December 2, 2019
Julio Macedo
Manager
American Diversified Energy LLC
711 W. 17th Street, Suite D-5
Costa Mesa, CA 92627
Re: American Diversified Energy LLC
Amendment No. 3 to Offering Statement on Form 1-A
Filed November 5, 2019
File No. 024-10904
Dear Mr. Macedo:
We have reviewed your amended offering 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 offering 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 offering statement and the
information you
provide in response to these comments, we may have additional comments.
Form 1-A Amendment No. 3 filed November 5, 2019
Use of Proceeds, page 44
1. We refer you to the first sentence of the first paragraph. Please revise
the net proceeds of
$520,000 to be consistent with net proceeds of $1,600,000, as disclosed
in the table.
2. In footnote (5) you indicate "..construction beyond the Harbor District
Project has not
been specifically identified." However, disclosure on pages 86, 91 and
F-28 indicates you
have executed an agreement with Niles East Mobile Home Estates to
construct and
operate a solar energy facility and entered into three separate Option to
Purchase
Agreements, two in Florida and one in California. Furthermore, in the
Summary of the
Offering, page 3, you disclose you intend to use proceeds from this
Offering towards the
aforementioned projects. Please explain why you have not identified the
agreements here
Julio Macedo
American Diversified Energy LLC
December 2, 2019
Page 2
or revise your disclosure here to identify these projects and the
proceeds to be used
towards them. Refer to Item 6 of Form 1-A.
3. We refer you to footnote (6) wherein you disclose the $379,419
advanced to the Company
by Julio Macedo is reflected as Related Party Advances on the July 31,
2019 balance
sheet. We are unable to locate any related party advances on the July
31, 2019 balance
sheet. Additionally, you state "The portion, remaining unpaid is
$172,447 has been
repaid." It is unclear from your disclosure whether there remains a
portion unpaid or not.
Please revise to clarify. If unpaid, please explain where it is
recorded on the balance
sheet. If paid, explain why you have allocated the use of proceeds
towards the repayment.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General, page 89
4. We refer you to the fourth paragraph on page 90 where you disclose,
"Of the $2,000,000
Minimum Offering Amount, as discussed in the Use of Proceeds, supra,
there are net
proceeds of $520,000 which will be used to pay $500,000 for the
License Permit Fee and
$20,000." Please revise your disclosure to indicate there are net
proceeds of $1,600,000
and indicate how such proceeds will be used.
5. Again, we refer you to the fourth paragraph on page 90 where you
disclose "..the plan of
solar operations will be paid from the net proceeds of $1,600,000
investment in ADE
Crescent by Corvette, LLC." Please revise to indicate the plan of
solar operations will be
paid in part from the proceeds of the sale ADE Crescent and the
$1,600,000 in proceeds
from this Offering.
Results of Operations, page 91
6. Please revise to also discuss the nine months ended July 31, 2019 as
compared to the nine
months ended July 31, 2018.
Liquidity and Capital Resources, page 92
7. We note you disclose $1,542,781 in convertible notes, net of discounts
of $185,966, as of
July 31, 2019. Please explain the discrepancy with the $1,456,815, net
of discounts,
reported on your balance sheet or revise. Please also review your
reference on page 91 to
$1,626,250 in proceeds attributable to convertible notes payable as of
July 31, 2019 and
explain why the proceeds are less than the gross payable reported on the
July 31, 2019
balance sheet of $1,642,781 or revise.
FirstName LastNameJulio Macedo
8. We note you disclose the Company will need "significant capital in
excess of the
Comapany NameAmerican Diversified Energy LLC Please explain why this amount is
different
minimum Offering amount of $1.8 million."
than $1.6 million disclosed on the cover and page 44 or revise.
December 2, 2019 Page 2
FirstName LastName
Julio Macedo
FirstNameDiversified Energy LLC
American LastNameJulio Macedo
Comapany2, 2019
December NameAmerican Diversified Energy LLC
Page 3
December 2, 2019 Page 3
FirstName LastName
Compensation of Directors and Executive Officers , page 94
9. Please update your disclosure to include the amounts of your executive
compensation for
your fiscal year ended October 31, 2019. Refer to Item 11 of Offering
Circular of Form 1-
A.
Financial Statements, page F-1
10. We note in exchange for 75% interest in ADE Crescent you received
$2,000,000 from
Corvette LLC to be used towards the completion of construction of the
Harbor District
Solar Facility. After the $400,000 reimbursement to you for certain
expenses already
incurred, there remained $1,600,000. As disclosed on page 4 ,"Of the
$1,600,000, there
remains $975,941, and of that, $975,865 has been used to cover general
and
administrative expenses, and the repayment of a portion of the Related
Party Notes."
Please explain how the $975,865 is reflected in the financial
statements and support your
accounting and presentation.
Note 5 - Related party Transactions
Option to Purchase Compressed Natural Gas Stations - Pompano Beach, Florida,
page F-22
11. We note on July 30, 2018 you entered into an agreement with American
CNG
regarding Pompano Beach. Your disclosure indicates an option price of
$50,000, which
has "not" been paid. Disclosure elsewhere on pages 86 and 96 indicates
an option price of
$100,000 that has been paid. Please explain the inconsistency or
revise. Please explain
how you accounted for the option agreement and where it is reflected
in the financials.
Note 10 - Subsequent Events
Investment of Corvette, LLC in ADE Crescent City LLC and Summary of the Amended
Restated Operating Agreement of ADE Crescent City LLC, page F-26
12. Please explain how you accounted for the sale of the 75% interest in
ADE Crescent and
the 25% you retained, including whether you remained in control or
lost control. In doing
so, please support all amounts recorded in your July 31, 2019 balance
sheet and cash flow
statement. Please explain why it was appropriate to present your
investment net of
$472,855 in costs and the nature of such costs. If you concluded
control was lost, please
explain why no gain or loss was recorded upon derecognition. Your
response should be
detailed in supporting your accounting treatment, amounts recorded and
include the
guidance you relied on. Please also add disclosure that explains your
accounting
treatment and financial statement activity.
13. Please explain your accounting basis for recording a negative carrying
amount for your
equity method investment as of July 31, 2019, and why you have not
recorded your share
of earnings or losses on the income statement. Reference is made to
ASC 323-10-35-20.
14. Rule 8-03(b)(3) of Regulation S-X requires the disclosure of sales,
gross profit, net
income (loss) from continuing operations, net income, and net income
attributable to the
Julio Macedo
American Diversified Energy LLC
December 2, 2019
Page 4
investee for equity investees that constitute 20 percent or more of a
registrant's
consolidated assets, equity or income from continuing operations
attributable to the
registrant. Please revise to provide such applicable disclosure for your
investment in ADE
Crescent or explain in detail why such disclosure is not required.
Exhibit 11.1, Consent of dbbmckennon, page III-1
15. We note your consent omits a reference to the balance sheet. Please have
your
auditor revise the consent to include such a reference.
You may contact Scott Stringer at (202) 551-3272 or Adam Phippen at
(202) 551-3336 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Daniel Morris at (202) 551-3314 or Mara Ransom at (202) 551-3264 with
any other
questions.
Sincerely,
FirstName LastNameJulio Macedo
Division of
Corporation Finance
Comapany NameAmerican Diversified Energy LLC
Office of Trade &
Services
December 2, 2019 Page 4
cc: Kristin Cano, Esq.
FirstName LastName