kodiak10k123107ex10-2.htm


    
      

      

    

    Kodiak Energy, Inc.

     

    EXHIBIT 10.2

    


    UNITED
STATES

    SECURITIES
AND EXCHANGE COMMISSION

    WASHINGTON,
D.C. 20549

    


    Division
of

    Corporate
Finance

    Mail Stop
7010

    


    
      	 
      	
              December
      12, 2007

            


    

    


    William
Tighe

    Chief
Executive Officer

    Kodiak
Energy, Inc.

    734
7th
Avenue S.W.

    Calgary,
Alberta, Canada T2P 3P8

    


    
      	
               
      

            	
              Re:

            	
              Kodiak
      Energy, Inc.

            


    

    Registration
Statement on Form SB-2

    Filed
November 13, 2007

    File No.
333-147325

    


    Annual
Report on Form 10-KSB

    Filed
April 4, 2007

    File No.
333-82434

    


    Dear Mr.
Tighe:

    


    We have
limited our review of the above filings to those issues we have addressed in our
comments. Where indicated, we think you should revise your document in response
to these comments. If you disagree, we will consider your explanation as to why
our response is inapplicable. Please be as detailed as necessary in your
explanation. In some of our comments, 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 review is to assist you in your compliance
with the applicable disclosure requirements and to enhance the overall
disclosure in your filings. 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 contact us at the telephone numbers listed at
the end of this letter.

    


    Form SB-2 filed November 13,
2007

    


    
      	
              1)

            	
              Please
      update your financial statements and other financial
      discussion.  Refer to Rule 3-12 of Regulation
    S-X.

            


    

     

    
      	
              2)

            	
              We
      note your announcement that, effective December 3, 2007, Mark Hlady
      resigned from the position of chief executive officer and William Tighe
      became your chief executive officer.  Please update the
      disclosure throughout your filing to reflect such
  changes.

            


    

     

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

     

    Compensation discussion and
analysis, page 33

     

    
      	
              3)

            	
              You
      state that Sicamous Oil & Gas Consultants, Ltd., a company owned by
      Mr. Tighe, is paid Cdn. $10,000 per month pursuant to a consulting
      agreement.  Section 3.1 of your agreement with Sicamous Oil
      & Gas Consultations, Ltd. (filed  as Exhibit 10.8 to your
      registration statement), provides for payment of $5,000 per month for
      services provided by Mr. Tighe during the term of such
      agreement.  Please reconcile this apparent
      inconsistency.

            


    

     

    Signatures

     

    
      	
              4)

            	
              Identify
      each person occupying more than one of the specified capacities, and make
      clear who is signing in the capacity of your principal accounting officer
      or controller.  See Instructions 1 and 2 to Signatures, Form
      SB-2.

            


    

     

    Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2006

     

    General

     

    
      	
              5)

            	
              It
      appears that your public float as of December 31, 2006, exceeded $25
      million.  Please tell us how you have evaluated whether you
      remain eligible to continue to use the Small Business Issuer
      forms.  Refer to Item 10(a)(2) of Regulation S-B for additional
      guidance.

            


    

     

    Business, page
3

     

    
      	
              6)

            	
              Please
      clarify whether you have proved reserves as defined by Rule 4-10(a) of
      Regulation S-X, as of September 30, 2007 and December 31,
      2006.  To the extent you do not have any proved reserves,
      address the following:

            


    

     

    
      	
               
      

            	
              ·

            	
              Revise
      your filing throughout to label yourself as an exploration-stage company,
      not a development stage company;

            


    

    


    
      	
               
      

            	
              ·

            	
              Revise
      the caption on your statements of operations to characterize revenues as
      income during the evaluation period, as the use of revenues implied that
      amounts are derived from a proved
property;

            


    

    


    
      	
               
      

            	
              ·

            	
              Disclose
      in the footnotes to the financial statements that you will begin recording
      revenue once it has been determined that you have proved reserves;
      and

            


    

    


    
      	
               
      

            	
              ·

            	
              Clarify
      on page 13 with regards to the Province/Granlea property whether that
      property had been evaluated in light of its production during
      2006.

            


    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      	
              7)

            	
              We
      note the disclosure under this section indicating that you are a
      development stage oil and gas company with no assets and
      liabilities.  However, your balance sheet as of December 31,
      2006, indicated that you have assets and liabilities.  Revise
      the disclosure under this section to resolve this apparent
      inconsistency.

            


    

     

    Description of Property,
page 8

    


    
      	
              8)

            	
              Explain
      to us where you have provided disclosure responsive to each of the items
      identified in Industry Guide 2.

            


    

    


    Management’s Discussion and
Analysis or Plan of Operation, page 12

    


    Province/Granlea – Southeast
Alberta, page 13

    


    
      	
              9)

            	
              We
      note that a substantial increase in water rates resulted in the well being
      shut in until it is re-evaluated.  If there is a reasonable
      likelihood that a material impairment will be recorded upon the
      re-evaluation of the Province/Granlea wells, please expand your MD&A
      to describe the impact an impairment would have on your financial
      statements.  Refer to FRC 501.12.b for additional
      guidance.

            


    

    


    
      	
              10)

            	
              We
      note on page 28 that you recorded a writedown of approximately $1.4
      million as a result of application of the ceiling test.  Please
      expand your MD&A to describe the specific reasons or factors
      underlying the impairment.

            


    

    


    Financial Statements, page
16

    


    
      	
              11)

            	
              Please
      provide the disclosures set forth by SFAS 69 to extent
      applicable.  For any disclosures that you do not believe are
      applicable, explain to us the reasons why you believe they do not apply to
      you.

            


    

    


    Consolidated Balance Sheets,
page 17

    


    
      	
              12)

            	
              We
      note that you have recorded at December 31, 2006, accounts receivable for
      $685,975.  Please expand your footnotes to describe what
      comprises your accounts receivable.  Note that this comment also
      applies to corresponding amounts appearing in your financial statements
      for the subsequent interim period.

            


    

    


    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    Consolidated Statements of
Operations, page 19

    


    
      	
              13)

            	
              We
      note that you presented stock-based compensation as a separate
      caption.  Please present the compensation expense on your
      statements of operations using the function of the expense (for example,
      general and administrative expense or operating expense).  Refer
      to SAB topic 14:F for additional
guidance.

            


    

    


    
      	
              14)

            	
              We
      note that you included a ceiling test impairment together with depletion,
      depreciation and accretion expense.  Please separately present
      the impairment expense or re-label the caption to more accurately reflect
      the nature of the expenses.

            


    

    


    
      	
              15)

            	
              Please
      present earnings per share on the face of the income
      statement.  See paragraph 36 of SFAS 128 for additional
      guidance.

            


    

    


    Consolidated Statements of
Cash Flows, page 20

    


    
      	
              16)

            	
              We
      note that you classified changes in non-cash working capital as investing
      and financing activities.  Please tell us what changes comprise
      these line items and how their classifications as investing and financing
      activities is more appropriate than classification as either an operating
      activity or a non-cash investing and financing activity.  Tell
      us whether the amounts presented as changes in non-cash working capital
      represent gross or net amounts of related receipts and payments and how
      their presentation is consistent with the guidance of paragraph 11 to 13
      of SFAS 95.

            


    

    


    Notes to Consolidated
Financial Statements, page 21

    


    Note 1. Organization, Basis
of Presentation and Going Concern Uncertainty, page 21

    


    
      	
              17)

            	
              We
      note disclosure in the first paragraph indicating that your consolidated
      financial statements are presented in accordance with generally accepted
      accounting principles in the United States of America, except as outlined
      in Note 2, which discloses the nature of restatements of previously issued
      financial statements.  Please revise this disclosure to include
      a clear and unqualified statement as to whether your consolidated
      financial statements as presented are prepared in accordance with U.S.
      GAAP.

            


    

    


    
      	
              18)

            	
              We
      note that you changed your policy for accounting for oil and gas
      properties from the successful efforts method to the full cost
      method.  Please tell us whether you obtained and filed a
      preferability letter in connection with this change.  See
      Exhibit 18 under term 601 of Regulation S-B and SAB Topic
      12:C.1.

            


    

    


    Note 6.  Capital
Assets, page 27

    


    Unproved Properties, page
28

    


    
      	
              19)

            	
              We
      note that included in oil and gas properties are costs of $1,430,987
      related to unproven properties, which exceeds the net book value of oil
      and gas properties of $1,270,253 as of December 31,
      2006.  Please reconcile this difference, and revise the notes to
      your consolidated financial statements as appropriate.  State
      separately on the face of the balance sheet the aggregate of capitalized
      costs of unproved properties and major development projects that are
      excluded from the capitalized costs being
  amortized.

            


    

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      	
              20)

            	
              Please
      revise to provide the disclosures required by Rule 4-10(c)(7)(ii) of
      Regulation S-X, including:

            


    

    


    
      	
               
      

            	
              ·

            	
              A
      description of the current status of the significant unproven properties,
      including the anticipated timing of the inclusion of the associated costs
      in the amortization computation;
and

            


    

    


    
      	
               
      

            	
              ·

            	
              A
      table showing by categories the costs making up the unproven oil and gas
      properties account balance.

            


    

    


    
      	
              21)

            	
              We
      note that you recorded an impairment under the ceiling test during
      2006.  Please clarify for us whether the impairment pertained to
      proved or unproved properties.  Please expand your footnotes to
      describe in reasonable detail the circumstances that led to the
      impairment.

            


    

    


    
      	
              22)

            	
              Provide
      us a reasonably detailed discussion of the drilling activates you have
      conducted during the two most recent fiscal years and through the date of
      your response.  As part of your response, describe the timing,
      type, location, results and current status of each
  well

            


    

    


    Note
7.  Convertible Debt, page 28

    


    
      	
              23)

            	
              We
      note that you issued convertible debt in 2005 as compensation for services
      received.  Please explain to us how you considered the guidance
      in EITF 01-01 in accounting for the issuance of convertible debt pursuant
      to the stock for services compensation
plan.

            


    

    


    Note 9.  Share
Capital, page 29

    


    
      	
              24)

            	
              We
      note that you issued 7,500,000 common shares to a non-employee and
      determined the value based on the invoices rendered for the services
      provided.  Paragraph 7 of SFAS 123(R) requires that a company
      use the fair value of goods or services received if it is more reliably
      measurable than the fair value of the equity instruments
      issued.  Please tell us why you believe the fair value of the
      services received was more reliable than the fair value of the common
      shares issued.  We generally believe the fair value of common
      stock issued is a more reliable measure.  Refer to paragraph A7
      of AFAS 123(R) for additional
guidance.

            


    

    


    
      	
              25)

            	
              Please
      clarify in the last paragraph on page 30 the percentage of your issued and
      outstanding common shared that may be issued under your stock option
      plan.

            


    

    


    Note
10.  Stock-Based Compensation, page 31

    


    
      	
              26)

            	
              Please
      explain to us how you addressed the disclosure requirements set forth by
      paragraphs A240 of SFAS 123(R).

            


    

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    Note 12.  Loss Per
Share, page 32

    


    
      	
              27)

            	
              Please
      revise your computation of basic and diluted loss per share to adjust
      retroactively for all periods presented to reflect your stock
      splits.  In addition, disclosure that that the per share
      computations reflect such changes in the number of
      shares.  Refer to paragraph 54 of SFAS 128 for additional
      guidance.

            


    

    


    Note 14.  Related
Party Transactions, page 33

    


    
      	
              28)

            	
              We
      note that your officers and directors purchased 10.2 million shares of
      common stock on December 22, 2005, for $0.02 per share.  We
      further note that 1 million common shares were purchased on December 30,
      2005, for $0.50 per share.  Please address the following related
      to these transactions:

            


    

     

    
      	
               
      

            	
              ·

            	
              Explain
      to us the reasons for the difference in the purchase price per share
      between the December 22,  2005 and the December 30, 2005
      subscriptions;

            


    

    


    
      	
               
      

            	
              ·

            	
              Tell
      us how you considered the guidance in paragraph 7 of SFAS 123(R) in which
      a share-based payment transaction with employees shall be measured based
      on the fair value the equity instruments issued;
  and,

            


    

    


    
      	
               
      

            	
              ·

            	
              Tell
      us how you determined the fair value of the common shares issued to your
      officers and directors as part of the December 22, 2005
      purchase.

            


    

     

    
      	
              29)

            	
              We
      note that you issued 2 million common shares in consideration for
      corporate development services rendered by a related party and that you
      valued the shares at a market price of $0.05 per share.  We
      further note on page 11 that your lowest stock price during 2006 was
      $0.375 per share.  Please tell us how you determined the fair
      value of the shares issued, and describe the accounting principles that
      you applied in recording the expense at a value other than the observable
      market price.

            


    

    


    Item 8A.  Controls
and Procedures, page 35

    


    
      	
              30)

            	
              We
      note your disclosure in your annual report and your quarterly reports for
      the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007
      regarding your conclusion that your disclosure controls and procedure were
      effective as of the date of each such
filing.

            


    

    


    Please
revise your annual report and each quarterly report to disclose the conclusions
of your principal executive and provincial financial officers, or persons
performing similar functions, regarding the effectiveness of your disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as
of the end of the period covered by each such report, based on the evaluation of
the controls and procedures required by Rule 13a-15(b).  See Item 307
of Regulation S-B.  For example, the conclusions of your principal
executive and principal financial officer regarding the effectiveness of your
internal controls and procedures should be as of December 31, 2006.

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      	
              31)

            	
              Please
      revise your annual report and your quarterly reports for the quarters
      ended March 31, 2007, June 30, 2007, and September 30, 2007 to provide the
      information required by Item 308(c) of Regulation
  S-B.

            


    

    


    Form 10-Q For the Fiscal
Quarter Ended September 30, 2007

    


    Unaudited Consolidated
Statements of Cash Flows, page 5

    


    
      	
              32)

            	
              Please
      disclose information about your non-cash investing and financing
      activities.  The disclosures may be either narrative or
      summarized in a schedule, and they should clearly relate the cash and
      non-cash aspects of transactions involving similar items.  Refer
      to paragraph 32 of SFAS 95 for additional
  guidance.

            


    

    


    Note 8.  Share
Capital, page 11

    


    
      	
              33)

            	
              We
      note in footnote (m) on page 13 that you purchased certain undeveloped oil
      and gas properties in Canada and the United States.  Please
      clarify whether the properties were proved or unproved based in the
      definitions found in Rule 4-10(a) of Regulation
  S-X.

            


    

    


    Management’s Discussions and
Analysis or Plan of Operation, page 19

    


    Southeast Alberta –
Manyberries, page 21

    


    
      	
              34)

            	
              We
      note that you will release nine sections of undeveloped properties back to
      Crown and abandon wells in the fourth quarter of 2007. Please describe for
      us how you considered this abandonment in applying your full cost ceiling
      test and evaluating unproved properties as of September 30,
      2007.  To the extent that an impairment is not necessary during
      the nine months ended September 30, 2007, provide indicative value as to
      the impact that the abandonment of the wells will have on your financial
      statements.

            


    

    


    Website

    


    
      	
              35)

            	
              If
      you retain links to the reports by SISM, you should make clear that you
      are paying $42,000 to SISM and that therefore it is not providing
      “independent coverage” notwithstanding the assertions in the reports to
      that effect.

            


    

    


    ***

    


    Closing
Comments

    


    As
appropriate, please amend your filings in response to these comments. You may
wish to provide us with marked copies of the amendments to expedite our review.
Please furnish a cover letter with your amendments that keys your responses to
our comments and provides any requested information. Detailed cover letters
greatly facilitate our review. Please understand that we may have additional
comments after reviewing your amendments and responses to our
comments.

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    We urge
all persons who are responsible for the accuracy and adequacy of the disclosure
in the filing to be certain that the filing includes all information required
under the Securities Act of 1933 and that they have provided all information
investors require for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company’s disclosure,
they are responsible for the accuracy and adequacy of the disclosures they have
made.

    


    Notwithstanding
our comments, in the event the company requests acceleration of the effective
date of the pending registration statement, it should furnish a letter, at the
time of such request, acknowledging that:

    


    
      	
               
      

            	
              ·

            	
              should
      the Commission or the staff, acting pursuant to delegated authority,
      declare the filing effective, it does not foreclose the Commission from
      taking any action with respect to the
filing;

            


    

    


    
      	
               
      

            	
              ·

            	
              the
      action of the Commission or the staff, acting pursuant to delegated
      authority, in declaring the filing effective, does not relieve the company
      from its full responsibility for the adequacy and accuracy of the
      disclosure in the filing; and

            


    

    


     

    
      	
               
      

            	
              ·

            	
              the
      company may not assert staff comments and the declaration of effectiveness
      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 advised that the Division of Enforcement has access to all
information you provide to the staff of the Division of Corporation Finance in
connection with our review of your filing or in response to our comments on your
filing.

    


    We will
consider a written request for acceleration of the effective date of the
registration statement as confirmation of the fact that those requesting
acceleration are aware of their respective responsibilities under the Securities
Act of 1933 and the Securities Exchange Act of 1934 as they relate to the
proposed public offering of the securities specified in the above registration
statement. We will act on the request and, pursuant to delegated authority,
grant acceleration of the effective date.

    


    We direct
your attention to Rules 460 and 461 regarding requesting acceleration of a
registration statement. Please allow adequate time after the filing of any
amendment for further review before submitting a request for acceleration.
Please provide this request at least two business days in advance of the
requested effective date.

    


    You may
contact Ryan Milne at (202) 551-3680 or Brad Skinner, Senior Assistant Chief
Accountant, at (202) 551-3489 if you have any questions regarding comments on
the financial statements and related matters. Please contact Laura Nicholson at
(202) 551-3584 or, in her absence, Timothy Levenberg, Special Counsel, at (202)
551-3707 with other questions.

    


    


    
      	 
      	
              Sincerely,

            
	 
      	 
      
	 
      	
              H.
      Roger Schwall

            
	 
      	
              Assistant
      Director

            


    

    


    
      	
              Cc:

            	
              B.
      Skinner

            


    

    R.
Milne

    T.
Levenberg

    L.
Nicholson

    


    via
facsimile

    Andrew
Hudders, Esq.

    (212)
754-0330