Apolo Gold & Energy Inc.
9th floor, Kam Chung Commercial Bldg.,
19-21 Hennessy Road, Wanchai, Hong Kong
chakwm@yahoo.com.hk
December 31, 2014
Tia L. Jenkins
Senior Assistant Chief Accountant
Office of Beverages, Apparel, and Mining
United States Securities and Exchange Commission
RE: | Apolo Gold & Energy Inc. |
Form 10-K for the Fiscal Year Ended June 30, 2014 |
Dear Tia L. Jenkins
We have amended the Form 10-K/A and the Form 10-Q and have included the changes in this response letter as follows:
Amendment No. 2 to Form 10-K for the Fiscal Year Ended June 30, 2014
Report of Independent Registered Public Accounting Firm, page F-2
1. We note the report provided by your prior auditor is dated September 20, 2013. However, your current auditor’s report on page F-1 identifies the prior auditor’s report being dated January 28, 2014. Please resolve this apparent inconsistency and revise as appropriate.
The entry on Page F-1 in the Form 10-K has been revised to read as follows:
The consolidated financial statements as at June 30, 2013 and prior years were audited by other auditors who expressed an opinion without reservation on those statements in their report dated September 20, 2013.
(PLEASE SEE PAGE F-1 IN THE FORM 10-K/A3)
Amendment No. 1 to Form 10-Q for the Fiscal Quarter Ended September 30, 2014
Item 4. Controls and Procedures, page 5
2. We note your revision in response to prior comment three of our letter dated November 21, 2014 concludes on your evaluation of the effectiveness of disclosure controls and procedures as of June 30, 2014. Please revise to disclose the conclusions related to the effectiveness of your disclosure controls and procedures as of September 30, 2014 to comply with Item 307 of Regulation S-K.
Changes in Internal Control over Financial Reporting, page 5
3. Please revise your disclosure related to changes in your internal control over financial reporting to reference the quarter ended September 30, 2014 as opposed to the year ended June 30, 2014 to comply with Item 308 (c) of Regulation S-K.
The entry on Page 5 respectingControls and Procedures and Changes in Internal Control over Financial Reportingin the Form 10-Q has been revised to read as follows:
We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as ofSeptember 30, 2014 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.
Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in ourQuarterly Report on Form 10-Q for the quarter ended September 30, 2014 fairly present our financial condition, results of operations and cash flows in all material respects.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:
Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.
Insufficient Written Policies & Procedures: We have insufficient written policies and procedures for accounting and financial reporting.
Inadequate Financial Statement Closing Process: We have an inadequate financial statement closing process.
Lack of Audit Committee: The lack of a functioning audit committee and lack of a majority of outside directors on the Company’s Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) prepare and implement sufficient written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors and audit committee members in the future.
Management, including our Chief Executive Officer and the Chief Financial Officer, has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
Thisquarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in thisquarterlyreport.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting that occurred duringthe quarter ended September 30,2014 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the effectiveness of controls and procedures
Our management, including our Chief Executive Officer and the Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Please note that the items in bold font are for your convenience only and will not appear in bold font in the filing.
(PLEASE SEE PAGE 5 IN THE FORM 10-Q/A2)
In responding to your comment letter dated December 18, 2014, Apolo Gold & Energy Inc. hereby acknowledges the following:
● | 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. |
Please also note that the requested changes have been made and the Form 10-K/A3 as well as the Form 10-Q/A2 have been filed with the Securities and Exchange Commission.
Sincerely
/s/ Edward Low | |
Edward Low | |
Chief Financial Officer | |
Apolo Gold & Energy, Inc. |