Mail Stop 3561 January 13, 2006
David Nunn, President
Fortune Oil & Gas, Inc.
305-1657 Martin Drive White Rock, British Columbia
Canada V4A-6E7
Re: Fortune Oil & Gas, Inc.
Amendment No. 2 to Form 10-SB
Filed December 22, 2005
Form 10-Q for the Fiscal Quarter Ended September 30,
2005
Filed November 16, 2005
File No. 0-51484
Dear Mr. Nunn:
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.
Please feel free to call us at the telephone numbers listed at the
end of this letter.
Amendment No. 2 to Form 10-SB
Item 2. Management`s Discussion of Analysis or Plan of Operation,
page 18
Liquidity and Capital Resources, page 28
1. We note your response to comment 5 of our letter dated November
3,
2005. You have indicated that you expect to have sufficient
liquidity to meet cash requirements in the near term. Please
clarify
such statements to specify whether your cash requirements include
your substantial short-term obligations that exist as of September
30, 2005. In this regard, we note that Camar Resources Canada,
Inc.
("CRC") has been paying such obligations on your behalf. Please
also
discuss the expected impact of your ongoing dispute with CRC as it
relates to lost production and your expected cash flows from the
joint venture. Further, please discuss your ability to raise
additional capital in the event of continuing delays in oil
production from the joint venture.
Note 3. Summary of Significant Accounting Policies, page F-8
2. Please tell us if you recognized a pro-rata portion of your
cumulative translation adjustments in measuring the gain on sale
of
your investment in Bawean PSC. Please refer to paragraph 14 of
SFAS
52 and FIN 37.
3. We note that your calculation of diluted shares outstanding
includes all 2.8 million options that were outstanding as of
September 30, 2005. The dilutive effect of outstanding options
should be reflected in diluted EPS by application of the treasury
stock method. Refer to paragraph 17 of SFAS 128. Please revise
or
advise.
Note 8. Sale of Oil Rights, page F-16
4. We have reviewed your response to comment number 8 of our
letter
dated November 3, 2005 along with your revised disclosures
included
in Notes 8, 12, and 16 of your Consolidated Financial Statements.
It
appears that CRC has filed a claim seeking damages for their
inability to proceed with oil production as a consequence of your
failure to settle the VAT owed to the Indonesian government. We
also
note that that CRC has also asserted that your ownership
percentage
has been diluted as a result of your failure to reimburse CRC for
trade debts settled on your behalf. Given the status of your
joint
venture and your various disputes with CRC, please explain to us
why
the gain recognized on the sale of the PSC should not be deferred
pending the outcome of your disputes with CRC.
Form 10-Q for the Fiscal Quarter Ended September 30, 2005
Item 4 - Controls And Procedures, page 45
5. We note that the Item 307 conclusion of effectiveness you
provide
at the end of the first paragraph specifies only part of the
definition of disclosure controls and procedures set forth in
Rules
13a-15(e) or 15d-15(e). Please revise to state, if accurate, that
your principal executive officer and principal financial officer
also
concluded that your disclosure controls and procedures are
effective
to ensure that information required to be disclosed in the reports
you file or submit under the Securities Exchange Act is
accumulated
and communicated to your management, including the principal
executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions
regarding
required disclosure. Alternatively, rather than providing a
definition, please cite only to the applicable rules.
6. We note in the third paragraph of your Item 308(c) disclosure
that
there have been no changes in your internal control over financial
reporting. However, the second paragraph appears to contradict
that
statement. Namely, the second paragraph discusses changes you
have
made to your internal controls. Please revise or advise. In
addition, with respect to that second paragraph, to the extent it
does represent a material change to your internal controls and
procedures, please revise to provide more information about the
change including what enhancements have been made and when, who
was
hired and what his engagement terms are, etc.
Item 6. Exhibits and Reports on Form 8-K, page 48
7. We note that these certifications do not correspond to the
language set forth in Item 601(b)(31). Please be aware that you
may
not deviate from the form of certification set forth in the Item.
To
the extent you must provide any clarifying disclosure with respect
to
matters covered by the certification, you should do so in the body
of
the 10-QSB itself. Please amend to provide the current
certifications required by Item 601(b)(31). As the certifications
relate to the entire periodic report, compliance with this
comment
requires that you refile your Form 10-QSB in its entirety with the
correct certifications.
***
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
letter with your amendment that keys your responses to our
comments
and provides any requested information. Detailed 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 John Cannarella, Staff Accountant, at 202-
551-
3337 or William Choi, Accounting Branch Chief, at (202) 551-3716
if
you have questions regarding comments on the financial statements
and
related matters. Please contact Anita Karu, Attorney-Advisor, at
202-551-3240, David Mittelman, Legal Branch Chief, at (202) 551-
3214,
or me at 202-551-3725 with any other questions.
Sincerely,
H. Christopher Owings
Assistant Director
Cc: Jennifer A. Post, Esq.
Richardson & Patel LLP
Fax: (310) 208-1154
David Nunn, President
Fortune Oil & Gas, Inc.
January 13, 2006
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