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United States securities and exchange commission logo
March 17, 2023
Daniel Kimes
Chief Executive Officer
ROC Energy Acquisition Corp.
16400 Dallas Parkway
Dallas, TX 75248
Re: ROC Energy
Acquisition Corp.
Registration
Statement on Form S-4
Filed February 14,
2023
File No. 333-269763
Dear Daniel Kimes:
We have reviewed your 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 amending your registration
statement and providing the
requested information. 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 any amendment to your registration statement
and the information
you provide in response to these comments, we may have additional
comments.
Registration Statement on Form S-4 Filed February 14, 2023
Cover Page
1. You refer to a PIPE
Financing throughout the filing. Please expand your disclosure on the
cover page and
throughout the filing to provide the terms of the PIPE Financing and to
highlight material
differences in the terms and price of securities issued at the time of the
IPO as compared to the
PIPE Financing. Disclose if the SPAC s sponsors, directors,
officers, or their
affiliates will participate in the PIPE Financing. State whether or not the
consummation of a PIPE
Investment is a condition to the business combination or is
otherwise necessary for
the parties to complete the business combination.
2. Please disclose the
majority owner of Drilling Tools International Holdings, Inc. ("DTI")
and its percentage
ownership. Disclose whether DTI's majority owner will or could
control PubCo after the
business combination and whether PubCo could be a controlled
company for Nasdaq
purposes.
Daniel Kimes
ROC Energy Acquisition Corp.
March 17, 2023
Page 2
Questions and Answers about the Proposals for ROC Stockholders
Q: What conditions must be satisfied to complete the business combination?,
page 2
3. Please highlight the following conditions to the business combination:
the Minimum Cash Condition of $55 million;
ROC having at least $5,000,001 of net tangible assets;
redemption by ROC of less than 95% of the Public Shares; and
the approval for listing of PubCo s common stock on Nasdaq
subject only to official
notice of issuance thereof.
Q: Did the ROC Board obtain a third-party valuation or fairness opinion...?,
page 3
4. Please highlight that an owner of Energy Capital Solutions is a
limited partner in DTI's
majority shareholder, which means that this individual indirectly owns
DTI and could
benefit from the business combination. Discuss why ROC retained Energy
Capital
Solutions to provide the fairness opinion in light of this potential
conflict. Disclose the
conclusion of the fairness opinion and clarify that it opines on the
fairness of the
transaction to ROC, from a financial point of view, as opposed to only
those shareholders
unaffiliated with the Sponsor or its affiliates. File a consent from
Energy Capital Solutions
as an exhibit.
Q: What are the material U.S. federal income tax consequences of the business
combination to
DTI stockholders?, page 10
5. We note your representation here and beginning on page 125 that the
parties to the
Business Combination Agreement "intend" for the business combination
to be treated as a
reorganization within the meaning of Section 368(a) of the U.S.
Internal Revenue Code of
1986, as amended. Please revise your disclosure here and throughout to
provide counsel s
opinion for each material tax consequence, including whether the
business combination
will qualify as a reorganization. If the opinion is subject to
uncertainty, please (1) provide
an opinion that reflects the degree of uncertainty (e.g., "should" or
"more likely than not")
and explains the facts or circumstances giving rise to the
uncertainty, and (2) provide
disclosure of the possible alternative tax consequences including risk
factor and/or other
appropriate disclosure setting forth the risks of uncertain tax
treatment to investors. Please
refer to Item 601(b)(8) of Regulation S-K and Section III.A. of Staff
Legal Bulletin 19,
Legality and Tax Opinions in Registered Offerings.
Summary of the Proxy Statement/Prospectus/Consent Solicitation Statement, page
14
FirstName LastNameDaniel Kimes
6. Please summarize the material tax consequences and disclose whether any
federal or state
Comapany NameROC
regulatory Energy Acquisition
requirements Corp. with or approval obtained in
connection with
must be complied
March the
17, transaction.
2023 Page 2
FirstName LastName
Daniel Kimes
FirstName LastNameDaniel Kimes
ROC Energy Acquisition Corp.
Comapany
March NameROC Energy Acquisition Corp.
17, 2023
March3 17, 2023 Page 3
Page
FirstName LastName
The Merger Consideration, page 15
7. We note your discussion of the treatment of DTI securities upon the
consummation of the
Business Combination. Please provide a plain English description of
the different
treatment of various equity holders of DTI, how the type and amount of
consideration will
be determined, the source of the shares, and the total amount of cash
and shares payable as
consideration.
Ownership of PubCo After the Closing, page 21
8. We note that the DTI stockholders' ownership upon closing disclosed on
page 23 is not
the same as the amount disclosed on page 3. Please advise or revise.
Risk Factors
Risks Related to DTI
We depend on a relatively small number of customers..., page 34
9. We note your disclosure that DTI depends on a relatively small number
of customers in a
single industry. To add context to this disclosure, please revise to
disclose the number of
customers for each period presented.
We are an emerging growth company..., page 35
10. Please note that your election to take advantage of the extended
transition period under the
JOBS Act for complying with new or revised accounting standards is not
irrevocable.
Revise your disclosures throughout the filing accordingly. Refer to
Question 37 of the
FAQ on Title 1 of the JOBS Act.
The lack of availability of the tools we purchase..., page 36
11. We note your risk factor indicating that DTI cannot be confident
that all costs will return
to the lower levels experienced in prior years even as the rate of
inflation abates and that
DTI s business and results of operations may be adversely
affected by these rising
costs Please update this risk factor and your related discussion
in the MD&A section if
recent inflationary pressures have materially impacted DTI s
operations or business. In
this regard, identify the types of inflationary pressures DTI is
facing and the extent its
business has been affected.
The global outbreak of COVID-19..., page 39
12. We note your disclosure that DTI has experienced volatility in its
supply chain. Please
discuss whether supply chain disruptions materially affect your
outlook or business goals.
Specify whether these challenges have materially impacted your results
of operations or
capital resources and quantify, to the extent possible, how your
sales, profits, and/or
liquidity have been impacted.
Daniel Kimes
ROC Energy Acquisition Corp.
March 17, 2023
Page 4
Unaudited Pro Forma Condensed Combined Financial Information
1. Basis of Pro Forma Presentation, page 76
13. It appears that the ending cash balance under Scenario 2 is below the
Minimum Cash
Condition that is disclosed on page 16. Please advise and revise to
disclose the terms of
the Minimum Cash Condition in the pro forma financial information.
Also, tell us why
your pro forma financial information does not give effect to the PIPE
Financing and why
the PIPE Investors are not included in the ownership tables on page
77.
14. Your Maximum Redemption Scenario assumes that 15,312,099 shares of ROC
common
stock are redeemed. Tell us how you arrived at this amount. In this
regard, revise to
disclose whether this amount reflects the number of shares that would
be redeemed in
order to meet the minimum cash condition. If so, revise to disclose
what will happen if
more than 15,312,099 public shareholders elect to redeem their shares
such that you are
unable to meet the minimum cash condition. If the Merger will not be
consummated were
this to happen, revise to clearly indicate as such. Alternatively, to
the extent you can
choose to waive such conditions or you intend to obtain additional
financing to fund such
redemptions, please include a discussion regarding the impact on the
pro forma financials
or affected amounts within such financial statements should more than
15,312,099 public
shares are redeemed. Refer to Article 11-02(a)(10) of Regulation S-X
15. We note that the number of shares owned in the Maximum Redemption
table on page 77
does not foot. Please revise.
2. Accounting for the Business Combination, page 77
16. Please revise to disclose the expected ownership percentage for the
legacy stockholder of
DTI that will be the largest single stockholder of New DTI.
3. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of
September
30, 2022, page 78
17. Please disclose the amount of transaction costs for DTI and ROC
separately in pro forma
adjustment 3(b). Also, tell us more about the $2.4 million in costs in
adjustment 4(b),
explain how they were not direct and incremental to the business
combination and tell us
why they were included as a pro forma adjustment if they do not relate
to the business
combination.
18. Your pro forma adjustments 3(e) and 4(c) appear to suggest that the
business combination
would accelerate the vesting of DTI stock options. Please tell us how
this is consistent
with the disclosure on page 15 which appears to indicate that each
outstanding DTI option
FirstName LastNameDaniel Kimes
shall be converted into a PubCo option. We also note that adjustment
3(g) reflects the net
Comapany NameROC
exercise of DTI Energy Acquisition
stock options. Corp.
Please tell us your basis for assuming
that the exercise of
March these option
17, 2023 will
Page 4 occur.
FirstName LastName
Daniel Kimes
FirstName LastNameDaniel Kimes
ROC Energy Acquisition Corp.
Comapany
March NameROC Energy Acquisition Corp.
17, 2023
March5 17, 2023 Page 5
Page
FirstName LastName
4. Adjustments to Unaudited Pro Forma Condensed Combined Statement of
Operations, page 79
19. Tell us how you considered Rule11-02(b)(5)(i) of Regulation S-X when
concluding that
the tax effect of the pro forma adjustments is not necessary. In this
regard, we note that
the pro forma adjustments that depict the tax effect of the individual
pro forma
adjustments would be different from the tax treatment of the business
combination.
Proposal No. 1 - The Business Combination Proposal
Background of the Business Combination, page 94
20. Please expand your discussion of the background section to provide
more detail regarding
the key steps of the negotiations for the financing arrangements. For
example, disclose
details surrounding the PIPE transaction, and the
negotiation/marketing processes (e.g.,
who selected the potential PIPE investors; what relationships did the
PIPE investors have
to the SPAC, the sponsors, the target and its affiliates, and the
placement agent; and
how the terms of the PIPE transactions were determined). In addition,
please expand your
disclosure of the parties negotiations of the Business Combination
and related agreements
to discuss the specific, material terms proposed in the letters of
intent, drafts of the merger
agreement, and related transactions, the terms and conditions of the
final merger
agreement, the determination of the final structure of the proposed
transaction, and the
ultimate amount and form of consideration.
Target Management Projections, page 113
21. Please expand your disclosure to discuss the material assumptions and
limitations
underlying the financial projections.
Proposal No. 3 - The Charter Proposal, page 130
22. You indicate that, under the proposed charter, the company's shares of
common stock will
include Class A and Class B common stock; however, the proposed
charter set forth in
Annex B and the description of the proposed charter under Description
of Securities do
not indicate that there will be two classes of common stock. Please
advise.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of DTI
Results of Operations, page 147
23. We note that revenue increased in several product categories; however,
it appears that
there are other factors that offset these increases. You also disclose
that operating costs
were impacted by increased labor and material costs but do not
quantify the impact of
these factors. Where a material change is due to two or more factors,
including any
offsetting factors, revise to describe the underlying reasons for
these changes in both
quantitative and qualitative terms. Refer to Item 303(b) of Regulation
S-K.
Daniel Kimes
FirstName LastNameDaniel Kimes
ROC Energy Acquisition Corp.
Comapany
March NameROC Energy Acquisition Corp.
17, 2023
March6 17, 2023 Page 6
Page
FirstName LastName
Liquidity and Capital Resources, page 154
24. Please revise your discussion of operating activities to provide a
more substantive
analyses of the factors affecting your operating cash flows during the
periods presented. In
this regard, revise to describe the underlying changes resulting in
the working capital
adjustments. Your discussion should also address sources and uses of
cash as well as
material trends and uncertainties affecting cash flows. Refer to
Section IV of SEC
Release 33- 8350.
Information about DTI, page 162
25. Please disclose on what basis DTI is a leading oilfield services
company, a leading
provider of downhole tools, and the market leader in North
American land drilling and
in U.S. Gulf of Mexico deepwater drilling operation tools rentals. In
addition, disclose on
what basis Drill-N-Ream is the leading wellbore conditioning tool.
Information about ROC
Conflicts of Interest, page 192
26. Revise your conflicts of interest discussion to clearly disclose that
EarlyBirdCapital was
also the underwriter in ROC s initial public offering and was
granted 180,000
representative founder shares for nominal consideration. Also expand
your risk factor on
page 56 to address this conflict of interest.
Description of Securities, page 202
27. We note that the proposed charter will include an exclusive federal
forum provision for
actions arising under the Securities Act. State that there is
uncertainty as to whether a
court would enforce such provision. Also state that investors cannot
waive compliance
with the federal securities laws and the rules and regulations
thereunder. As set forth in
the proposed charter in Annex B, disclose that the exclusive state
forum provision in your
proposed charter does not apply to actions arising under the Exchange
Act. Please also
revise to include related risk factor disclosure and discuss how there
is a risk that your
exclusive forum provisions may result in increased costs for investors
to bring a claim in
the chosen forum.
Beneficial Ownership of Securities, page 209
28. We note that HHEP-Directional, LP is a beneficial owner of more than
5% of your voting
securities. Please update your beneficial ownership to reflect this.
Please also expand your
disclosure in the filing to clarify whether Hicks Equity Partners
holds a significant interest
in DTI, highlighting any affiliation with HHEP-Directional, LP.
Daniel Kimes
FirstName LastNameDaniel Kimes
ROC Energy Acquisition Corp.
Comapany
March NameROC Energy Acquisition Corp.
17, 2023
March7 17, 2023 Page 7
Page
FirstName LastName
Financial Statements (Unaudited) - Drilling Tools International Holdings, Inc.
Note 3 - Balance Sheet Details - Current Assets and Current Liabilities, page
F-16
29. We note that there has been a significant increase in the allowance
for obsolete inventory.
Please explain the reasons for this increase and tell us what
consideration was given to
disclosing in your discussion of operating costs in MD&A.
Financial Statements (Audited) - Drilling Tools International Holdings, Inc.
Note 1 - Summary of Significant Accounting Polices
Emerging Growth Company, page F-29
30. Revise to disclose, here and on page F-7, that as result of your
election to use
the extended transition period, your financial statements may not be
comparable to
companies that comply with public company effective dates.
Revenue Recognition, page F-30
31. We note that product revenue is typically recognized when the product
is made available
to the customer for pickup at the Company s shipping dock. Please
explain to us how you
determined that this is the point in which control has transferred to
your customer and
explain how you considered the factors in ASC 606-10-25-30.
Note 9 - Income Taxes, page F-43
32. Please revise to describe what is included in the "other" reconciling
item in your 2021
statutory income tax rate reconciliation. To the extent this
represents more than one
significant item, please revise to present each significant item on a
separate line. Refer to
Rule 4-08(h)(2) of Regulation S-X.
General
33. In response to a comment on your 2021 Form 10-K, you indicated that
your Sponsor is not
controlled by, and has no substantial ties with a non-U.S. person;
however, Alberto
Pontonio, a director of the company and member of your Sponsor is a
citizen of Italy and
the United States. Please also tell us whether anyone or any entity
associated with or
otherwise involved in the transaction, is, is controlled by, or has
substantial ties with a
non-U.S. person. If so, include risk factor disclosure that addresses
how this fact could
impact your ability to complete your initial business combination. For
instance, discuss
the risk to investors that you may not be able to complete an initial
business combination
with a U.S. target company should the transaction be subject to review
by a U.S.
government entity, such as the Committee on Foreign Investment in the
United States
(CFIUS), or ultimately prohibited. Further, disclose that the time
necessary for
government review of the transaction or a decision to prohibit the
transaction could
prevent you from completing an initial business combination and
require you to liquidate.
Disclose the consequences of liquidation to investors, such as the
losses of the investment
Daniel Kimes
ROC Energy Acquisition Corp.
March 17, 2023
Page 8
opportunity in a target company, any price appreciation in the combined
company, and the
rights, which would expire worthless.
34. We note that the Sponsor, directors, officers, advisors, or any of their
respective affiliates
may purchase public shares in privately negotiated transactions or in the
open market
either prior to or following the completion of the business combination,
and that such a
purchase could include a contractual acknowledgment that such stockholder
agrees not to
exercise its redemption rights and could include a contractual provision
that directs such
stockholder to vote such shares in a manner directed by the purchaser.
Please provide your
analysis on how any such purchases would comply with Rule 14e-5.
35. 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.
36. Please revise to disclose all possible sources and extent of dilution
that shareholders who
elect not to redeem their shares may experience in connection with the
business
combination. Provide disclosure of the impact of each significant source
of dilution,
including the amount of equity held by founders, convertible securities,
including rights
retained by redeeming shareholders, at each of the redemption levels
detailed in your
sensitivity analysis, including any needed assumptions.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Chen Chen, Staff Accountant, at (202) 551-7351 or
Christine Dietz,
Senior Staff Accountant, at (202) 551-3408 if you have questions regarding
comments on the
financial statements and related matters. Please contact Alexandra Barone,
Staff Attorney, at
(202) 551-8816 or Kathleen Krebs, Special Counsel, at (202) 551-3350 with any
other questions.
Sincerely,
FirstName LastNameDaniel Kimes
Division of
Corporation Finance
Comapany NameROC Energy Acquisition Corp.
Office of
Technology
March 17, 2023 Page 8
cc: Michael J. Blankenship
FirstName LastName