amao_corresp
|
Joan S. Guilfoyle
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
|
May 5,
2023
Benjamin
Holt
Jeffrey
Gabor
Shannon
Menjivar
Howard
Efron
Division
of Corporation Finance
Office
of Real Estate & Construction
U.S.
Securities and Exchange Commission
100 F
Street, N.E.
Washington,
D.C. 20549
Re:
American
Acquisition Opportunity Inc.
Amendment
No. 1 to Registration Statement on Form S-4
Filed
February 6, 2023
File No. 333-268817
Dear
Mr. Holt, Mr. Gabor, Ms. Menjivar, and Mr. Efron:
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 February 24, 2023 (the
“Comment
Letter”) regarding Amendment No. 1 to the
Company’s Registration Statement on Form S-4 ( the
“Amended Registration
Statement”). Concurrent herewith, we are filing
Amendment No. 2 to the Registration Statement reflecting the
changes set forth below (the “Second Amended Registration
Statement”). For ease of reference, we have reproduced
the comments below in bold with our response following each
comment. Please note that
the Second Amended Registration Statement also reflects updated
financial information for each of the parties for the fiscal year
ended December 31, 2022 as well as the impact of the redemptions
(where appropriate) in connection with the Company’s Special
Meeting of Stockholders held on March 21, 2023.
Amendment No. 1 to Registration Statement on Form S-4 filed
February 6, 2023
Questions and Answers About the Business Combination
Q. What matters will stockholders consider at the special meeting?
, page 6
1.
Please
revise to clarify whether you will be increasing the number of
authorized shares of Class A Common Stock.
RESPONSE: The Second Amended
Registration Statement has been revised to clarify that the number
of authorized shares of Class A Common Stock will not be
increased.
Q. What interests do American Acquisition Opportunity's current
officers and directors have in the Business Combination?, page
14
2.
We
note your response to comment 9. Please revise to reconcile your
disclosure regarding the shares of class A common stock to be
received and the exchange ratio. In this regard, as a non-exclusive
example, we note that your page 14 disclosure states that White
River Holdings LLC is expected to receive 2,922,290 shares of class
A common stock. However, Exhibit A of the merger agreement states
that White River Holdings LLC is expected to receive 2,862,897
shares. Additionally, we note that your page 14 disclosure states
that the approximate exchange ratio is 1.61. However, your page 59
disclosure states that the approximate exchange ratio is
1.77.
RESPONSE: The Company
acknowledges the Staff’s comment, and has updated the filing
accordingly here and elsewhere in the document to consistently
reflect the exchange ratio based on the estimated number of shares
of Royalty common stock anticipated to be outstanding. Please note
that because the merger consideration is a fixed number of shares,
the exchange ratio will decrease as the number of shares of Royalty
common stock that are outstanding increases. This is why the exchange ratio
disclosed in the Second Amended Registration Statement is less than
what was used in the exhibit to the Merger Agreement
Risk Factors
We may be subject to the Excise Tax included in the Inflation
Reduction Act of 2022..., page 43
3.
We
note your disclosure as to the potential effects of the stock
buyback excise tax enacted as part of the Inflation Reduction Act
in August 2022. If applicable, include in your disclosure
that the excise tax could reduce the trust account funds available
to pay redemptions or that are available to the combined company
following a de-SPAC.
Describe
the risks of the excise tax applying to redemptions in connection
with:
●
liquidations
that are not implemented to fall within the meaning of
“complete liquidation” in Section 331 of the Internal
Revenue Code,
●
extensions,
depending on the timing of the extension relative to when the SPAC
completes a de-SPAC or liquidates, and
●
de-SPACs,
depending on the structure of the de-SPAC transaction.
RESPONSE: For the information of the
Staff, the trust agreement would not permit the Company to use
trust funds to pay any excise tax to the extent a tax applied. We
respectfully ask the Staff reconsider the comment with respect to
the addition of any further disclosure in this Risk Factor as
requested by the three bullet points. The Company believes that the
disclosure requested by the first two bullet points is already
covered by the Risk Factor. With respect to third bullet point, the
Company believes that the Risk Factor should address the risks
associated with this business combination which does not involve a
structure that would give rise to the issue referenced in the last
bullet point.
Unaudited Pro Forma Condensed Statement of Operations for the Nine
Months Ended
September 30, 2022, page 49
4.
We
note your response to comment 21 and we continue to note what
appears to be a number of referencing and mathematical errors
within the Unaudited Pro Forma Condensed Statement of Operations
for the Nine Months Ended September 30, 2022 for each of the
redemption scenarios on pages 49 to 51. Please revise in an amended
filing.
RESPONSE: In accordance with the SEC
requirements, the pro forma income statement for the nine months
ended September 30, 2022 has been eliminated from this
filing.
Note 2 - Transaction Accounting Adjustments, page 57
5.
We
note your response to comment 22. Please tell us
how adjustments B and C relate to the de-SPAC transaction,
including the purpose of the transactions, and the related parties
involved and update your disclosure, as appropriate.
RESPONSE: The Company
acknowledges the Staff’s comment and has revised the pro
forma adjustments to only reflect the mandatory conversion of the
debt outstanding as of December 31, 2022 rather than the full
amount of the loan commitment.
6.
We
note your response to comment 23. Please tell us
how adjustment D relates to the de-SPAC transaction, the
purpose of the transaction and whom the transaction is with and
update your disclosure, as appropriate.
RESPONSE: The Company
acknowledges the Staff’s comment, and notes that adjustment D
is related to the transaction based on its mandatory conversion of
Royalty’s convertible debt upon the closing of the merger.
The Second Amended Registration Statement has been updated
accordingly.
Proposal No. 1 - The Business Combination Proposal
Background of the Business Combination, page 66
7.
We
note your response to comment 24. Please disclose, if true, whether
your Business Combination Agreement was made on terms equivalent to
those that prevail in arm’s length transactions.
RESPONSE: The Company acknowledges the
Staff’s comment, and directs the Staff to the first sentence
in the Background of the Business Combination section on page 63,
‘The terms of the Business Combination are the result of
arm’s length negotiations between representatives of American
Acquisition Opportunity and Royalty.”
8.
We
note your response to comment 30 and partially reissue the comment.
Please revise your disclosure in this section to clearly describe
how you formulated equity value of Royalty equal to $111,000,000.
Please also revise to clarify whether this valuation was subject to
any negotiation between the parties. In this regard, we note that
it is unclear how the parties arrived at a final valuation of
$111,000,000 after Royalty initially proposed a valuation of
$150,000,000. You state on page 69 that “[t]he merits of
lowering the valuation from initial discussions of $150,000,000 to
$111,000,000 were discussed….” However, you do not
specify what such merits were or the negotiation considerations
that may have resulted in changes to the valuation.
RESPONSE: The Company acknowledges the
Staff’s comment, and has updated the Second Amended
Registration Statement on page 66 accordingly.
9.
We
note your response to comments 31 and 65. Please tell us what
specific PCAOB guidance the auditor cited and explain to us why
such guidance precludes them from being able to be considered an
expert in this situation. We may have additional comments after
reviewing your response.
RESPONSE:
The Company acknowledges the Staff’s
comment, and clarifies that BF Borgers CPA PC, who serves as
the Company’s independent auditor, did not also serve as
independent CPA firm and valuation expert. The valuation work
performed was done by an independent CPA firm, Blue & Co., LLC
, within its valuation team comprised of business valuation
professionals. The reason that it cited was that that their insurer
would not permit a consent due to the provisions of AI 26:
Responsibilities Regarding Filings Under Federal Securities
Statutes: Auditing Interpretations of AS 4101. The engagement
letter signed with the independent CPA firm limited its scope to
use by the Company’s board of directors, and precluded the
use of the report in public offering documents. The Company was not
privy to any legal dialogue between the independent CPA firm and
its counsel.
10.
We
note your response to comment 33 and reissue the comment.
Please expand your background discussion to provide more detailed
disclosure regarding key business combination agreement negotiation
considerations and how they changed over time. Currently, the
background disclosure references drafts of, and discussions
regarding, the business combination agreement without providing
details or explaining the significance of material agreement terms
or how they may have changed before being reflected in the approved
business combination agreement. Please identify the original
terms, clarify discussion points, and explain how and why any terms
were revised over time.
RESPONSE: The disclosures in the
background section have been expanded in accordance with the
Staff’s comment including page 66 and page 70.
11.
We
note your response to comment 34. Please revise your
disclosure to include the substance provided in your response
letter.
RESPONSE: The disclosure on page 69 has
been revised in accordance with the Staff’s
comment.
American Acquisition Opportunity Board's Reasons for Approval of
the Business Combination,
page 73
12.
We
note your response to comment 38 and reissue the comment.
Please revise to reconcile your page 75 disclosure regarding public
company comparables. In this regard, we note your statement
that management selected five publicly traded royalty
companies. However, the graphic on page 75 appears to include
financial metrics for 12 companies. If the public company
comparables sample included companies that management did not
ultimately review and compare to Royalty, please explain why such
companies were excluded.
RESPONSE: The Company acknowledges
the Staff’s comment, and has updated the chart on page 72 of
Second Amended Registration Statement to include financial metrics
for the five publicly traded royalty companies. An incorrect chart
was erroneously included in the Amended Registration
Statement.
13.
We
note your response to comment 39 and reissue the comment.
Please revise to specify Royalty’s actual/projected
enterprise value to revenue and enterprise value to EBITDA for
2021, 2022, and 2023. It does not appear that the table has
been revised.
RESPONSE: The Company acknowledges the
Staff’s comment, and has updated page 72 of the Second
Amended Registration Statement accordingly.
14.
We
note your response to comment 42. Please revise your
disclosure to include the substance provided in your response
letter.
RESPONSE: The Company acknowledges the
Staff’s comment, and has updated page 70 of the Second
Amended Registration Statement accordingly.
Certain Royalty Projected Financial Information, page
76
15.
Please
provide your basis for presenting projections beyond three years
and why these projections are reasonable.
RESPONSE: The Company acknowledges the
Staff’s comment, and notes that the Company believes that its
use of five years of projections is reasonable as many of the
income streams are unit-by-unit sales which could lead to
fluctuations but instead long term contracts which generate
revenue.
16.
Please
tell us and disclose whether the projections are in line with
historic operating trends. If they are not, please disclose
why the change in trends is appropriate and assumptions are
reasonable. Include within your revised disclosure factors or
contingencies that would affect such growth ultimately
materializing.
RESPONSE: The Company acknowledges the
Staff’s comment, and has updated the Second Amended
Registration Statement accordingly including additional disclosures
on page 70 and page 72.
17.
We
note your disclosure of the material assumptions used in the review
of the financial projections of Royalty on page 77. Please
expand your disclosure to provide more detail on these material
assumptions. Revise your disclosure to fully describe what
each line item in the projected financial information represents
and the material assumptions used to support the information
presented.
RESPONSE: The Company acknowledges the
Staff’s comment, and has updated the Second Amended
Registration Statement accordingly.
18.
Please
tell us the process undertaken to formulate the projections and
assumptions, the parties who participated in the preparation of the
projections, and how they were used. Also tell us when the
projections were prepared and whether or not the projections still
reflect management's views on future performance and/or what
consideration the board gave to obtaining updated projections or
that the projections cannot be relied upon.
RESPONSE: Royalty’s
management prepared the projections based upon the actual contract
terms, and anticipated contract terms for the royalty streams
included in the projections. The projections were completed during
the first quarter of 2022, and still reflect management’s
view on future performance including new opportunities and
investments made during 2022. American Acquisition
Opportunity’s board reviewed audited financial statements of
Royalty in lieu of requesting updated projections.
Information About Royalty, page 108
19.
We
note your response to comment 46. Please revise to describe
the material terms of each of Royalty’s resources and land
assets, including the following:
●
the
term of the FUB Mineral royalty agreement,
●
the
principal, interest rate, and term of the Ferrox Holdings
convertible note, and
●
the
term of the Sycamore Holdings land rental agreement and whether
rent is fixed or variable.
RESPONSE: The Company acknowledges the
Staff’s comment, and has updated page 107 of the Second
Amended Registration Statement accordingly.
Royalty Management Co. Management's Discussion and
Analysis
Liquidity and Capital Resources, page 113
20.
We
note your response to comment 48 and reissue the comment.
Please revise to more completely discuss Royalty's ability to
generate and obtain adequate amounts of cash, and its plans for
cash, in the next 12 months and separately beyond the next 12
months. Describe and analyze material cash requirements and
sources of cash from known contractual and other arrangements,
including the material terms of debt or note arrangements impacting
liquidity. In this regard, we note your financial statement
disclosure regarding investments in LLCs, notes receivable, and
convertible debt. Please refer to Item 303 of Regulation
S-K.
RESPONSE: The Company acknowledges the
Staff’s comment, and has updated page 113 of the Second
Amended Registration Statement accordingly.
Certain Royalty Relationships and Related Party Transactions, page
115
21.
We
note your response to comment 52. For the $2,000,000
convertible note issued to Westside Advisors LLC and the $250,000
convertible note issued to T Squared Partners LP, please revise to
disclose the largest aggregate amount of principal outstanding
during the period for which disclosure is provided, the amount
thereof outstanding as of the latest practicable date, the amount
of principal paid during the periods for which disclosure is
provided, the amount of interest paid during the period for which
disclosure is provided, and the rate or amount of interest payable
on the indebtedness.
RESPONSE: The Company acknowledges the
Staff’s comment, and has
updated the Second Amended Registration Statement
accordingly.
22.
We
note your response to comment 53 and reissue the comment.
Please revise to more fully explain how you determined the fair
value of the LBX Tokens. In this regard, we note that
your related party American Resources Corporation appears to hold
2,000,000 LBX Tokens to which it has assigned a fair value of
$0.
RESPONSE: The Company
acknowledges the Staff’s comment, and notes that the LBX
Token has been carried at $0 on Royalty’s balance
sheet. During 2022, it
was determined due to lack of market acceptance of the token that
the entire investment carries a value of $0 and was adjusted
accordingly.
Security Ownership of Certain Beneficial Owners and Management,
page 152
23.
Please
update the beneficial ownership table. In this regard, we
note your Definitive Proxy Statement on Schedule 14A filed
September 13, 2022 and Preliminary Proxy Statement on Schedule
14A filed February 17, 2023.
RESPONSE: The table has been revised in
accordance with the Staff’s comment.
24.
We
note your response to comment 55 and reissue the comment.
Please revise your tabular disclosure on page 153 to clarify where
beneficial ownership is held through a legal entity.
RESPONSE: The table has been revised in
response to the Staff’s comment.
Land Betterment Exchange (LBX), page F-48
25.
We
note your response to comments 53 and 58 and we reissue the
following elements of our prior comments for which we did not
locate a response and/or request further
clarification:
●
You
mention on page F-50 that the LBX tokens are based on the BEP20
framework.
Supplementally
share with us the basic nature of the BEP20 framework including,
but not limited to, if this framework is actively being used to
identify and transfer specific coins.
●
Tell
us your motivation and/or purpose for acquiring these tokens and
whether you have intent to invest in additional LBX tokens or other
crypto assets. In your response, specifically address why you were
motivated to acquire these tokens since you have disclosed on page
F-62 that there was no market for the LBX Token as of June 30, 2022
and further tell us if a market has been established subsequently
or when a market is anticipated to be established.
●
Tell
us how you account specifically for the convertible note in the
amount of $2 million and 76,924 warrants which were issued to
Westside Advisors LLC as disclosed on page 108. Additionally, help
us to understand whether or not you remain liable for the
convertible notes and the warrants irrespective of the fair value
of the LBX tokens. And, if this is the case, why is it appropriate
to present no liability or net zero the liability on your balance
sheet. Cite any accounting literature upon which you
rely.
●
Since
you have disclosed that there is no market for the LBX token as of
June 30, 2022, tell us why you feel it is appropriate to assign a
$2 million value to the LBX token as disclosed on page F-62. In
your response, please address your overall accounting policy for
tokens including how you account for the scenario where the fair
value of the token falls below the carrying value of the token.
Cite any accounting literature upon which you rely.
RESPONSE: The Company informs us that
BEP-20 is a Binance Smart Chain token standard that extends
Ethereum’s ERC-20 standard. BEP-20 defines a framework and a
set of rules that BSC-based tokens have to follow. BEP-20 is fully
compatible with both ERC-20 and Binance Chain BEP-2 token
standards.
These
tokens were acquired to help ensure positive environmental
stewardship and carbon offsets. No market has subsequently been
established, and Royalty does not plan to invest in other
tokens.
As
outlined in the Note 11 to the financial statement footnotes, and
on page 33 the note is being carried as a liability. All note legal
obligations are in force, and they are not subject to resets on
fair or carried value of the token.
During
2022, it was determined due to lack of market acceptance of the
token that the entire investment carries a value of $0 and was
adjusted accordingly.
Note 5 - Intangible Assets, page F-62
26.
We
note your response to comment 61. Please describe to us the
assets and liabilities that were acquired including
quantitative amounts and where such amounts are located in your
financial statements.
RESPONSE: The contract asset acquired
was a power contract with a utility company and $0 of liabilities
were assumed. This is described in Note 6 – Intangible Assets
of Royalty’s Financial Statements.
27.
We
note your response to comment 62 and reissue a portion of
the prior comment as we were unable to find that
information in your response. Please provide a supplemental
summary of your analysis for each indefinite-lived intangible
asset listed in your chart on page 62. Your summary should
highlight those factors that led you to conclude that there is
no foreseeable limit on the period of time over which each
indefinite-lived intangible asset listed in your chart is
expected to contribute to your cash flows.
RESPONSE: The Company’s
position that the intangible assets are indefinite-lived in nature
is based the Company’s belief that there are no legal,
regulatory, contractual, competitive or economic factors that limit
their useful life to Royalty. The Company’s determination was
not made based the potential infinite life of the contribution of
cash flow.
Exhibits
28.
We
note your response to comment 63. However, the exhibit index
continues to refer to the Form 8-K filed April 6, 2021, which does
not appear to include the company's amended and restated
certificate of incorporation. Please
revise.
Additionally,
please revise to include an active hyperlink to each of Exhibits
3.1, 3.3, and
3.4 and
an active link to Exhibit 10.17, as required by Item 601(a)(2) of
Regulation S-K.
RESPONSE: The Exhibit Index has been
revised to correct to the Form 8-K index and to add active links
for the referenced exhibits.
Please
do not hesitate to contact Mitchell Nussbaum at (212) 407-4159 or
Joan S. Guilfoyle at (202) 524-8567 at Loeb & Loeb LLP with any
questions or comments regarding this letter.
Sincerely,
Joan S.
Guilfoyle
Senior
Counsel