Mail Stop 0511
April
19,
2005
Cameron Fink, Chief Executive Officer
Gondwana Energy Ltd.
Suite 400-534 17th Avenue S W
Calgary Alberta, T2S 0B1 Canada
RE: Gondwana Energy Ltd. ("the company")
File No. 0-51203
Registration Statement on Form 10-SB
Filed March 14, 2005
Dear Mr. Fink:
We have reviewed your filing and have the following comments.
Where
indicated, we think you should revise your document in response to
these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is to
assist
you in your compliance with the applicable disclosure requirements
and to enhance the overall disclosure in your filing. We look
forward to working with you in these respects. We welcome any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. Inasmuch as the company is in the development stage with no
revenues, no customers, no contracts, no funds, one employee, it
could be considered a "blank check" company as defined by Rule 419
of
Regulation C. Please advise or revise as appropriate.
2. Please consider the circumstances under which the company`s
securities may be issued to management, promoters or their
affiliates
or associates, and amend or advise accordingly. We note the large
amount of authorized but unissued common stock, which may be
issued
without further shareholder approval or notice.
3. The current intent of promoters, management and principal
shareholders with respect to promoting other blank check or shell
entities should be disclosed with as much detail as possible.
4. A new section should be added describing any previous blank
check
offerings in which the company`s promoters and management (or
persons
engaged in management type activities) may have been involved.
The
discussion should include for each blank check offering, the date
of
the initial public offering, the file number, offering price,
aggregated dollar amount raised, purpose of the offering, any
mergers
or acquisitions that have occurred, dates of such transactions,
consideration given and received, and management`s subsequent
involvement in each company.
5. State whether this is a voluntary filing and disclose whether
the
company will voluntarily file periodic reports in the event its
obligation to file such reports is suspended under the Exchange
Act.
6. Include the Commission file number on the front cover of all
future amendments to this registration statement and on subsequent
Exchange Act periodic reports.
Item 1. Description of Business
7. Reference is made to Note 1 to the financial statements. It
would
appear that the information in the second paragraph should be
included up front in the description of business of the company.
Furthermore, please discuss the company`s "investment criteria".
8. Please explain "[W]e are a New Zealand focused exploration
stage
company..."
9. Since the company is not currently subject to reporting
obligations under the 1934 Act, it is not entitled to rely upon
the
"safe harbor" for forward looking statements provided under
Section
21E of the 1934 Act. Please revise the disclosure appropriately.
10. We note you propose to raise additional financing through the
sale of equity securities "during the fiscal year". Please expand
the discussion here or in the Management`s Discussion and Analysis
to
fully discuss the company`s financing plans, including
approximately
how much cash will need to be raised, the time frame contemplated,
and the offering proposed to the extent known at this time.
11. The statement "[W]e do not currently employ our sole officer
and
he devotes approximately 40% of his time to our business" is
noted.
Please expand to discuss the arrangement between Mr. Fink and the
company. If an employment agreement is entered into, this should
be
filed as an exhibit to the registration statement. See Item
601(b)
of Regulation S-B.
12. We further note "[O]ur officer and director devotes a
significant
amount of his time to other interests or competing businesses,
which
may conflict with our operations and business." Please discuss
the
nature of the other interests or businesses, and identify such
companies. Also, state Mr. Fink`s position or responsibility in
each
organization.
13. In the penultimate paragraph, you disclose that the company`s
activities have been limited to raising funds, conducting
preliminary
investigations into joint venture agreements, and reviewing
governmental gazettals. Please expand this discussion to provide
specificity regarding each activity. We may have further comment
upon the receipt of this information.
14. Further in that same paragraph, you state "[W]e intend to
derive
all of our revenue from a discovery of commercial quantities of
hydrocarbons." Please fully explain your plans in this regard.
We
may have further comment.
WE MAY BE UNABLE TO CONTINUE AS A GOING CONCERN
15. This section appears to be a risk factor and should be
relocated
to the Risk Factor section. Also, please update the working
capital
balance as of a more recent date.
NEW ZEALAND PETROLEUM EXPLORATION PERMITS
16. Explain how these requirements will directly affect the
company.
17. In the penultimate paragraph, please explain "[T]he Ministry
of
Economic Development also has the jurisdiction to unitize
producing
permits."
ENVIRONMENTAL REGULATION IN NEW ZEALAND
18. Briefly discuss how these requirements will specifically
affect
the company.
Risk Factors
We have a limited history of operations and our sole officer and
director spends only a portion of his time...
19. It appears that you have combined two risk factors. Please
discuss the risk associated with the company`s limited history of
operations and separately discuss the potential risk associated
with
your officer`s spending only a portion of his time on this
business.
We have incurred net losses since inception...
20. Please update the accumulated deficit as of a more recent
date.
Item 2. Plan of Operation
21. Please expand the initial paragraph to discuss in detail with
respect to joint venture agreements with existing permit holders
as
mentioned here. The status of any discussions, agreements or
understandings should be addressed in adequate detail.
22. Update the discussion in the second paragraph to state the
company`s working capital balances of cash and debt as of a more
recent date.
23. Reference is made to the third paragraph. Inasmuch as Mr.
Fink
is the sole employee, director and officer of the company at the
present time, the reference to "[W]e have agreed to pay him a
consulting fee of two thousand dollars a month starting April 1st.
2005..." is confusing. Please revise. If Mr. Fink has signed a
consulting agreement, this should be made clear, the agreement
filed
as an exhibit to the registration statement, and the material
terms
of such agreement outlined here.
24. Also, please make clear the source of funds for the $2,000 per
month considering the fact that the company has no funds coming in
now.
Item 3. Description of Property
25. Please disclose the lease terms agreed upon for the use of the
executive corporate office.
Item 5. Directors, Executive Officers, Promoters...
26. Please indicate whether any of the named companies are SEC
reporting companies.
Item 6. Executive Compensation
27. The disclosure in Note 4 to the financial statements is noted
with regard to the company`s president receiving $50,000 for
"future
services consideration" on April 2, 2004. Please clarify the
nature
of the services covered by this amount and the time period
involved.
We also note that "...shares were issued at an amount agreed upon
by
the Company and its President."
28. We note disclosure in the financial statements reflecting that
the company paid certain "deferred stock-based compensation" in
2003
and 2004 that is not reflected in the executive compensation
table.
We also note potentially conflicting disclosure in footnote 2(g)
to
the company`s financial statements. Please revise as appropriate.
Item 7. Certain Relationships and Related Transactions
29. Please discuss the material terms of the agreement with
International Resource Management Corp., disclose the business
reasons for entering into the agreement, and file such agreement
as
an exhibit to the registration statement.
30. Reference is made to Note 3 to the financial statements, part
b)
thereof. It would appear that this information should be included
in
the Related Transactions section, and the herein-referenced
"common
Director" be identified.
Transactions with Promoter
31. Confirm that Mr. Fink is the company`s only promoter.
Part II.
Item 1. Market Price of and Dividends...
Shareholder Matters
32. Please update the high and low bid information to include the
first quarter of 2005.
Item 3. Changes in and Disagreements with Accountants
33. It should be made clear if true that "our board of directors"
is
made up solely of one person, Mr. Fink.
Financial Statements
34. We note your disclosure on page 4 which states that your
officer
devotes approximately 40% of his time to your business, and is not
currently employed by you. Please tell us supplementally whether
any
amounts have been recorded in the financial statements relating to
the services provided by your officer(s), and approximately how
much
time has been incurred by such officer(s) on Company business.
Note
that all costs of doing business should be included in the
registrant`s financial statements, including expenses incurred on
its
behalf by its major shareholders. Where services are performed for
the Company by its major shareholders at no charge, we believe
that
the substance of such transactions is the payment of the Company`s
expenses through a capital contribution by the shareholder. See
Staff Accounting Bulletin Topics 1.B.1 and 5.T. Please revise the
financial statements to include such costs, or explain
supplementally
why you believe that no revisions are required.
35. Revise the statement of operations to reclassify interest
income
as other income instead of as revenue.
36. We note that you disclose other annual compensation of $50,000
in
2004 for Mr. O`Bryne, your former CEO. It does not appear that
such
compensation was recorded in the financial statements. Please
revise
the financial statements as appropriate to reflect this
compensation,
or tell us why you believe that no revisions are required. Please
also revise the presentation of the summary compensation table to
clearly describe what this compensation relates to.
Commitments and Contingencies Footnote
37. We note your disclosure regarding properties on Page 12.
Please
disclose any lease commitments relating to such properties in the
footnotes to the financial statements, or tell us why you believe
that no disclosure is required.
38. If it is at least reasonably possible that a loss contingency
(on
an individual basis or in aggregate) would have a material adverse
effect upon the financial statements taken as a whole, please
disclose the nature of the contingency (ies), management`s
assessment
of the effect upon the financial statements and an estimate of the
amount of loss in a note to the financial statements. If it is
probable that a material loss would be incurred, the loss should
be
accrued. Refer to SFAS 5 and revise as necessary.
Note 4 - Common Stock
39. We note your disclosure regarding the transaction in which
2,116,667 shares of common stock were issued to your President in
exchange for $12,700 in cash and future services valued at
$50,000.
In your disclosure, you state that deferred compensation relating
to
the future services is being charged to operations over the
estimated
restricted period of the shares. It appears that the transaction
was
valued based on the estimated fair value of the Company`s common
stock of $.03 per share. If this is the case, please revise your
disclosure to specifically state this. Otherwise, please revise
the
financial statements to reflect the fair value of the issued
shares.
Also, please tell us supplementally whether the shares are
actually
restricted in nature (as to the ownership rights themselves, not
as
to any resale restrictions). If there are such vesting
restrictions,
please revise the disclosure to state the vesting period. If the
shares are not subject to vesting provisions, we believe that it
would not be appropriate to record deferred compensation. Instead,
the full amount of the calculated compensation expense would be
recognized in the statement of operations on the date of issuance,
as
the sale of the stock below fair value would represent an award
for
past services, as described in paragraph 30 of FAS 123. Please
revise your financial statements and related disclosures
accordingly.
Lastly, please revise your disclosure under Item 6 - Summary
Compensation Table to reflect the compensation attributable to
this
transaction.
Note 6 - Subsequent Event
40. It is unclear from your disclosure whether this transaction
was
made with a related party. We note that the same transaction is
discussed on Page 15 under a related party caption. Please revise
your disclosure to clarify the nature of the related party
relationship, if any, with the entity from which the shares were
repurchased.
Signatures
41. The individual operating in the capacity of principal
financial
officer and principal accounting officer or controller should be
so
designated in accordance with the Form requirements. Please note
in
the amendment to be filed.
Closing Comments
We urge all persons who are responsible for the accuracy and
adequacy
of the disclosure in the filings reviewed by the staff to be
certain
that they have provided all information investors require. Since
the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that
* 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 in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; 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.
In addition, please be advised that the Division of Enforcement
has
access to all information you provide to the staff of the Division
of
Corporation Finance in our review of your filing or in response to
our comments on your filing.
As appropriate, please amend your registration statement in
response
to these comments. You may wish to provide us with marked copies
of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
You may contact Carlton Tartar at (202) 942-2847 if you have any
questions regarding the financial statements and related matters.
Please contact Janice McGuirk at (202) 942-1787 with any other
questions.
Sincerely,
John
Reynolds, Assistant Director
Office
of Emerging Growth Companies
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