ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion in this section contains forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology such as "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "should," "would" or "will" or the negative of these terms or other comparable terminology, but their absence does not mean that a statement is not forward looking. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which could cause our actual results to differ from those projected in any forward-looking statements we make. See "Risk Factors" in Part I, Item 1A of this report for a discussion of some of these risks and uncertainties. This discussion should be read with our financial statements and related notes included elsewhere in this report.

Overview

We merged with a public company shell in April 2006 and commenced operations in September 2006. We acquired certain producing oil and gas properties in December 2006 which have been shut-in since January 2007. We acquired The Carnrite Group ("Carnrite") in August 2007 and Pearl Investment Company ("Pearl") in December 2007. Our revenues from Carnrite and Pearl are principally derived from consulting and engineering services to the oil, gas and energy industry. Carnrite's management consulting services provide content rich advice to keep companies engaged in the oil and gas sector competitive in the global market. Pearl provides engineering and consulting services focused on the design, build, operations, maintenance, and development of upstream oil and gas assets including associated gathering, compression and processing facilities.. In February 2008, we acquired Epic Integrated Services LLC, a provider of personnel training, documentation and data management to the oil, gas and energy industry. With respect to this discussion, the terms "Epic," "Company", "we," "us," and "our" refer to Epic Energy Resources, Inc. and our wholly-owned subsidiaries.

Significant Developments

On February 20, 2008, Epic acquired Epic Integrated Solutions, LLC ("Epic Integrated") or ("EIS"), an unaffiliated entity, for cash and 1,000,000 shares of its restricted common stock. At closing, Epic paid $600,000 in cash, issued 1,000,000 shares of its common stock to the three owners of Epic Integrated, and paid acquisition costs of $267,000. An additional $1,400,000 will be paid to the three owners in periodic installments during 2008 and 2009. In accordance with EITF No. 95-8 "Accounting for Contingent Consideration Paid to the Shareholders for an Acquired Enterprise in a Business Combination", the contingent consideration is considered additional purchase price consideration.

During 2007, Epic acquired two significant companies (Carnrite and Pearl) that have increased our annualized consulting revenues substantially. These companies generated pro forma annual revenues for 2007 of approximately $59.3 million. In early 2008, we acquired an additional company (Epic Integrated) which generated 2007 revenues of approximately $2.9 million. As a result, our operations are principally related to consulting and related services to the

energy industry. We plan to continue to search for opportunities to co-invest with our clients or purchase underperforming producing oil and gas properties and utilize our expanded service capabilities to enhance production from these acquisitions. We also plan to strategically co-invest with our clients or take up to 100% working interest in surface infrastructure projects where we are contracted to design, build and operate gathering, compression and/or processing facilities.

During 2007, Epic raised over $28.9 million in debt and equity capital to fund our acquisitions and operations. In addition, Epic issued over 4.7 million shares of our common stock in conjunction with these acquisitions.

Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, assets held for sale, long-lived assets, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions and factors that we believe to be reasonable under the circumstances. Based on our ongoing review, we make adjustments we consider appropriate under the facts and circumstances. The accompanying condensed consolidated financial statements are prepared using the same critical accounting policies discussed in our 2007 Annual Report on Form 10-KSB.

Operating Activities

Because Epic had minimal operations until the acquisition of Carnrite in August 2007, Epic's historical operating results and period to period comparisons are not significant until 2007. All increases in Epic's revenues and expenses between 2008 and 2007 are associated with the acquisitions of Carnrite and the Pearl Investment Company. The results of operations for the six months ended June 30, 2008 include the historical results of Epic Integrated Solutions from and after January 1, 2008.

Expenses which are directly related to oil and gas production are charged to lease operating expenses. All other expenses (except depletion, accretion and impairment), whether they relate to consulting services or oil and gas exploration/development, are recorded as general and administrative expenses.

Epic grew significantly in 2007 through the acquisitions of Carnrite and Pearl. In February 2008, we acquired Epic Integrated Solutions and we expect to continue an aggressive acquisition plan in the foreseeable future. We plan to strategically continue our growth in geographic regions where our engineering expertise is our strength, such regions including the Rocky Mountains, Texas, Oklahoma and Kansas. As we build our infrastructure, we expect to expand our service region throughout the United States and into foreign countries that are seeking our expertise.

As of July 31, 2008, Epic's backlog for consulting services to be provided in the future was approximately $45.8 million. This compares with a combined backlog of approximately $19.0 million as of July 31, 2007. We believe demand for our services remains strong and will continue to increase as we expand our service regions throughout 2008. This backlog could change due to macro economic market activity and customer demand changes.

We plan to continue our search for underperforming oil and gas producing assets where we believe our engineering expertise can improve production. Oil prices have recently risen to over $135 a barrel. As a result, enhanced recovery projects have become more economically feasible.

Three Months ended June 30, 2008 compared with Three Months ended June 30, 2007

Revenues were approximately $16.6 million for the quarter ended June 30, 2008 compared with approximately $28,931 for the quarter ended June 30, 2007. The increase of $16.6 million was primarily the result of the acquisitions of Carnrite in August 2007, Pearl in December 2007, and Epic Integrated effective January 1, 2008.

Operating Expenses were approximately $18.7 million for the quarter ended June 30, 2008 compared with approximately $1.8 million for the quarter ended June 30, 2007 resulting in an increase of approximately of $16.9 million. This increase was primarily the result of the acquisitions of Carnrite in August 2007, Pearl in December 2007 and Epic Integrated effective January 1, 2008, partially offset by a reduction in impairment of oil and gas properties.

Loss from Operations was approximately $2.2 million for the quarter ended June 30, 2008 and $1.8 million for the quarter ended June 30, 2007.

Other Income (Expense) was approximately $(1.7) million for the quarter ended June 30, 2008 compared with approximately $(43,500) for the quarter ended June 30, 2007, an increase of $1.6 million. The increase was primarily due to interest expense and debt discount amortization associated with the acquisition of Pearl in December of 2007.

Net Loss was $3.8 million or $.09 per share for the quarter ended June 30, 2008 compared with $1.8 million or $.06 per share for the quarter ended June 30, 2007 resulting in an increased loss of $2.0 million. One of the primary reasons for the net loss in 2008 was the $1.4 million of interest expense for the second quarter of 2008.
Six Months ended June 30, 2008 compared with Six Months ended June 30, 2007

Revenues were approximately $34.0 million for the six months ended June 30, 2008 compared with approximately $105,000 for the six months ended June 30, 2007. The increase of $33.9 million was primarily the result of the acquisitions of Carnrite in August 2007, Pearl in December 2007 and Epic Integrated effective January 1, 2008.

Operating Expenses were approximately $36.1 million for the six months ended June 30, 2008 compared with approximately $2.3 million for the six months ended June 30, 2007 resulting in an increase of approximately $33.7 million.

This increase was primarily the result of the acquisitions of Carnrite in August 2007, Pearl in December 2007 and Epic Integrated in February 2008.

Loss from Operations was approximately $2.0 million for the six months ended June 30, 2008 compared with a loss from operations of approximately $2.2 million for the six months ended June 30, 2007 resulting in increased income of $175,000. This increase was primarily the result of losses suffered by Pearl and Epic Integrated.

Other Income (Expense) were approximately $(3.0) million for the six months ended June 30, 2008 compared with approximately $(74,000) for the six months ended June 30, 2007, an increase of $3.0 million. The increase was primarily due to interest expense and debt discount amortization associated with the acquisition of Pearl in December of 2007.

Net Loss was $5.1 million or $.12 per share for the six months ended June 30, 2008 compared with $2.3 million or $.05 per share for the six months ended June 30, 2007 resulting in an increased loss of $2.8 million. One of the primary reasons for the net loss in 2008 was the $3.1 million of interest expense for the first six months of 2008.

Liquidity and Capital Resources

Between October 2006 and April 2007 Epic raised $1,414,700, net commissions, from the sale of 1,455,100 shares of its common stock, plus 491,500 Series A warrants and 963,600 Series B warrants, to private investors. The Series A warrants expired on December 31, 2007. Each Series B Warrant entitles the holder to purchase one share of Epic's common stock at a price of $2.50 per share at any time prior to October 31, 2009.

On December 5, 2007 Epic sold 4,406,334 shares of its common stock to a group of private investors for gross proceeds of $6,609,500, or $1.50 per share. The investors also received warrants which entitle the holders to purchase up to 4,406,334 shares of the Company's common stock. The warrants are exercisable at a price of $1.50 per share and expire on December 5, 2012.

On December 31, 2007 Epic sold an additional 1,023,001 shares of its common stock to a group of private investors for gross proceeds of $1,534,502 or $1.50 per share. The investors also received warrants which entitle the holders to purchase up to 1,023,001 shares of Epic's common stock. The warrants are exercisable at a price of $1.50 per share and expire on December 5, 2012.

On December 5, 2007 Epic also sold notes in the principal amount of $20,250,000 to a second group of private investors. The notes bear interest of 10% per year. The notes are due and payable on December 5, 2012 and are secured by liens on all of Epic's assets. The purchasers of the notes also received Series D warrants which entitle the holders to purchase up to 15,954,545 shares of Epic's common stock. The warrants are exercisable at a price of $1.65 per share and expire on December 5, 2012. Interest on the notes is payable quarterly with the first interest payment due on January 1, 2008. Beginning December 1,

2008 Epic is required to make quarterly payments of $1,265,625 toward the principal amount of the notes in cash or in kind.

On February 20, 2008, Epic acquired Epic Integrated Solutions, LLC ("Epic Integrated") or ("EIS"), an unaffiliated entity, for cash and 1,000,000 shares of its restricted common stock. At closing, Epic paid $600,000 in cash, issued 1,000,000 shares of its common stock to the three owners of Epic Integrated, and paid acquisition costs of $267,000. An additional $1,400,000 will be paid to the three owners in periodic installments during 2008 and 2009. In accordance with EITF No. 95-8 "Accounting for Contingent Consideration Paid to the Shareholders for an Acquired Enterprise in a Business Combination", the contingent consideration is considered additional purchase price consideration.

Operating activities provided cash of $1.5 million during the six months ended June 30, 2008 compared with approximately $504,000 of cash used in operations during the six months ended June 30, 2007. We had a net loss for the six months ended June 30, 2008 of $5.1 million which was offset by changes in assets and liabilities of $2.6 million. In addition we had $934,287 of non-cash depreciation and depletion during the six months, $873,735 of expense for shares issued for compensation and $462,000 expense for bad debts. For the six months ended June 30, 2007, we had a net loss of $2.3 million which was offset by $1.3 million in impairment of oil and gas properties, changes in assets and liabilities of approximately $203,000 and non-cash expenditures of approximately $232,000 for the expense of shares issued for compensation.

During the six months ended June 30, 2008, we had investing activities that provided cash of $.4 million principally as a result of the decrease in restricted cash of $3.2 million offset by acquisition of equipment of $1.5 and $1.1 million of additional acquisition costs related to Epic Integrated and Pearl. During the quarter ended June 30, 2007, we had no investing activities.

We had $3.9 million of cash flows used in financing activities during the six months ended June 30, 2008 primarily as a result of the decrease in bank overdrafts of $3.4 million. We had cash provided by financing activities of approximately $.4 million during the six months ended June 30, 2007 principally due to the issuance of $.5 of common stock during that quarter.

As of June 30, 2008, we had working capital of $(319,282) compared with working capital of $7.6 million at December 31, 2007. Average collection of accounts receivable was approximately 87 days.

Epic expects that its gas wells will begin producing again by the latter part of August 2008, which will provide additional cash to fund its operations. As a result of the acquisition of Carnrite, Pearl and EIS and the anticipated production from its shut-in gas wells in the latter part of August 2008 Epic believes that cash provided by its operations will satisfy its future capital and debt service requirements.

Contractual Commitments

There have been no material changes to Epic's contractual commitments during the first quarter. Please see Note 7 to the accompanying financial statements for a more information on Epic's debt position, and Epic's Annual Report on Form 10-KSB for December 31, 2007 for a complete discussion of Epic's lease obligations.

Except for the commitments arising from its operating leases arrangements, Epic has no other off-balance sheet arrangements that are reasonably likely to have a material effect on its financial statements.