August 28, 2013
via EDGAR
| Pamela Long Assistant Director U.S. Securities and Exchange Commission Division of Corporation Finance Washington, D.C. 205494631 |
| Re: | Ener-Core, Inc. Current Report on Form 8-K Filed July 10, 2013 File No. 333-173040 |
Dear Ms. Long:
On behalf of Ener-Core, Inc. (the “Company”), we are pleased to respond to Staff’s comments in its August 6, 2013 comment letter. The comments have been transcribed, with the Company’s response immediately below.
General
| 1. | Please advise whether you qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act. We note in particular that a Form S-1 filed by Inventtech, Inc. was declared effective on November 28, 2011, but it is unclear whether any sales of equity securities were made pursuant to this registration statement on or before December 8, 2011. Please advise. To the extent you qualify as an emerging growth company, please revise your Form 8-K accordingly. See Question 24 of the Jumpstart Our Business Startups Act Frequently Asked Questions. |
Response
The Company is not certain when any sales of equity securities were made pursuant to the referenced Registration Statement on Form S-1. In an abundance of caution, and even if the Company could qualify as an emerging growth company, it has chosen to forgo the benefits of such and not to be so labeled.
Pamela Long
August 28, 2013
Page 2
Entry into a Material Definitive Agreement, page 2
| 2. | Disclose that you were a shell company before the merger transaction. See Rule 12b-2 under the Exchange Act. |
Response
The Company’s disclosure has been revised to state that it had been a shell company before the merger transaction and, as a result of the completion of the Merger, it no longer is a shell company.
Completion of Acquisition or Disposition of Assets, page 2
| 3. | Please delete the reference to “Form 10-SB” as this form is no longer in use and smaller reporting companies must use the same forms as other SEC reporting companies. |
Response
The Company’s disclosure has been revised to substitute the reference “Form 10” to the prior reference of “Form 10-SB.”
Description of Business, page 2
| 4. | Disclose the specific factual basis for and the context of all your beliefs, estimates, and opinions. Note that you must have a reasonable basis for all projections, statistics, and assertions, or they should be removed from the filing. If you relied on a third party source for the information, disclose whether the source is publicly available, represents the most recently available data, and remains reliable. To expedite our review, please provide us copies of each source, marked clearly to highlight the portion or section that contains the information, and cross reference it to the appropriate location in the Form 8-K. |
Response
Certain aspects of the Company’s disclosure has been revised in response to Staff’s comment. Certain of the Company’s stated beliefs stem from its business experience prior and subsequent to the spin-off from FlexEnergy, Inc. Further, the Company is supplementally providing to Staff, with this response letter, a copy of two publications that specifically give support to such beliefs (Supplemental attachment no. 1 and supplemental attachment no. 2).
Pamela Long
August 28, 2013
Page 3
| 5. | To the extent material, please disclose the name(s) of any principal suppliers. Please also disclose whether you have entered into an agreement with any supplier, and, if so, tell us what consideration you have given to filing any agreement with a supplier as an exhibit to the Form 8-K. See Item 101(h)(4)(v) and Item 601(b)(10) of Regulation S-K. |
Response
The Company’s disclosure has been revised to provide the names of its current and prospective principal suppliers for the microturbines that are the material component of its products. Further, the Company has filed, in connection with the contemporaneously submitted request for confidentiality treatment, a redacted version of its agreement with Dresser-Rand a.s., as Exhibit 10.10.
Our Technology, page 4
| 6. | We note your reference to testing and verification of your technology as part of a U.S. Department of Defense demonstration program. Please clearly state whether you commissioned this testing. Please also explain the relationship, if any, of this testing to the contract you entered into with Southern Research Institute regarding the installation of an oxidizer demonstration unit and Flex power stations, as discussed on page 24. We note on page nine you state that you were a “subcontractor” to Southern Research Institute. Please disclose your relationship to SRI and clarify the involvement of the DoD in the testing and verification. |
Response
The Company’s disclosure has been revised to note that the Company did not commission the referenced testing, as well as to clarify the related disclosure as requested by Staff in both sections.
Sales, Marketing and Distribution, page 7
| 7. | We note your reference to a conditional purchase order from EECT Turbomachinery. Please disclose whether this is your only sale of the FP250 to date, and clarify whether the purchase order is binding. Please also disclose, to the extent material, the number of units covered by the purchase order and the pricing for the units. Please tell us what consideration you have given to filing the purchase order as an exhibit to the Form 8-K. See Item 601(b)(10) of Regulation S-K. |
Pamela Long
August 28, 2013
Page 4
Response:
The Company’s disclosure has been revised to note that the referenced sale was its first sale of an FP250, to clarify that the purchase order is binding, and that it is for one unit. The Company now notes the pricing for the unit in MD&A on page 26. Further, the Company has filed the purchase order and the related purchase order, letter of acknowledgment, and letter of credit as Exhibits 10.14, 10.14(a), 10.14(b), and 10.14(c), respectively.
Research and Development, page 8
| 8. | Disclose the amount spent during each of the last two fiscal years on research and development activities, and, if applicable, the extent to which the cost of the activities is borne directly by customers. See Item 101(h)(4)(x) of Regulation S-K. |
Response
The Company’s disclosure has been revised to note the amounts spent in each of the last two fiscal years on research and development activities and to note that none of such costs was borne by customers of the Company.
Current and Future Efforts, page 10
| 9. | We note that you are currently in “joint-development” with Dresser-Rand on the KG2-3GO. Please disclose whether you have entered into a joint-development agreement or similar agreement with Dresser-Rand, and file any such agreements as an exhibit to the registration statement. Please also disclose any material terms of such agreements. Finally, please revise your disclosure on page three under “Our Products” to clarify that the KG2-3GO is part of a joint development project with Dresser-Rand. |
Response
The Company’s disclosure has been revised to note, primarily on page 3, the relationship between it and Dresser-Rand, including the joint development relationship between the entities and that the KG2-3GO is a part of such project. Further, as noted above in the Company’s response to comment no. 5, it has filed, in connection with the contemporaneously submitted request for confidentiality treatment, a redacted version of its agreement with Dresser-Rand a.s., as Exhibit 10.10.
Pamela Long
August 28, 2013
Page 5
Intellectual Property Protection, page 10
| 10. | To the extent material, disclose the duration or term of the two patents that you have been granted. See Item 101(h)(4)(vii) of Regulation S-K. |
Response
The Company’s disclosure has been revised to note the duration or term of the two patents that it has been granted.
Government Regulation, page 10
| 11. | To the extent material, discuss the costs and effects of compliance with environmental laws. See Item 101(h)(4)(xi) of Regulation S-K. |
Response
The Company’s disclosure has been fully revised. Note that the costs and effects of compliance with environmental laws fall on potential customers of the Company and not on the Company itself. Those amounts to be incurred by the customers may be relatively large; however the scope and, calculations thereof will ultimately depend on ongoing changes to various governmental regulations and orders over which the Company, currently, has no control or material input.
Our future is dependent upon our ability to obtain additional financing…, page 12
| 12. | Disclose the known or estimated amount of additional financing that you will require to proceed with the manufacture and distribution of your products. |
Response
The Company’s disclosure has fully been revised in the first risk factor to respond to the comment.
A Note About Forward-Looking Statements, page 21
| 13. | Revise the disclosure to clarify whether you are eligible to rely on the safe harbor provision of the Private Litigation Reform Act of 1995 for forward looking statements. See Section 21E of the Exchange Act. Please provide us your analysis supporting your position. |
Pamela Long
August 28, 2013
Page 6
Response
Although the Company believes that it is eligible to rely on the safe harbor provision of the Private Litigation Reform Act of 1995 for forward looking statements, inasmuch as the Company is neither offering nor issuing its securities in connection with or through the use of the Current Report on Form 8-K, it has modified the disclosure to note that any forward-looking statements it may not be covered by the safe harbor provision of the Act.
Liquidity and Capital Resources, page 31
| 14. | Please revise this section to include a reasonably detailed discussion of your ability or inability to produce sufficient cash to support operations during the 12 month period after the date of the financial statements included in the Form 8-K. |
Response
The Company’s disclosure has fully been revised to respond to the comment.
Contractual Obligations, page 32
| 15. | We note your statement that you have “presented below” a summary of the most significant assumptions used in your determination of amounts presented in the tables. We are unable to locate these assumptions and tables. Please advise and revise accordingly. |
Response
The Company’s disclosure has fully been revised and expanded to respond to the comment.
Related Party Transactions, page 32
| 16. | We note your reference to Note 12 and Note 5 in your financial statements. These cross references appear to be incorrect. Please revise accordingly. Please also confirm that you have provided the disclosure required by Item 404(d) of Regulation S-K for any transaction with related persons since the beginning of your last fiscal year, or any currently proposed transaction, in which the amount involved exceeds one percent of the average of your total assets at year end for the last two completed fiscal years. We note that the relevant disclosure in your financial statements only covers the period after December 31, 2012. Please make similar revisions to your disclosure on page 39, or, in the alternative, delete the duplicative disclosure. |
Pamela Long
August 28, 2013
Page7
Response
The Company’s disclosure has fully been revised and expanded to respond to the comment.
| 17. | If applicable, provide disclosure relating to any promoter as required by Item 404(c) of Regulation S-K. |
Response
The Company does not believe that there is any applicable disclosure required.
Description of Property, page 33
| 18. | We note the disclosure that you have assumed one third of all liabilities under the lease agreement between FlexEnergy, Inc. and Meehan Holdings, LLC for your current facility. Please file the lease agreement and the agreement evidencing your assumption of one third of all liabilities under the lease agreement as exhibits to the Form 8-K, or tell us why you do not believe that you are required to do so. See Items 102 and 601(b)(10) of Regulation S-K. |
Response
As previously disclosed, the Company’s financial obligations stem from its spin-out from FlexEnergy, Inc., and not due to any direct relationship with Meehan Holdings, LLC, which does not views the Company or its wholly-owned subsidiary as being formally obligated under the lease. Accordingly, the Company has not modified its disclosure; however, the Company did file that lease as Exhibit 10.13 to its Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2013, which was incorporated by reference into this amended Current Report.
Directors and Executive Officers, page 35
| 19. | For each director or person nominated or chosen to become a director, discuss briefly the specific experience, qualifications, attributes, or skills that led to the conclusion that the person should serve as a director at the time that the disclosure is made in light of the company’s business and structure. See Item 401(e)(1) of Regulation S-K. |
Pamela Long
August 28, 2013
Page 8
Response
The Company’s disclosure has been revised and expanded to respond to the comment.
Executive Compensation, page 37
| 20. | Revise your disclosure to provide a narrative description of any material factors necessary to understand the information disclosed in the summary compensation table, including the material terms of each option award. See Item 402(o)(4) of Regulation S-K. |
Response
The Company has revised the footnotes to the summary compensation table and has added an introductory paragraph to the description of the extant employment agreements.
| 21. | Please provide the disclosure required by Item 402(p) of Regulation S-K. |
Response
The Company has added an option awards table at the bottom of page 38.
Unregistered Sales of Equity Securities, page 42
| 22. | State the value of the 45,692,103 shares of common stock issued by Ener-Core, Inc. to the holders of the common stock of Ener-Core Power, Inc. in exchange for their shares of common stock of Ener-Core Power, Inc. See Item 701(c) of Regulation S-K. |
Response
The Company’s disclosure has been revised and expanded to respond to the comment.
| 23. | Please include all securities sold by you within the past three years which were not registered under the Securities Act. We note, for example, your issuance of notes to various stockholders, as referenced in your financial statements. See Item 701 of Regulation S-K. |
Pamela Long
August 28, 2013
Page 9
Response
In the merger transaction, the pre-existing public company was the “legal acquirer” and the pre-existing operating company (Ener-Core Power, Inc., f/k/a Flex Power Generation, Inc.) was the “accounting acquirer.” As such, the historical financial statements of the resulting entity that are reported from and after the closing of the merger transaction are, to a large extent, the historical (and then-current) financial statements of the accounting acquirer; however, non-financial statement disclosures concerning the sales and issuances of securities are those of the legal acquirer, all of which disclosures were believed to have been made in the various Securities Act and Securities Exchange Act filings of the public company prior to the closing of the merger transaction.
Report of Independent Registered Public Accounting Firm, page F-3
| 24. | We note from your Item 4.01 disclosure that you engaged Kelly & Company as your auditors on July 1, 2013. We further note that the audit opinion included in your filing covering all periods presented is dated July 8, 2013. Please clarify for us if Kelly & Company was also the auditor of the predecessor, FlexEnergy. |
Response
Kelly & Company was not the auditor of FlexEnergy, Inc.
Exhibit 10.1
| 25. | Other than their captions, it appears that you did not file the schedules to Exhibit 10.1. Unlike Item 601(b)(2) of Regulation S-K, there is no provision in Item 601(b)(10) of Regulation S-K for omitting schedules. Please refile exhibit 10.1 with its schedules. |
Response
The Company refiled Exhibit 10.1 with the schedules as Exhibit 10.10 to its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013. Such filing has been incorporated by reference into the amended Current Report.
Pamela Long
August 28, 2013
Page 10
Exhibit 21.1
| 26. | Disclose the state or other jurisdiction of incorporation or organization of your subsidiary. See Item 601(b)(21)(i) of Regulation S-K. |
Response
Exhibit 21.1 now notes that the Company’s subsidiary, Ener-Core Power, Inc., is a Delaware corporation.
The Company believes that it has fully responded to Staff’s comments. If Staff should have any further comments in respect of this Amended Current Report, please contact the Company and the undersigned.
Pamela Long
August 28, 2013
Page11
Thank you for your courtesy and cooperation in this matter.
Very truly yours,
/S/ Randolf W. Katz
Randolf W. Katz
RWK/dlp
Encls, as noted
On behalf of Ener-Core, Inc., the following acknowledgments are made:
| · | The Company is responsible for the adequacy and accuracy of the disclosure in the filings; |
| · | Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filings; and |
| · | The Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
ENER-CORE, INC.
| By: | /S/ Alain Castro | |
| Alain J. Castro, Chief Executive Officer |
