HART & TRINEN, LLP
ATTORNEYS AT LAW
1624 Washington Street
Denver, CO 80203
William T. Hart, P.C. ________ Email: harttrinen@aol.com
Donald T. Trinen Facsimile: (303) 839-5414
(303) 839-0061
March 18, 2008
Kristina Aberg
Securities and Exchange Commission
Mail Stop 4561
100 F Street, NE
Washington, DC 20549
Re: Epic Energy Resources, Inc.
Form S-1/A
This office represents Epic Energy Resources, Inc. (the "Company").
Amendment #1 to the Company's registration statement has been field with the
Commission. This letter provides the Company's responses to the comments
received from the Staff by letter dated February 12, 2008. The paragraph numbers
in this letter correspond with the numbered paragraphs in the Staff's comment
letter. The number under the "Page Number" column indicates the page number in
the registration statement where the response to the comment can be found. The
letters "FS" in the page number column refer to the page in the Company's
financial statements.
Page Number
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1. Comment complied with. 53
2. Comment complied with. 54
3. Comment complied with. 53
4. Comment complied with. 54
5. Comment complied with. 54
6. There were no prior securities transactions between Epic or
any of its predecessors, selling shareholders, any affiliates
of the selling shareholders, or any person with whom any selling
shareholder had a contractual relationship regarding the sale
of the notes or warrants.
7. We have added the information requested by the first bullet
point of this comment. The other bullet points do not apply
since the selling shareholders have not been included in any
other registration statements filed by the Company. 53
1
Page Number
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8. We provided the disclosure requested by the first bullet
point of this comment. Based upon information provided to
us by the selling shareholders, none of the selling
shareholders have or had a short position in the Company's
common stock. 16
9. It is the Company's position that the description of all
relationships and arrangements between the Company, and any of
its predecessors, the selling shareholders, any affiliates
of the selling shareholders, or any person with whom any
shareholder had a contractual relationship regarding the sale
of the notes or warrants has been disclosed in the prospectus.
In addition, it is the Company's position that all agreements
between or among the foregoing parties have been filed as
exhibits to the registration statement.
10. Comment complied with. 10
11. Comment noted.
12. Comment complied with.
13. Comment complied with. FS-1/FS-73
14. Comment complied with. 3
15. Comment complied with. 3
16. Comment complied with. 6-9
17. Comment complied with. 6
18. The Company does not have any current acquisition plans.
19. Comment complied with. 8
20. Comment complied with. Please note that the Company's
financial statements do not reflect "cost of goods sold",
although they do reflect lease operating expenses. 12
21. Comment complied with. 13
22. Comment complied with. 16
23. Comment complied with. 14
24. Comment complied with. 16
2
Page Number
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25. Comment complied with. 52
26. The disclosure which is the subject of this comment has
been revised to delete any reference to independent petroleum
engineers. 19
27. Comment complied with. 6, 26
28. The information requested by this comment will be
furnished supplementally.
29. Comment complied with. 25
30. Comment complied with. 32
31. Comment complied with. 33
32. Comment complied with. 33
33. Comment complied with. 36
34. Comment complied with. 36
35. Comment complied with. 36
36. Comment complied with. 39
37. The directors' compensation policy posted on the
Company's website is intended to pertain to compensation
which will be paid during 2008 and subsequent years.
The director's compensation disclosed in the registration
statement is that which was paid during the year ended
December 31, 2007. We have added total columns to the
directors' compensation table. 39
38. Comment complied with. 40
39. Comment complied with. 41
40. Comment complied with. 41
41. Comment complied with. 42
42. Comment complied with. 42
43. Comment complied with. 42
3
Page Number
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44. Comment complied with. 42
45. Comment complied with. 43
46. Each of the selling shareholders provided the Company
with a questionnaire which was attached to the Registration
Rights Agreement filed as part of Exhibit 10.4. In the
questionnaire, each selling shareholder represented that they
expected to pay only normal commissions in connection with the
sale of their shares.
47. None of the Company's shareholders are registered broker-dealers
or affiliates of broker-dealers.
48. None of the selling shareholders are affiliates of broker-dealers.
49. Comment complied with. 55
50. Comment complied with. 55, Exh. 23.1
51. The pro forma financial statements have been revised. F-58
52. The significant customer relationships pertain to potential
future revenues for Pearl. Accordingly, these customer relationships
are considered goodwill and none of the purchase price was
specifically allocated to customer relationships.
53. The pro forma financial statements have been revised to
include an adjustment for interest expense for the notes sold
in December, 2007. See explanatory note #6. F-61
54. The 4,397,000 shares sold in December 2007 were restricted
securities. The Company's stock is listed on the OTC Bulleting
Board and is thinly traded. As a result of the foregoing, a 50%
discount to the market price of the Company's common stock on
December 5, 2007 was considered reasonable. Please note that
subsequent to January 25, 2008 the Company's common stock has
traded below $1.50 per share.
55. The issuance of the warrants in connection with the sale of
the notes resulted in a reduced interest rate on the notes. As a
result, a financial derivative was created related to the
warrants. The Company's interpretation of EITF 00-19 was that the
warrants should be classified as equity (additional paid in
capital) with a corresponding debt discount that should be
amortized to income over the life of the notes. The Company's
conclusion was based on its belief that there was no penalty
related to the warrants for lack of fulfillment. There are
liquidated damages for the sales of common stock and the notes,
but not for the warrants.
4
Page Number
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Thus, by their very nature, these terms do not require
registration. The Company used the Black Scholes method to
calculate the value of the warrants (and corresponding debt
discount) and developed a debt discount amortization schedule
based on the parameters of the 10% note.
56. The pro forma financial statements have been adjusted to
reflect the potential payment of damages to the investors in the
December 2007 financing. F-61
57. The 44,000,000 shares were sold for cash of $440. At the time
of the sale there was no market for the Company's common stock, the
Company did not have any assets or liabilities, and the Company was
not operating. The fair value of the 44,000,000 shares was the $440
received by the Company.
58. Comment complied with. F-9
59. The Company is in negotiations to sell the gas from its
Kansas wells to Oneok Field Services. If an agreement is reached,
Oneok may begin purchasing gas from the Company by May 2008. As a
result, no revisions to the Company's reserves are necessary.
60. See our response to comment 59.
61. Comment complied with. F-17
62. See our response to Comment 59.
63. The Company's amended 10-Q report has been filed with the
Commission.
64. Paragraph 48 of SFAS No. 141 provides flexibility due to
the difficulty of closing financial books on a date other than
a month or quarter-end. The date used for the acquisition
(July 1, 2007) was less than one fiscal quarter from the actual
date of the transaction (August 13, 2007). Since the effective
date for financial statement purposes was other than the actual
date the transaction took place, the Company adjusted the cost
of the acquisition and net income was reduced by using an
imputed interest rate.
65. The significant customer relationships pertain to potential
future revenues for Carnrite. Accordingly, these customer
relationships are considered goodwill and none of the purchase
price was specifically allocated to customer relationships.
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Page Number
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66. At the present time, Epic Exploration and Production
does not have any assets or liabilities and has not
commenced operations. Epic Exploration and Production will be
consolidated with the Company when it begins operations.
Pursuant to Section 7-106-202(2) of the Colorado Revised
Statutes, the consideration received for shares may consist
of any benefit to a coproration.
67. Footnote 4 has been revised to include disclosure of the
line of credit. F-27
68. Footnote 12 has been amended to disclose the warrant activity. F-15
69. The pro forma financial statements pertaining to the Carnrite
acquisition have been consolidated with the pro forma financial
statements pertaining to the acquisition of the Pearl Investment
Company.
70. The description of the cost of services has been amended. F-38
71. Comment complied with. F-38
72. The re-organization enabled Pearl to isolate the risks and
liabilities of each unit from Pearl's other divisions. For
accounting purposes Pearl consolidates all business units,
eliminating any intercompany transactions.
73. Comment complied with. Shares were issued to certain employees
of the Pearl Investment Company to reward them for their past
service to Pearl and to encourage the employees to remain with
Pearl. Item 15
74. Comment complied with. Item 16
75. Comment complied with. Signature
page
76. Comment complied with. Exh. 5
If you should have any questions concerning the foregoing, please do not
hesitate to contact the undersigned.
Very Truly Yours,
HART & TRINEN, L.L.P.
By
William T. Hart
WTH:ap