SEC Comment Letter for EVOLUTION PETROLEUM CORP (EPM) (CIK 0001006655) (EPM) — Mar 13, 2007
EVOLUTION PETROLEUM CORP (EPM) (CIK 0001006655)
Date: March 13, 2007 · CIK: 0001006655 · Accession: 0000000000-07-013039
AI Filing Summary & Sentiment
Reasoning
Letter
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 DIVISION OF CORPORATION FINANCE Mail Stop 7010 March 13, 2007 By US Mail and Facsimile Mr. Sterling H. McDonald Chief Financial Officer Evolution Petroleum Corporation 820 Gessner, Suite 1340 Houston, TX 77024
Re: Evolution Petroleum Corporation Form 10-KSB for the fiscal year ended June 30, 2006 Filed September 27, 2006 File No. 1-32942
Dear Mr. McDonald:
We have limited our review of your filings to those issues we have addressed in our comments. Where indicated, we think you should revise your documents in response to these comments. If you disagree, we w ill consider your explanation as to why our comment is inapplicable or a revision is unneces sary. Please be as detailed as necessary in your explanation. In some of our comme nts, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may raise additional comments.
Please understand that the purpose of our re view 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 any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Mr. Sterling H. McDonald Evolution Petroleum Corporation March 13, 2007 Page 2 Form 10-KSB for the fiscal year ended June 30, 2006
General
1. Please correct your Commission File Numb er, indicated on the cover page to reflect the correct file number, 001- 32942, and correct the spelling of your company name.
2. Please include page numbe rs throughout your filing.
Management’s Discussion and Anal ysis or Plan of Operation
Critical Accounting Policies and Estimates
3. Revise your disclosures to address the material implicat ions of the uncertainties that are associated with the methods, assumptions and estimates underlying your critical accounting policies and estimate s. Specifically, you should provide the following:
(a) An analysis of the uncertain ties involved in applyi ng the principle and the variability that is reasonably like ly to result from its application.
(b) An analysis of how you arrived at the measure and how accurate the estimate or underlying assumptions have been in the past.
(c) An analysis of your specifi c sensitivity to change, based on outcomes that are reasonably likely to occur and have a material effect.
Please refer to FRC Section 501.14 for further guidance.
Financial Statements
Balance Sheets
4. We note that you classified common st ock totaling 351,333 shares subject to demand registration rights separate from stockholders’ equity. However, we were unable to find a discussion of the co rresponding registration rights agreement. Please add disclosure to address the speci fic details of this agreement, clearly outlining its requirements and any related damages or penalties that may be or have been incurred. Also, please address the classifica tion criteria in EITF 00-19 that let you to believe mezzanine equity was the appropriate classification.
Mr. Sterling H. McDonald Evolution Petroleum Corporation March 13, 2007 Page 3 Statements of Changes in Stockholders’ Equity
5. During fiscal year 2006, we note that you r ecorded an exercise of warrants of 1,278,064 shares of common stock and recorded $1,278 of proceeds. Please confirm that the exercise prices of these warrants were equivalent to the par value of your common stock, if true.
Note 3 – Summary of Significant Accounting Policies
6. We note that you follow the full cost me thod of accounting for your investments in oil and natural gas properties. Please revise your policy describing the limit of the net carrying value of your oil and natural gas propertie s (i.e., “ceiling test”) to clarify whether the reference to “cash fl ows from proved reserv es” is intended to encompass both net revenues as well as future expenditures to be incurred in developing and producing th e proved reserves.
7. We note your revenue recognition policy stating you recognize o il and natural gas revenues from your interests in producing we lls at the time oil and natural gas is sold. Expand your disclosure to address all of the criteria required for revenue recognition set forth in Section A.1 of SA B Topic 13. It should also be clear whether you are following the sales or entitlement methods outlined in EITF 90- 22.
Exhibit 32
8. Your officers’ certifications , pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, relate to your annual report on Form 10-KSB for the year ended June 30, 2005. Please amend your filing to include updated officers’ cert ifications that correspond to your current year’s filing.
As appropriate, please amend your filing and respond to these comments within 10 business days or tell us when you will provid e us with a response. You may wish to provide us with marked copies of the amendm ent to expedite our review. Please furnish a cover letter with your amendment that keys your responses to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review. Please understand that we may have addi tional comments after reviewing your amendment and responses to our comments.
We urge all persons who are responsi ble for the accuracy an d adequacy of the disclosure in the filing to be certain that the filing includes all in formation required under the Securities Exchange Act of 1934 and th at they have provided all information investors require for an informed invest ment decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
Mr. Sterling H. McDonald Evolution Petroleum Corporation March 13, 2007 Page 4
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 filing;
staff comments or changes to disclosure in response to staff comments 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 advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
You may contact Nasreen Mohammed at (202) 551-3773 or Don Delaney at (202) 551-3863 if you have questions regarding comm ents on the financial statements and related matters. Please contact me at (202) 551-3686 with any other questions.
S i n c e r e l y ,
K a r l H i l l e r B r a n c h C h i e f
Show Raw Text
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
Mail Stop 7010
March 13, 2007
By US Mail and Facsimile
Mr. Sterling H. McDonald
Chief Financial Officer
Evolution Petroleum Corporation
820 Gessner, Suite 1340
Houston, TX 77024
Re: Evolution Petroleum Corporation
Form 10-KSB for the fiscal year ended June 30, 2006
Filed September 27, 2006
File No. 1-32942
Dear Mr. McDonald:
We have limited our review of your filings to those issues we have addressed in
our comments. Where indicated, we think you should revise your documents in response
to these comments. If you disagree, we w ill consider your explanation as to why our
comment is inapplicable or a revision is unneces sary. Please be as detailed as necessary
in your explanation. In some of our comme nts, we may ask you to provide us with
information so we may better understand your disclosure. After reviewing this
information, we may raise additional comments.
Please understand that the purpose of our re view 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 any other aspect of our
review. Feel free to call us at the telephone numbers listed at the end of this letter.
Mr. Sterling H. McDonald
Evolution Petroleum Corporation
March 13, 2007 Page 2
Form 10-KSB for the fiscal year ended June 30, 2006
General
1. Please correct your Commission File Numb er, indicated on the cover page to
reflect the correct file number, 001- 32942, and correct the spelling of your
company name.
2. Please include page numbe rs throughout your filing.
Management’s Discussion and Anal ysis or Plan of Operation
Critical Accounting Policies and Estimates
3. Revise your disclosures to address the material implicat ions of the uncertainties
that are associated with the methods, assumptions and estimates underlying your
critical accounting policies and estimate s. Specifically, you should provide the
following:
(a) An analysis of the uncertain ties involved in applyi ng the principle and the
variability that is reasonably like ly to result from its application.
(b) An analysis of how you arrived at the measure and how accurate the
estimate or underlying assumptions have been in the past.
(c) An analysis of your specifi c sensitivity to change, based on outcomes that
are reasonably likely to occur and have a material effect.
Please refer to FRC Section 501.14 for further guidance.
Financial Statements
Balance Sheets
4. We note that you classified common st ock totaling 351,333 shares subject to
demand registration rights separate from stockholders’ equity. However, we were
unable to find a discussion of the co rresponding registration rights agreement.
Please add disclosure to address the speci fic details of this agreement, clearly
outlining its requirements and any related damages or penalties that may be or
have been incurred. Also, please address the classifica tion criteria in EITF 00-19
that let you to believe mezzanine equity was the appropriate classification.
Mr. Sterling H. McDonald
Evolution Petroleum Corporation
March 13, 2007 Page 3
Statements of Changes in Stockholders’ Equity
5. During fiscal year 2006, we note that you r ecorded an exercise of warrants of
1,278,064 shares of common stock and recorded $1,278 of proceeds. Please confirm that the exercise prices of these warrants were equivalent to the par value
of your common stock, if true.
Note 3 – Summary of Significant Accounting Policies
6. We note that you follow the full cost me thod of accounting for your investments
in oil and natural gas properties. Please revise your policy describing the limit of
the net carrying value of your oil and natural gas propertie s (i.e., “ceiling test”) to
clarify whether the reference to “cash fl ows from proved reserv es” is intended to
encompass both net revenues as well as future expenditures to be incurred in
developing and producing th e proved reserves.
7. We note your revenue recognition policy stating you recognize o il and natural gas
revenues from your interests in producing we lls at the time oil and natural gas is
sold. Expand your disclosure to address all of the criteria required for revenue
recognition set forth in Section A.1 of SA B Topic 13. It should also be clear
whether you are following the sales or entitlement methods outlined in EITF 90-
22.
Exhibit 32
8. Your officers’ certifications , pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, relate to your annual report on Form 10-KSB for the year ended June 30,
2005. Please amend your filing to include updated officers’ cert ifications that
correspond to your current year’s filing.
As appropriate, please amend your filing and respond to these comments within
10 business days or tell us when you will provid e us with a response. You may wish to
provide us with marked copies of the amendm ent to expedite our review. Please furnish
a cover letter with your amendment that keys your responses to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review.
Please understand that we may have addi tional comments after reviewing your
amendment and responses to our comments.
We urge all persons who are responsi ble for the accuracy an d adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
Mr. Sterling H. McDonald
Evolution Petroleum Corporation
March 13, 2007 Page 4
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
filing;
staff comments or changes to disclosure in response to staff comments 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 advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
You may contact Nasreen Mohammed at (202) 551-3773 or Don Delaney at (202)
551-3863 if you have questions regarding comm ents on the financial statements and
related matters. Please contact me at (202) 551-3686 with any other questions.
S i n c e r e l y ,
K a r l H i l l e r
B r a n c h C h i e f