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
May 13, 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 #2 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 April 11, 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
1. Our calculation showing the number of shares which can
be sold by means of the Company's registration statement
is shown below.
Total shares outstanding 43,948,921
Less shares owned by persons listed in
Principal Shareholder section of prospectus (20,508,000)
------------
Shares owned by non-affiliates 23,440,921
Percentage allowed to be registered 30%
------------
Shares allowed to be registered upon
conversion of notes 7,032,276
============
Shares registered upon conversion of notes 6,200,000
Page Number
It is our understanding that the Company can register all
shares sold in the December 2007 private offering (as well as all
shares issuable upon the exercise of the warrants sold in the
December 2007 offering) since the current market price of the
Company's common stock is below the price at which the shares
were sold and is also below the warrant exercise price.
2. The calculation of the shares held by non-affiliates is
shown below.
Total shares outstanding 43,948,921
Less shares owned by persons listed in
Principal Shareholder section of prospectus (20,508,000)
------------
Shares owned by non-affiliates 23,440,921
=============
The shares of common stock sold to the investors in the
December 2007 offering are included in the number of shares
held by non-affiliates. The shares issuable upon the exercise
of the warrants and the conversion of the notes sold in December
2007 are not included in the number of shares held by non-affiliates
since these shares have not yet been issued.
3. A revised reserve report has been sent to the staff under
separate cover.
4. The undiscounted future cash flows as shown in the
registration statement should now agree with the revised
reserve report sent to the staff.
5. Comment complied with. F-1/F-80
6. Comment complied with. F-1
7. The number of shares being registered for payment to the
note holders has been limited pursuant to staff comment #1.
In accordance with Comment 4 in the staff's February 12, 2008
letter, page 57 shows the number of shares issuable upon the
payment of the notes calculated at a 10% discount to the market
price of the Company's common stock on December 5, 2007. As a
result, the number of shares shown on pages 10 and 57 will not
be in agreement.
8. Comment complied with. 7
9. Comment complied with. 6
Page Number
10. In accordance with staff comment #1, the number of
shares which the Company is allowed to register has been
limited. Accordingly, the Comparative Share Data section
has been revised. 10, 11
11. Comment complied with. 44
12. The share ownership of Mr. Kinney has been added to
the prospectus. We did not add the share ownership for
Mr. Murray since Mr. Murray is not an officer of the
Company and does note own more than 5% of the Company's
outstanding shares. Mr. Murray was included in the
executive compensation table pursuant to Instruction 2
to Item 402(a)(3) of Regulation S-K. 45
13. Comment complied with. 57
14. The figure which is the subject of this comment has
been revised. 59
15. Oneok has told the Company that it is not pursuing the
project. Epic has a preliminary contract with IACX for an
installation of a nitrogen rejection unit to place the field
back on production by September 1, 2008. The installation of
the nitrogen rejection unit will result in a sales of 264
MCFPD of pipeline quality gas.
16. The agreement pertaining to the acquisition of the
Carnrite Group provides that the effective date of the
Agreement is March 28, 2007. However, the Company decided
to use July 1, 2007 as the accounting acquisition date
as provided in the guidance in FAS 141 due to the
impracticality of using a non-accounting cutoff date as
the accounting acquisition date.
17. SFAS 141 permits a preliminary allocation of the
purchase price to the intangible assets acquired from
the Carnrite Group, provided the Company's financial
statements indicate that the allocation is preliminary.
In this regard, see the third paragraph of footnote 3
to the Company's financial statements. The Company will
determine the amounts which will be allocated to customer
relationships at the time the Company makes a final
allocation of the purchase price to the intangible assets
of the Carnrite Group.
18. Prior to the reorganization Pearl operated through
a number of divisions, all of which were owned by Pearl.
The reorganization involved moving the assets, liabilities
and operations of each division into its own limited
liability company. Each limited liability company is
wholly owned by Pearl. The reorganization enabled Pearl
to isolate the risks and liabilities of each division from
Pearl's other divisions. Both before and after the reorganization
all of the Pearl entities were under common control.
Page Number
19. The disclosure which is the subject of this comment is
included in Amendment No. 2 to the Registration Statement. F-76
20. SFAS 141 permits preliminary allocation of the purchase
price to the intangible assets acquired from the Pearl
Development Company, provided the Company's financial
statements indicate that the allocation is preliminary.
In this regard, see the third paragraph of footnote 3 to
the Company's financial statements. The Company will
determine the amounts which will be allocated to customer
relationships at the time the Company makes a final
allocation of the purchase price to the intangible assets
of the Pearl Development Company.
21. No adjustment was considered necessary since the
salaries paid under the old employment agreements were
the same as the salaries paid under the new employment
agreements.
22. None of the investors in the December 2007 offering
were in any way affiliated with the Company. As a result,
it was not necessary to record an expense for the
difference between the fair value of the Company's
common stock on December 5, 2007 and the offering price.
23. The issuance of the warrants attached to the debentures
did not create a "derivative liability." The purchasers of
the debentures also received warrants which entitle the
holders to purchase up to 15,954,545 shares of the Company's
common stock at a price of $1.65 per share. Under the Black
Scholes method, using an expected life of five years,
volatility of 72% and a risk-free interest rate of 3.28%,
the Company determined the warrants associated with the
debentures had a fair value of $13,085,380 as of the date
of the transaction. This amount was recorded as additional
paid in capital with a corresponding amount recorded as a
debt discount associated with the debentures. The debt discount
is being amortized to interest expense over the life of the
debentures, which mature on December 1, 2012. A total of
$206,808 of debt discount was amortized to interest expense in 2007.
24. Comment complied with. Item 17
25. Comment complied with. Exhibit 10.6
26. Comment complied with. Exhibit 23.2
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.
/s/ William T. Hart
By
William T. Hart
WTH:ap