private void Form1_Load(object sender, System.EventArgs e)
{
    axSftDirectory1.OLEDropMode = SftControlOLEDropModeConstants.OLEDropSftControlManual;
    axSftDirectory1.AutoExpandDragDrop = true;
}

private void axSftDirectory1_OLEDragDrop(object sender, AxSftDirectoryLib25._ISftDirectoryEvents_OLEDragDropEvent e)
{
    // make sure the control doesn't perform its usual default handling of
    // the files (copy/move, etc.)
    e.defaultHandling = false;

    if (e.data.GetFormat((short) SftOLEClipboardConstants.sftCFFiles)) {
        for (int i = 0 ; i < e.data.Files.Count ; ++i) {
            MessageBox.Show("\"" + e.data.Files[i+1] + "\" being dropped.");
            // perform your own processing here
        }
    } else {
        // some other format
    }
}

private void axSftDirectory1_OLEDragOver(object sender, AxSftDirectoryLib25._ISftDirectoryEvents_OLEDragOverEvent e)
{
    // make sure the control doesn't perform its usual default handling of
    // the files (copy/move, etc.)
    e.defaultHandling = false;

    e.effect = 0;
    if (e.data.GetFormat((short) SftOLEClipboardConstants.sftCFFiles)) {
        if (e.folder != null) {
            // we'll accept anything
            e.effect = 3; //vbDropEffectCopy | vbDropEffectMove
        }
    }
}