June
21, 2017
VIA EDGAR
United
States Securities and Exchange Commission
Division
of Corporation Finance
100 F
Street, N.E.
Washington,
D.C. 20549
Attention:
Pamela Long, Assistant Director
RE:
Wrap
Technologies, Inc.
Amendment
No. 1 to Registration Statement on Form S-1
Dear
Ms. Long:
This
letter is submitted on behalf of Wrap Technologies, Inc. (the
“Company”) in
response to comments of the staff of the Office of Manufacturing
and Construction (the “Staff”) of the Securities and
Exchange Commission (the “Commission”) with respect to
Amendment No. 1 to the Company’s Company's Registration
Statement on Form S-1 (the “Registration Statement”), first
filed on April 17, 2017, as set forth in your letter, dated June
14, 2017 (the “Comment
Letter”) addressed to James A. Barnes, President and
Chief Financial Officer of the Company. Contemporaneously herewith,
the Company is filing pre-effective amendment No. 2 to the
Registration Statement (the “Amendment”) in response to the
Staff’s comments raised in the Comment Letter.
For
reference purposes, the Staff’s numbered comments have been
reproduced in bold herein, with responses immediately following
such comment. The responses provided herein are based upon
information provided to Disclosure Law Group by the
Company.
General
1.
Please
disclose the number of common shares you are registering in the
initial public offering.
Response
We are
registering 2,666,666 shares of common stock in the initial public
offering, for $1.50 per share. Disclosure has been added to the
Amendment in response to the Staff’s comment.
2.
We
note your response to comment two in our letter dated May 12, 2017.
Please revise the registration statement to comply with Rule 419 or
state prominently on the cover page of the prospectus that you are
not a blank check company and have no plans or intentions to engage
in a business combination following this offering.
Response
The
disclosure requested by the Staff in the comment above now appears
on the prospectus cover page of the Amendment.
Prospectus Cover Page
3.
We note that you have disclosed an offering price range. We presume
that you are omitting the final price of the offering pursuant to
Rule 430A of the Securities Act and that you file this information
in a form of prospectus filed with the Commission pursuant to Rule
424(b). Please clarify how you will proceed in this
regard.
Response
We
have added the final price of $1.50 per share in the Amendment, in
response to the Staff’s comment.
Business, page 23
MegaWest Merger, page 24
4.
Please disclose the nature of Petro River Oil Corp.’s
business in this section. We note the disclosure on page 6 of the
Alternate Prospectus.
Response
The
disclosure requested by the Staff in the comment above is included
in the Business section, beginning on page 23 of the
Amendment.
Related Party License and Royalties, page 28
5.
We note your response to comment 17 in our letter dated May 12,
2017. Please revise your disclosure to include the statement from
your response letter that Syzygy Licensing, L.L.C. has no ongoing
operations such as manufacturing.
Response
The disclosure requested by the Staff in the
comment above is included in the Business section of the Amendment,
under the heading “Related Party License and
Royalties” on page
28.
Alternate Prospectus
Alternate Pages; The Offering, page 4
6.
We note your response to comment ten in our letter dated May 12,
2017 Please revise your disclosure to state that Petro River is,
rather may be deemed, an underwriter.
Response
The disclosure requested by the Staff in the
comment above is included in the Alternate Pages to the Amendment,
in the section titled “The
Distribution,” under the
heading “Shares to be Distributed by
Petro River,” beginning
on page Alternate Prospectus - 7.
7.
We note your response to comment 11 in our letter dated May 12,
2017. In addition to the alternate prospectus registering all of
the shares of common stock of the registrant owned by Petro River
that are being distributed to the Petro River shareholders, the
alternate prospectus must also (1) register the resale of shares by
Petro River Oil Corp.’s shareholders, which should be at a
fixed price, (2) all of the Petro River Oil Corp.’s
shareholders who receive shares in the distribution must be
identified, and Item 507 of Regulation S-K disclosure must be
provided and (3) such shareholders must be named as underwriters.
In this regard, we refer you to Securities Act Rules Compliance
Disclosure & Interpretations 612.15 which can be found on our
website at
https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm.
Response
The
Company has reviewed the Staff’s comment, and requests
reconsideration of the Staff’s position, for the following
reasons, as discussed with the Staff on June 15, 2017.
Petro River’s Shareholders Shouldn’t be Considered
Underwriters.
The Company is registering the distribution of
shares previously issued by the Company to Petro River Oil Corp
(“Petro River”), and, as set forth above, Petro River has
agreed to be named as an underwriter. In this regard, Petro River
does not disagree that it falls within the definition of an
underwriter under Section 2(a)(11) of the Securities Act of 1933,
as amended (“Securities
Act”), since it arguably
received the shares from the Company with a view to distribution to
Petro River’s shareholders. As a result, the transaction
involving the distribution of shares by Petro River to its
shareholders, upon declaration of effectiveness of the registration
statement, will be registered under the Securities Act, and Petro
River will be named as the underwriter since it arguably received
the shares with a view towards their distribution, with attendant
liability under Section 11 of the Securities
Act.
Since
the registration statement intends to register the distribution of
the shares to Petro River’s shareholders, and Petro River is
named as an underwriter, the analysis then turns to the transaction
involving the offer and sale of shares received by Petro
River’s shareholders as a dividend, whether such transaction
requires registration, or whether an exemption therefrom is
available. If an exemption is available, then naming such
shareholders as an underwriter in the registration statement, as
suggested by the Staff, would not be required.
The
Company believes that Petro River’s shareholders should not
be required to register the offer and sale of shares received from
Petro River in a registered transaction, or otherwise be named as
an underwriter, since an exemption from registration is available
for the subsequent offer and sale of their shares in reliance of
Section 4(a)(1) of the Securities Act, which exempts a transaction
by a person other than an issuer, underwriter, or dealer. In this
regard, Petro River’s shareholders are not taking the
securities from the Company with a view to the distribution of such
shares, or even from an affiliate of the Company. Such shareholders
are receiving the shares as a dividend, and would rely on the
exemption for resales typically relied upon by shareholders
receiving shares in a registered transaction – Section
4(a)(1). As a result, Petro River’s shareholders should be
able to avail themselves of the “ordinary trading”
exemption typically available to shareholders receiving registered
shares, rather than being required to separately register such
transaction and be named as an underwriter – a requirement
that does not apply in ordinary broker transactions not involving
an underwriter. To hold otherwise would require a conclusion that
Petro River’s shareholders are receiving the shares from the
Company, rather than from the underwriter in a registered
transaction, with a view to their distribution in an unregistered
transaction, and that is simply not the case.
The CDI Cited by the Staff Should be Distinguished.
The
Staff cites Securities Act Compliance Disclosure &
Interpretation 612.15 (the “Interpretation”) in support of
its position that Petro River’s shareholders should be named
as underwriters and selling stockholders in the registration
statement. The Interpretation relies on a few facts that justify
the Staff’s position in such Interpretation, which facts can
be distinguished from those in the instant case, as
follows:
1. In contrast to the
parent company identified in the Interpretation, Petro River has
active operations, rather than “minimal
operations”;
2. Petro River did not
create the Company, with “no significant operations”
with the objective of spinning it off to its shareholders. To the
contrary, the Company is a company independent of Petro River, and
has a fully developed product and business plan;
3. Petro River was not
involved in the formation of the Company, nor was it involved in
its development;
4. In the transaction
that is the subject of the Interpretation, such transaction
involved a merger of the spun-off subsidiary after the creation of the subsidiary,
and spin-off. In the instant case, the merger of the Company with
and into Petro River’s subsidiary occurred before the
spin-off;
5. In contrast to the
parent company in the case of the Interpretation, Petro River is
not distributing 95% of the outstanding shares of the Company, but
rather only 2%; and
6. After the spin-off
and merger, insiders (or affiliates) of Petro River are not contemplating selling shares of
the Company that they receive in the spin-off, in contrast to the
insiders of the parent company in the case of the Interpretation,
which justifies requiring such insiders (affiliates) to be named as
underwriters, as the Staff concluded in such
Interpretation.
As a
result of the above analysis, the Company respectfully believes
that the Staff’s reliance on the Interpretation is misplaced,
as the facts in the instant case can be clearly distinguished.
Further, the facts in the instant case clearly support the fact
that Petro River’s shareholders are receiving the shares in a
registered transaction, and therefore should be entitled to rely on
Section 4(a)(1) to exempt any further offers and sales by such
shareholders in ordinary brokers transactions, without the
requirement under the Securities Act to separately register such
transactions and be named as an underwriter in any applicable
registration statement.
Undertakings
8.
Please disclose the undertakings required by Item 512(i) of
Regulation S-K.
Response
The
undertaking required by Item 512(i) of Regulation S-K is included
with the Company’s undertakings appearing under Item 17 of
the Amendment, beginning on page II-3.
* *
*
If you
have any questions or would like to discuss our response, please
contact the undersigned at (619) 795-7050.
Very
truly yours,
/s/ Daniel W. Rumsey
Daniel
W. Rumsey
Managing
Partner
Disclosure Law
Group, a Professional Corporation
cc: James A.
Barnes
President and Chief
Financial Officer
Wrap Technologies,
Inc.
