk Factor has been added to page 42 of Amendment No. 1 in response to the Staff’s comment.
17.
Please revise to address the risk that the financial interests of your officers and directors may have influenced their decision to approve the business combination and to continue to pursue the business combination. As a non-exclusive example only, we note that your officers and directors own common stock and warrants of the company which will expire worthless in the event the business combination with Royalty or a business combination with another target is not effected in the required time period.
RESPONSE: A new Risk Factor has been added to page 41of Amendment No. 1 in response to the Staff’s Comment.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 5
18.
Please revise to address the risk that your officers and directors may have had financial incentives to enter into the business combination with Royalty. As an illustrative example only, to the extent your officers and directors are expected to continue to serve in such capacities with Royalty following the consummation of the business combination, they may have had financial incentives to enter into the business combination, including the ability to receive cash compensation or fees, stock options, or stock awards that the Royalty board of directors may determine to pay to its officers and/or directors following the closing of the business combination.
RESPONSE: Page 41 has been revised in accordance with the Staff’s comment.
19.
Please revise to address the risk that your officers, directors, and their affiliates may make a substantial profit on the shares of American Acquisition Opportunity that they own, even if Royalty's common stock subsequently declines in value or is unprofitable for public stockholders, and such interests may have influenced their decision to approve the business combination.
RESPONSE: A new Risk Factor has been added on page 40 of Amendment No. 1 in response to the Staff’s comment.
20.
Please disclose the material risks to unaffiliated investors presented by taking Royalty public through a merger rather than an underwritten offering. These risks could include, for example, the absence of due diligence conducted by an underwriter that would be subject to liability for any material misstatements or omissions in a registration statement.
RESPONSE: A new Risk Factor has been added on page 42 of Amendment No. 1 in response to the Staff’s comment.
Unaudited Pro Forma Condensed Statement of Operations for the Nine Months Ended
September 30, 2022, page 44
21.
The income statement amounts in the SPAC (historical) column on pages 44 to 46 do not agree to the income statement amounts on page F-23. Additionally, the OpCo (Historical) columns provided in the statements provided for the nine-month periods ended September 30, 2022 and the periods ended December 31, 2021 do not agree to the amounts in the financial statements provided elsewhere in the filing. Please revise accordingly in an amended filing or otherwise advise.
RESPONSE: The Pro Forma Tables have been corrected in accordance with the Staff’s comment.
Note 2 - Transaction Accounting Adjustments , page 52
22.
We note the adjustment described in Footnote (B) represents the additional issuance of convertible debt to a related party. Further, we note that the adjustment described in Footnote (C) converts such amount into shares of Royalty common stock at $6.50 per share. Please tell us how these adjustments relates to the de-spac transaction, including the purpose of the transactions, and the related parties involved.
RESPONSE: In accordance with the terms of the convertible debt agreement, in connection with the Business Combination, the remaining amounts due under the agreement will be advanced and converted into shares of Royalty common stock at the conversion price shown.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 6
23.
We note your adjustment described in Footnote (D). Please tell us how this adjustment relates to the de-spac transaction, the purpose of the transaction and whom the transaction is with. Include within your response why the shares issued in the transaction are issued at $9 per share.
RESPONSE: The shares were issued at $9.00 in accordance with the terms of the debt agreement.
Proposal No 1. - The Business Combination Proposal
Background of the Business Combination, page 61
24.
Please revise to make clear the basis on which "[t]he terms of the Business Combination are the result of arm’s length negot
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CORRESP
1
filename1.htm
amao_corresp.htm
Joan S. Guilfoyle
Senior Counsel
901 New York Avenue NW
3rd Floor East
Washington, DC 20001-4432
Direct 202.524.8467
Main 202.618.5000
Fax 202.618.5001
jguilfoyle@loeb.com
February 3, 2023
Benjamin Holt
Jeffrey Gabor
Division of Corporation Finance
Office of Real Estate and Construction
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
American Acquisition Opportunity Inc.
Registration Statement on Form S-4
Filed December 15, 2022
File No. 333-268817
Dear Mr. Holt and Mr. Gabor:
On behalf of our client, American Acquisition Opportunity Inc., a Delaware corporation (the “Company”), we submit to the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”) this letter setting forth the Company’s response to the comments contained in the Staff’s letter dated January 12, 2023 (the “Comment Letter”) regarding the Company’s Registration Statement on Form S-4 (the “Registration Statement”). Concurrent herewith, we are filing Amendment No. 1 to the Registration Statement reflecting the changes set forth below (the “Amended Registration Statement”). For ease of reference, we have reproduced the comments below in bold with our response following each comment.
Cover Page
1.
Please revise to disclose the post-business combination voting power of the sponsor and its affiliates.
RESPONSE: The Cover Page has been revised in accordance with the Staff’s comment as follows:
Assuming no redemptions of American Acquisition Opportunity Class A Common Stock, the sponsor and these affiliated parties would control 63.2% of the Combined Company. If the maximum number of shares are redeemed, these parties would control 66.5% of the Combined Company.
2.
Please tell us whether you will be deemed a “controlled company” as defined by the market on which you intend to list and, if so, whether you intend to rely on any exemptions as a controlled company. If applicable, please disclose on the prospectus cover page and in the prospectus summary that you are a controlled company, and include a risk factor that discusses the effect, risks and uncertainties of being designated a controlled company.
RESPONSE: The Company hereby informs the Staff that it will not be a “controlled company” as such term is defined by Nasdaq rules at there will not be any individual, group or company that has more than 50% of its voting power. The officers of the Company are not acting together as a group.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 2
Questions and Answers About the Business Combination, page 5
3.
Please add a question and answer that highlights the business combination consideration, including the relative equity ownership percentage split and any contingency consideration. Also, please include the post transaction equity value of the combined company and the value of equity to be issued to the Royalty shareholders.
RESPONSE: The existing Q&A entitled “What equity stake will current American Acquisition Opportunity’s stockholders and Royalty’s stockholders have in the Combined Company after the Closing?” on page 11 of Amendment No. 1 shows the relative equity ownership percentage split under various scenarios. The Company has also expanded the existing Q&A entitled “What are the possible sources and extent of dilution that holders of public shares who elect not to redeem their public shares will experience in connection with the Business Combination” on page 11 of Amendment No. 1 in response to the Staff’s Comment.
4.
Revise your disclosure to show the potential impact of redemptions on the per share value of the shares owned by non-redeeming shareholders by including a sensitivity analysis showing a range of redemption scenarios, including minimum, maximum and interim redemption levels.
RESPONSE: The Q&A entitled “What are the possible sources and extent of dilution that holders of public shares who elect not to redeem their public shares will experience in connection with the Business Combination” has been expanded on page 13 of Amendment No. 1 in response to the Staff’s comment.
5.
We note that certain shareholders agreed to waive their redemption rights. Please describe any consideration provided in exchange for this agreement.
RESPONSE: For the information of the Staff, in connection with the Company’s initial public offering, holders of our founders shares (Class B common stock) and directors and executive officers entered into a letter agreement with the Company and the underwriter for the Company’s initial public offering in which they agreed that they would not seek any redemption rights with respect to those shares. No consideration was given to those individuals for this agreement. The Company had previously entered into forward purchase agreements in connection with a meeting held in March 2022 to approve an amendment to extend the period of time in which it may complete an initial business combination. These agreements are no longer in effect.
6.
It appears that underwriting fees remain constant and are not adjusted based on redemptions. Revise your disclosure to disclose the effective underwriting fee on a percentage basis for shares at each redemption level presented in your sensitivity analysis related to dilution.
RESPONSE: Page 15 of Amendment No. 1 has been revised to add a Q&A showing the effective underwriting fee at each redemption scenario. For the Staff’s information, the underwriter in the Company’s IPO has agreed to take shares of stock in lieu of the deferred underwriting fee.
7.
Please revise your disclosures here, and elsewhere as appropriate, to quantify the number of shares that will have registration rights following the consummation of the Business Combination.
RESPONSE: Pages 26, 40, 61 and 76 in Amendment No. 1 have been revised in accordance with the Staff’s comment.
Q.
Did the American Acquisition Opportunity Board obtain a third-party valuation or fairness opinion..?, page 8
8.
Please revise to make clear, if true, that the independent third party valuation report did not pass upon the fairness of the business combination to the company's public stockholders. In this regard, we note your statement that "[t]he American Acquisition Board’s assessment [that the Business Combination was in the best interest of American Acquisition Opportunity’s stockholders] was subsequently confirmed by the independent third party valuation report," which suggests the report opined as to the fairness of the business combination.
RESPONSE: The Q&A has been revised in accordance with the Staff’s comment.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 3
Q.
What interests do American Acquisition Opportunity's current officers and directors have in the Business Combination?, page 11
9.
Please revise to clarify your statement that "two officers and three directors have ownership interests in and one officer and director positions with Royalty." Please also revise to make clear that Mr. Sauve, a director of the company, is the chief executive officer and chairman of Royalty Management Corporation and is anticipated to continue as chief executive officer and chairman of the combined company following the closing; and that Messrs. Ehlebracht and Hasler, directors of the company, are anticipated to continue as directors of the combined company following the closing.
RESPONSE: Pages 26, 40, 61 and 76 of Amendment No. 1 and elsewhere in the document have been clarified in accordance with the Staff’s comment.
Summary of the Proxy Statement/Prospectus, page 18
10.
Please revise the summary disclosure concerning Royalty to highlight the going concern determinations.
RESPONSE: The Summary has been revised in accordance with the Staff’s comment.
Interests of Certain Persons in the Business Combination, page 23
11.
Please quantify the aggregate dollar amount and describe the nature of what the sponsor and its affiliates have at risk that depends on completion of a business combination. Include the current value of securities held, loans extended, fees due, and out-of-pocket expenses for which the sponsor and its affiliates are awaiting reimbursement. Provide similar disclosure for the company’s officers and directors.
RESPONSE: Pages 26, 40, 61 and 76 and elsewhere in Amendment No. 1 where the Interests of Certain Persons are discussed have been revised in accordance with the Staff’s comment.
12.
Please revise here, and elsewhere as appropriate, to specify Mr. Sauve's interest in the business combination as a director of the company, chief executive officer and chairman of Royalty, and anticipated continuation as chief executive officer and chairman of the combined company following the closing.
RESPONSE: Pages 26, 40, 61 and 76 and elsewhere in Amendment No. 1 have been revised in accordance with the Staff’s comment.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 4
Summary of Risk Factors, page 24
13.
Please expand your disclosure in the risk factors section to address in detail each bulleted summary risk factor on page 24. As a non-exclusive example only, we note your summary risk factor regarding holdings in the mining industry. However, it does not appear that this risk is addressed in the risk factors section.
RESPONSE: Both the Summary of Risk Factors on page 27 of Amendment No. 1 and the Risk Factors have been revised in accordance with the Staff’s comment.
Risk Factors, page 28
14.
Please revise to address the risk that, because Royalty is a related party, there was a conflict of interest in determining whether Royalty was appropriate for your initial business combination.
RESPONSE: The Risk Factor on page 40 has been revised in accordance with the Staff’s comment.
15.
Please revise to address the risk that, because the company amended its charter to remove the requirement that a fairness opinion be obtained for a business combination with an affiliated entity, public stockholders are relying on the judgement of the board to determine whether the transaction is fair to the company from a financial point of view.
RESPONSE: The Risk Factor has been revised on page 41 of Amendment No. 1 in response to the Staff’s comment.
16.
We note your page 68 disclosure that the company amended its charter to remove the requirement that redemptions only be permitted if there would be at least $5,000,001 in net tangible assets after redemptions. Please revise your risk factors to clearly discuss the impact that the trust falling below $5,000,001 would have upon your listing on Nasdaq and discuss the consideration given to this possibility in your determination that this provision is no longer needed. Please provide clear disclosure that removal of this provision could result in your securities falling within the definition of penny stock and clearly discuss the risk to the company and investors if your securities were to fall within the definition of penny stock.
RESPONSE: A new Risk Factor has been added to page 42 of Amendment No. 1 in response to the Staff’s comment.
17.
Please revise to address the risk that the financial interests of your officers and directors may have influenced their decision to approve the business combination and to continue to pursue the business combination. As a non-exclusive example only, we note that your officers and directors own common stock and warrants of the company which will expire worthless in the event the business combination with Royalty or a business combination with another target is not effected in the required time period.
RESPONSE: A new Risk Factor has been added to page 41of Amendment No. 1 in response to the Staff’s Comment.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 5
18.
Please revise to address the risk that your officers and directors may have had financial incentives to enter into the business combination with Royalty. As an illustrative example only, to the extent your officers and directors are expected to continue to serve in such capacities with Royalty following the consummation of the business combination, they may have had financial incentives to enter into the business combination, including the ability to receive cash compensation or fees, stock options, or stock awards that the Royalty board of directors may determine to pay to its officers and/or directors following the closing of the business combination.
RESPONSE: Page 41 has been revised in accordance with the Staff’s comment.
19.
Please revise to address the risk that your officers, directors, and their affiliates may make a substantial profit on the shares of American Acquisition Opportunity that they own, even if Royalty's common stock subsequently declines in value or is unprofitable for public stockholders, and such interests may have influenced their decision to approve the business combination.
RESPONSE: A new Risk Factor has been added on page 40 of Amendment No. 1 in response to the Staff’s comment.
20.
Please disclose the material risks to unaffiliated investors presented by taking Royalty public through a merger rather than an underwritten offering. These risks could include, for example, the absence of due diligence conducted by an underwriter that would be subject to liability for any material misstatements or omissions in a registration statement.
RESPONSE: A new Risk Factor has been added on page 42 of Amendment No. 1 in response to the Staff’s comment.
Unaudited Pro Forma Condensed Statement of Operations for the Nine Months Ended
September 30, 2022, page 44
21.
The income statement amounts in the SPAC (historical) column on pages 44 to 46 do not agree to the income statement amounts on page F-23. Additionally, the OpCo (Historical) columns provided in the statements provided for the nine-month periods ended September 30, 2022 and the periods ended December 31, 2021 do not agree to the amounts in the financial statements provided elsewhere in the filing. Please revise accordingly in an amended filing or otherwise advise.
RESPONSE: The Pro Forma Tables have been corrected in accordance with the Staff’s comment.
Note 2 - Transaction Accounting Adjustments , page 52
22.
We note the adjustment described in Footnote (B) represents the additional issuance of convertible debt to a related party. Further, we note that the adjustment described in Footnote (C) converts such amount into shares of Royalty common stock at $6.50 per share. Please tell us how these adjustments relates to the de-spac transaction, including the purpose of the transactions, and the related parties involved.
RESPONSE: In accordance with the terms of the convertible debt agreement, in connection with the Business Combination, the remaining amounts due under the agreement will be advanced and converted into shares of Royalty common stock at the conversion price shown.
Benjamin Holt
Jeffrey Gabor
February 3, 2023
Page 6
23.
We note your adjustment described in Footnote (D). Please tell us how this adjustment relates to the de-spac transaction, the purpose of the transaction and whom the transaction is with. Include within your response why the shares issued in the transaction are issued at $9 per share.
RESPONSE: The shares were issued at $9.00 in accordance with the terms of the debt agreement.
Proposal No 1. - The Business Combination Proposal
Background of the Business Combination, page 61
24.
Please revise to make clear the basis on which "[t]he terms of the Business Combination are the result of arm’s length negot