Mail Stop 6010
December 22, 2005
VIA U.S. MAIL AND FAX (651) 452-4948
Mr. John J. Jungbauer
Vice President, Finance and Chief Financial Officer
MedicalCV, Inc.
9725 South Robert Trail
Inver Grove Heights, Minnesota 55077
Re: MedicalCV, Inc.
Form 10-KSB for the year ended April 30, 2005
Filed July 21, 2005
File No. 000-33295
Dear Mr. Jungbauer:
We have reviewed your response dated December 7, 2005 and
have
the following comments. We have limited our review to only your
financial statements and related disclosures and will make no
further
review of your documents. In our comments, we asked 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 comment or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-KSB for the Fiscal Year Ended April 30, 2005
Financial Statements, page 40
Note 9. Shareholders` Equity (Deficit), page 56
Preferred Stock, page 57
1. Please refer to prior comment 1 from our November 4, 2005
letter.
We note that the preferred stock includes the following redemption
provisions:
* In the event of a change in control transaction, the preferred
shareholders may elect to either participate in the transaction on
an
as-converted basis or to require the acquirer to redeem the shares
for their stated value plus any accrued and unpaid dividends.
* If such a change in control occurs at any time that the company
is
not in compliance with certain conditions (primarily maintenance
of
adequate authorized and registered shares), the shareholders may
require the acquirer to redeem the shares for 110% of their stated
value plus accrued but unpaid dividends (a change in control while
in
default). If this occurs, the preferred shareholders have the
right
to measure the value of this redemption based upon the as-
converted
value of the preferred shares or at the stated value plus accrued
interest, whichever is greater.
* The preferred shareholders also have the right to require the
company to redeem the shares for 100% of their stated value in the
event that the company defaults under the terms of the preferred
stock and related agreements.
Please tell us your consideration of SFAS 133, including
paragraphs
11(a) and 61(e), and EITF 00-19 with respect to the accounting for
the put options on the preferred stock.
2. With respect to your response to prior comment 1 from our
November
4, 2005 letter, we note that you would account for the price re-
set
feature, should it occur, under EITF Topic D-42, The Effect on the
Calculation of Earnings per Share for the Redemption or Induced
Conversion of Preferred Stock. Please consider whether Issue 7 of
EITF Topic 00-27 is the applicable accounting for this feature if
it
occurs. If not, please consider the extent to which your
disclosure
should be modified to explain the redemption feature associated
with
the price re-set feature.
3. Please refer to prior comment 2 from our November 4, 2005
letter.
Please note that it is generally not appropriate to split the
components of a derivative into different line items on the income
statement. Please refer to the December 1, 2005, Current
Accounting
and Disclosure Issues in the Division of Corporation Finance.
Please
revise future filings to comply, or tell us how you considered
this
guidance in your determination of the appropriate classification
for
the excess of the fair value of the warrant over the proceeds
received for the preferred stock. If you continue to believe
classifying this amount as interest expense is appropriate, then
please explain in more detail why you believe the excess fair
value
of the warrants represents the cost of obtaining funds for your
preferred stock (an equity host) and why the cost of obtaining
those
funds is properly classified as interest expense.
Form 10-QSB/A for the Quarterly Period Ended July 31, 2005
Financial Statements, page 3
Note 4. Earnings (Loss) Per Share, page 7
4. Please refer to our prior comment 6. We see that you filed an
amendment to your Form 10-QSB for the three months ended July 31,
2005 to correct dilutive loss per share from continuing
operations.
The nature of an error in previously issued financial statements
and
the effect of the correction on net income (loss) and net income
(loss) per share should be disclosed in the period in which the
error
was discovered and corrected. Please revise this Form 10-QSB/A to
disclose all information required by paragraph 37 of APB Opinion
20.
As appropriate, please respond to this comment within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please file
your cover letter on EDGAR as correspondence. Please understand
that
we may have additional comments after reviewing your responses to
our
comments.
You may contact Julie Sherman, Staff Accountant, at (202)
551-
3640, or me at (202) 551-3603 if you have questions. In this
regard,
do not hesitate to contact Angela Crane, Accounting Branch Chief,
at
(202) 551-3554.
Sincerely,
Jay Webb
Reviewing Accountant
Mr. John J. Jungbauer
MedicalCV, Inc.
December 22, 2005
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