As filed September 12, 2006 File No. 333-_______
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GALAXY ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
COLORADO 98-0347827
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
1331 - 17TH STREET, SUITE 1050, DENVER, COLORADO 80202 (303) 293-2300
(Address, including zip code, and telephone number, including area
code, or registrant's principal executive offices)
MARC E. BRUNER, PRESIDENT, GALAXY ENERGY CORPORATION
1331 - 17TH STREET, SUITE 1050, DENVER, COLORADO 80202
(303) 293-2300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of all communications to:
FAY M. MATSUKAGE, ESQ., DILL DILL CARR STONBRAKER & HUTCHINGS, P.C.
455 SHERMAN STREET, SUITE 300, DENVER, COLORADO 80203
(303) 777-3737; (303) 777-3823 FAX
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a registration statement pursuant to General Instruction I.D. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1)<F1> UNIT (4)<F4> PRICE (4)<F4> REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par 9,770,830 $0.39 $3,810,623.70 $407.74
value per share shares (2)<F2>
- --------------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par 18,489,375 $0.39 $7,210,856.25 $771.56
value per share shares (3)<F3>
- --------------------------------------------------------------------------------------------------------------------
TOTAL 28,260,205 $0.39 $11,021,479.95 $1,179.30
shares
- --------------------------------------------------------------------------------------------------------------------
- -----------------
<FN>
(1)<F1> Pursuant to Rule 416 of the Securities Act of 1933, as amended, this
registration statement also covers such additional number of shares of
common stock that may become issuable as a result of any stock splits,
stock dividends, or other similar transactions.
(2)<F2> These shares represent approximately 130% of the shares (i) all of the
shares of common stock issuable upon conversion in full of convertible
debentures, (ii) all shares issuable as interest on the debentures
assuming all interest payments are made in shares of common stock and
the debentures are held until maturity, (iii) all of the shares of
common stock issuable upon exercise of warrants, (iv) any securities
issued or issuable upon any stock split, dividend or other distribution
recapitalization or similar event with respect to the foregoing and (v)
any additional shares issuable in connection with any anti-dilution
provisions in the debentures. The registrant will file a new
registration statement to cover the resale of any shares beyond the
amounts included in this registration statement.
(3)<F3> These shares represent approximately 175% of the additional shares
underlying the convertible notes, based on the number of shares that
would be issuable on conversion due to a decrease in the conversion
price, less shares already registered. The registrant will file a new
registration statement to cover the resale of any shares beyond the
amounts included in this registration statement.
(4)<F4> Estimated pursuant to Rule 457(c) solely for the purpose of calculating
the registration fee, based upon the average of the bid and asked
prices for such shares of common stock on September 8, 2006, as
reported by the American Stock Exchange.
</FN>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
Subject to Completion, Dated September 12, 2006
GALAXY ENERGY CORPORATION
UP TO 28,260,205 SHARES OF COMMON STOCK
Unless the context otherwise requires, the terms "we", "our" and "us"
refers to Galaxy Energy Corporation.
This prospectus relates to the resale by selling stockholders of up to
28,260,205shares of common stock. We will not receive any proceeds from sale of
any of the shares offered by the selling stockholders. We will pay the expenses
of registering these shares.
Our common stock is traded on the American Stock Exchange under the
symbol "GAX." On September 8, 2006, the closing price for our common stock was
$0.39 per share.
INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. A
DETAILED EXPLANATION OF THESE RISKS IS INCLUDED IN THE SECTION ENTITLED "RISK
FACTORS" OF THIS PROSPECTUS, BEGINNING ON PAGE 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal OFFENSE.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
____________, 2006
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY.............................................................3
RISK FACTORS...................................................................4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................10
USE OF PROCEEDS...............................................................11
SELLING STOCKHOLDERS..........................................................11
PLAN OF DISTRIBUTION..........................................................13
LEGAL MATTERS.................................................................14
EXPERTS.......................................................................15
WHERE YOU CAN FIND MORE INFORMATION...........................................15
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................15
2
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. You should carefully read this entire prospectus and the financial
statements contained in this prospectus before purchasing our securities.
GALAXY ENERGY CORPORATION
We are an independent oil and gas company engaged in lease acquisition,
exploration, development and production of natural gas. We conduct exploration
activities to locate natural gas and crude petroleum through two wholly-owned
subsidiaries, Dolphin Energy Corporation and Pannonian International, Ltd. As we
commence production of these products, they will be sold to purchasers in the
immediate area where the products are produced. Our operations are focused in
the following core operating areas in the United States:
o THE POWDER RIVER BASIN LOCATED IN WYOMING AND MONTANA. Over the last
couple of years we have acquired leasehold interests in and are
developing five different coal bed methane ("CBM") project areas in the
basin. As of August 9, 2006 we had interests in 160 completed wells, 67
wells in various stages of completion and eight water disposal wells.
Of the completed wells, 21 were delivering natural gas into sales
pipelines, 30 were still dewatering (a precursor to the production of
natural gas), and the remainder were shut-in pending future
infrastructure development work.
o THE PICEANCE BASIN OF WESTERN COLORADO. We currently have drilling or
completion activities underway on four of our operated wells in the
Basin. In addition, we have varying working interests in four
non-operated wells, which include one producing well and three wells
that are in the completion phase. Our leasehold locations are located
in close proximity to natural gas pipelines and the roads needed for
efficient development. We have entered into a non-binding letter of
intent to sell our interest in these properties to an affiliated party.
The proposed transaction is subject to the buyer obtaining financing,
approval by our senior lenders, and other terms and conditions.
We also have interests in early stage natural gas projects in Europe,
where we are being carried by our partners in the initial wells being drilled in
following projects:
o NEUES BERGLAND EXPLORATION PERMIT IN GERMANY. This is a 149,000-acre
leaseholding near Kusel, in southwest Germany. Drilling on the first
test well on the property, the Glantal-1 well, has been completed and
no significant natural gas flows were encountered. As a result, the
wellbore has been plugged and abandoned. The project's mapping has
always shown substantial compartmentalization of possible reservoirs
over the anticlinal structure and the geological information obtained
from the Glantal-1 well will be utilized to guide further planned
exploration efforts, including a specific seismic program covering
selected portions of the Permit within which this well is located, to
determine potential additional drilling locations. Our interest in this
leasehold is 30% and could be reduced to 24%, depending upon the
outcome of the future drilling program.
o JIU VALLEY OF ROMANIA. This is a 21,500-acre coalbed methane project.
The initial test well in this project finished drilling in September
2005. Based on the gas shows during the drilling of the well and core
analyses and preliminary desorption measurements in the field our
partner, a related party, and we have determined to enlarge the cored
section to run casing to total depth of the well and to commence
completion and testing operations. Our interest in this project is 25%.
We also hold leases on 1,955 undeveloped net acres in Texas. These
cover six identified prospects in Rusk and Nacogdoches counties. We do not
currently have the financial resources to drill these properties. These leases
have terms ranging from 18 to 24 months. We have engaged Meagher Oil & Gas
Properties, Inc. to assist us with the sale of certain non-core assets
consisting primarily of undeveloped properties in the Powder River Basin of
Montana and Wyoming, and our properties in East Texas.
Our principal executive offices are located at 1331 - 17th Street,
Suite 1050, Denver, Colorado 80202. Our telephone number is (303) 293-2300. Our
website is located at WWW.GALAXYENERGY.COM. Information contained in our website
is not part of this prospectus.
3
THE OFFERING
Securities offered.............Up to 28,260,205 shares of common stock that may
be acquired by selling stockholders.
Use of proceeds................We will not receive any of the proceeds from the
selling stockholders of shares of our common
stock.
Securities outstanding.........76,425,943 shares of common stock as of August
31, 2006.
Plan of distribution...........The offering is made by the selling stockholders
named in this prospectus, to the extent they sell
shares. Sales may be made in the open market or
in private negotiated transactions, at fixed or
negotiated prices. See "Plan of Distribution."
Risk factors...................An investment is subject to a high degree of
risk. See "Risk Factors."
RISK FACTORS
Before deciding to invest in us or to maintain or increase your
investment, you should carefully consider the risk factors described below,
together with all other information in this prospectus and in our other filings
with the Securities and Exchange Commission ("SEC"), before making an investment
decision. If any of the following risks actually occurs, our business, financial
conditions or operating results could be materially adversely affected. In such
case, the trading price of our common stock could decline, and you may lose all
or part of your investment.
WE HAVE A LIMITED OPERATING HISTORY AND HAVE GENERATED ONLY VERY LIMITED
REVENUES. WE HAVE INCURRED SIGNIFICANT LOSSES AND WILL CONTINUE TO INCUR LOSSES
FOR THE FORESEEABLE FUTURE.
We are a development stage oil and gas company and have earned very
limited production revenue. We have not yet generated any proved resources on
any of our properties. Our principal activities have been raising capital
through the sale of our securities and identifying and evaluating potential oil
and gas properties.
At May 31, 2006, our deficit accumulated during the development stage
was $49,043,768 and our working capital deficit was $10,020,314. The report of
our independent auditors on the financial statements for the year ended November
30, 2005, included an explanatory paragraph indicating there was substantial
doubt regarding our ability to continue as a going concern. For the 2006 fiscal
year, we do not expect our operations to generate sufficient cash flows to
provide working capital for our ongoing overhead, the funding of our lease
acquisitions, and the exploration and development of our properties. Without
adequate financing, we may not be able to successfully develop any prospects
that we have or may acquire and we may not achieve profitability from operations
in the near future or at all.
OUR SHORT-TERM CASH COMMITMENTS REQUIRES US TO SELL MORE DEBT AND/OR EQUITY
SECURITIES AND/OR SELL OUR ASSETS, WHICH MAY BE DETRIMENTAL TO OUR SHAREHOLDERS.
As of May 31, 2006, we had contractual obligations due within less than
a year of $14,700,205. To meet these obligations, we will need to raise
additional funds by selling debt and/or equity securities, and selling assets or
farm-outs or similar types of arrangements. Any financing obtained through the
sale of our equity will likely result in substantial dilution to our
shareholders. We have granted a security interest in our assets to the holders
of some of our notes. This limits our ability to sell debt securities, as we
would have to offer subordinated debt. Also, the existence of a security
interest in our assets restricts our ability to sell assets. If we are forced to
sell assets to meet our operating and capital requirements, we may not realize
the full market value of the assets and the sales price could be less than our
carrying value of the assets.
4
THE LACK OF PRODUCTION AND ESTABLISHED RESERVES FOR OUR PROPERTIES IMPAIRS OUR
ABILITY TO RAISE CAPITAL.
As of May 31, 2006, we have established very limited production of
natural gas from a limited number of wells, and have no properties for which
reserves have been established, making it more difficult to raise the amount of
capital needed to fully exploit the production potential of our properties.
Therefore, we may have to raise capital on terms less favorable than we would
desire. This may result in increased dilution to existing stockholders.
THE VOLATILITY OF NATURAL GAS AND OIL PRICES COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
We are producing and selling oil and gas only on a limited basis at
this time. However, the prices of natural gas and oil affect our business to the
extent that such prices influence a decision to invest in our company. If the
prices of natural gas and oil are low, investors may decide to invest in other
industries.
TERMS OF SUBSEQUENT FINANCINGS MAY ADVERSELY IMPACT YOUR INVESTMENT.
We may have to engage in common equity, debt, or preferred stock
financing in the future. Your rights and the value of your investment in the
common stock could be reduced by any type of financing we do. Interest on debt
securities could increase costs and negatively impacts operating results, and
investors in debt securities may negotiate for other consideration or terms
which could have a negative impact on your investment. Preferred stock could be
issued in series from time to time with such designations, rights, preferences,
and limitations as needed to raise capital, and the terms of preferred stock
could be more advantageous to those investors than to the holders of common
stock. If we need to raise more equity capital from sale of common stock,
institutional or other investors may negotiate terms at least as, and possibly
more, favorable than the terms of your investment. In addition, any shares of
common stock that we sell could be sold into the market and subsequent sales
could adversely affect the market price of our stock.
As an example of the foregoing, the purchasers of convertible notes
issued in May 2005 negotiated a perpetual overriding royalty interest with
respect to our existing domestic acreage averaging from 1% to 3%, depending upon
the nature and location of the property, a right of first refusal with respect
to future debt and/or equity financings, and a right to participate in any
farm-out financing transactions that do not have operating obligations by the
financing party as a material component. The grant of the overriding royalty
interest reduces somewhat the value of the properties to us, thereby negatively
impacting your investment. The existence of a right of first refusal to
participate in future financings may place some limitation on our ability to
negotiate the best possible terms for such financings or may deter others from
offering financing to us.
THE DEVELOPMENT OF OIL AND GAS PROPERTIES INVOLVES SUBSTANTIAL RISKS THAT MAY
RESULT IN A TOTAL LOSS OF INVESTMENT.
The business of exploring for and producing oil and gas involves a
substantial risk of investment loss that even a combination of experience,
knowledge, and careful evaluation may not be able to overcome. Drilling oil and
gas wells involves the risk that the wells will be unproductive or that,
although productive, the wells do not produce oil and/or gas in economic
quantities. There is no way to predict in advance of drilling and testing
whether any prospect encountering oil or gas will yield oil or gas in sufficient
quantities to cover drilling or completion costs or to be economically viable.
The seismic data, other technologies, and the study of producing fields in the
area do not enable us to know conclusively prior to drilling that oil and gas
will be present, or if present, if it is in commercial quantities. We cannot
assure anyone that the analogies that we draw from available data from other
wells, more fully explored prospects, or producing fields will be applicable to
our drilling prospects.
Other hazards, such as unusual or unexpected geological formations,
pressures, fires, blowouts, loss of circulation of drilling fluids or other
conditions may substantially delay or prevent completion of any well. Adverse
weather conditions can also hinder drilling operations.
DELAYS IN OBTAINING PERMITS FOR METHANE WELLS COULD IMPAIR OUR BUSINESS.
Drilling coal bed methane wells requires obtaining permits from various
governmental agencies. The ease of obtaining the necessary permits depends on
the type of mineral ownership and the state in which the property is located.
Intermittent delays in the permitting process can reasonably be expected
throughout the development of
5
any play. We may shift our exploration and development strategy as needed to
accommodate the permitting process. As with all governmental permit processes,
permits may not be issued in a timely fashion or in a form consistent with our
plan of operations.
IF WE ARE NOT THE OPERATOR OF OUR WELLS, WE WILL HAVE LITTLE OR NO CONTROL OVER
THE PROJECT.
If we are not the operator of the wells in which we have an interest,
we will have limited or no control over the project. More specifically, we will
have limited or no control over the following:
o the timing of the drilling and recompleting of wells;
o the timing and amounts of production; and
o the development and operating costs.
In addition, if we should produce natural gas, we may experience possible
negative gas balance conditions because the operator may sell to a purchaser
other than ours, which may cause a delay in the sale of gas to our interests.
WE MAY INCUR LOSSES AS A RESULT OF TITLE DEFICIENCIES IN THE PROPERTIES IN WHICH
WE INVEST.
It is our practice in acquiring oil and gas leases or undivided
interests in oil and gas leases not to undergo the expense of retaining lawyers
to examine the title to the mineral interest to be placed under lease or already
placed under lease. Rather, we will rely upon the judgment of oil and gas lease
brokers or landsmen who perform the field work in examining records in the
appropriate governmental office before attempting to place under lease a
specific mineral interest. This practice is widely followed in the oil and gas
industry. Prior to the drilling of an oil and gas well, however, it is the
normal practice in the oil and gas industry for the person or company acting as
the operator of the well to obtain a preliminary title review of the spacing
unit within which the proposed oil and gas well is to be drilled to ensure there
are no obvious deficiencies in title to the well; however, neither we nor the
person or company acting as operator of the well will obtain counsel to examine
title to such spacing unit until the well is about to go into production. It
frequently happens, as a result of such examinations, that certain curative work
must be done to correct deficiencies in the marketability of the title, and such
curative work entails expense. The work might include obtaining affidavits of
heirship or causing an estate to be administered. It does happen, from time to
time, that the examination made by the title lawyers reveals that the oil and
gas lease or leases are worthless, having been purchased in error from a person
who is not the owner of the mineral interest desired. In such instances, the
amount paid for such oil and gas lease or leases is generally lost.
WE ARE SUBJECT TO ENVIRONMENTAL REGULATIONS THAT CAN ADVERSELY AFFECT THE TIMING
AND COST OF OUR OPERATIONS.
In general, our exploration activities are subject to certain federal, state and
local laws and regulations relating to environmental quality and pollution
control. Such laws and regulations increase the costs of these activities and
may prevent or delay the commencement or continuance of a given operation.
Compliance with these laws and regulations has not had a material effect on our
operations or financial condition to date. Specifically, we are subject to
legislation regarding emissions into the environment, water discharges, and
storage and disposition of hazardous wastes. In addition, legislation has been
enacted which requires well and facility sites to be abandoned and reclaimed to
the satisfaction of state authorities. As of this date, we are unable to predict
the ultimate cost of compliance.
WE ARE SUBJECT TO GOVERNMENTAL REGULATIONS THAT MAY ADVERSELY AFFECT THE COST OF
OUR OPERATIONS.
Oil and gas exploration, development and production are subject to
various types of regulation by local, state and federal agencies. Legislation
affecting the oil and gas industry is under constant review for amendment and
expansion. Also, numerous departments and agencies, both federal and state, are
authorized by statute to issue and have issued rules and regulations binding on
the oil and gas industry and its individual members, some of which carry
substantial penalties for failure to comply. The regulatory burden on the oil
and gas industry increases our cost of doing business and, consequently, affects
our profitability. The possibility exists that laws and regulations enacted in
the future will adversely affect the oil and gas industry. Such new legislation
or regulations could drive up the cost of doing business to the point where our
projects would not be economically feasible.
6
Most states in which we own and operate properties have statutes, rules
and regulations governing conservation matters including the unitization or
pooling of oil and gas properties, establishment of maximum rates of production
from oil and gas wells and the spacing of such wells.
OUR COMPETITORS MAY HAVE GREATER RESOURCES THAT COULD ENABLE THEM TO PAY A
HIGHER PRICE FOR PROPERTIES.
The oil and gas industry is intensely competitive and we compete with
other companies which have greater resources. Many of such companies not only
explore for and produce crude oil and natural gas but also carry on refining
operations and market petroleum and other products on a worldwide basis. Such
companies may be able to pay more for productive oil and natural gas properties
and exploratory prospects, and to define, evaluate, bid for and purchase a
greater number of properties and prospects than our financial or human resources
permit. Our ability to acquire additional properties and to discover reserves in
the future will be dependent upon our ability to evaluate and select suitable
properties, to obtain funding and to consummate transactions in a highly
competitive environment. There is also competition between the oil and gas
industry and other industries with respect to the supply of energy and fuel to
industrial, commercial and individual customers. At this stage of our
development, we cannot predict if we will be able to compete effectively against
such companies.
MARC A. BRUNER AND HIS AFFILIATES CONTROL A SIGNIFICANT PERCENTAGE OF OUR
OUTSTANDING COMMON STOCK, WHICH WILL ENABLE THEM TO CONTROL MANY SIGNIFICANT
CORPORATE ACTIONS AND MAY PREVENT A CHANGE IN CONTROL THAT WOULD OTHERWISE BE
BENEFICIAL TO OUR STOCKHOLDERS.
Through shares owned individually and by Resource Venture Management
and Bruner Group, LLP, Marc A. Bruner beneficially owned approximately 17.0% of
our stock as of June 28, 2006. In addition, he is the father of our president,
Marc E. Bruner. This control by Mr. Bruner could have a substantial impact on
matters requiring the vote of the stockholders, including the election of our
directors and most of our corporate actions. This control could delay, defer or
prevent others from initiating a potential merger, takeover or other change in
our control, even if these actions would benefit our stockholders and us. This
control could adversely affect the voting and other rights of our other
stockholders and could depress the market price of our common stock.
OUR FUTURE OPERATING RESULTS MAY FLUCTUATE AND CAUSE THE PRICE OF OUR COMMON
STOCK TO DECLINE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES FOR INVESTORS.
Our limited operating history and the lack of production or reserve
reports on our properties make it difficult to predict accurately our future
operations. We expect that our operating results will fluctuate significantly
from quarter to quarter, due to a variety of factors, many of which are beyond
our control. If our operating results fall below the expectations of investors
or securities analysts, the price of our common stock could decline
significantly. The factors that could cause our operating results to fluctuate
include, but are not limited to:
o worldwide or regional demand for energy;
o domestic and foreign supply of natural gas and oil;
o weather conditions;
o domestic and foreign governmental regulations;
o political conditions in natural gas or oil producing regions;
o price and availability of alternative fuels;
o availability and cost of drilling equipment;
o our ability to establish and maintain key relationships with
lessors, drilling partners and drilling funds;
o the amount and timing of operating costs and capital
expenditures relating to maintaining our business, operations,
and infrastructure; and
o general economic conditions and economic conditions specific to
the energy sector.
These and other external factors have caused and may continue to cause
the market price and demand for our common stock to fluctuate substantially,
which may limit or prevent investors from readily selling their shares of common
stock and may otherwise negatively affect the liquidity of our common stock.
7
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. If securities class action litigation is brought against us it could
result in substantial costs and a diversion of our management's attention and
resources, which could hurt our business.
OUR ISSUANCE OF THE CONVERTIBLE DEBT AND WARRANTS COULD SUBSTANTIALLY DILUTE THE
INTERESTS OF SHAREHOLDERS.
We issued convertible notes in 2004 that have an outstanding principal
balance of approximately $6.248 million at September 1, 2006. We also issued
$7.695 million in notes in March 2005 and $10.0 million in notes in May 2005.
These notes are convertible into shares of our common stock at any time prior to
their respective maturity dates at a current conversion price of $1.25, subject
to adjustments for stock splits, stock dividends, stock combinations, and other
similar transactions. The initial conversion prices of these notes were $1.87
and $1.88. The conversion prices of the convertible notes could be further
lowered, perhaps substantially, in a variety of circumstances, including:
o our issuance of common stock below the convertible notes'
conversion prices, either directly or in connection with the
issuance of securities that are convertible into, or
exercisable for, shares of our common stock;
o our failure to comply with specific registration and listing
obligations applicable to the common stock into which the
convertible notes are convertible; and
o our breaching other obligations to the holders of the
convertible notes.
We issued $7.0 million of convertible debentures in April and June
2006, which are convertible into shares of our common stock at a conversion
price of $1.56 per share, subject to adjustments for stock splits, stock
dividends, stock combinations, and other similar transactions.
In addition to the convertible debt, we issued to the holders of
convertible notes in August 2004 three-year warrants that currently entitle the
warrant holders to purchase an aggregate of 6,400,001 shares of our common stock
at an exercise price of $1.25 per share. As originally issued, these warrants
were exercisable at $1.54 per share to purchase a total of 5,194,806 shares. We
also issued three-year warrants to the holders of convertible notes in March
2005 to purchase an aggregate of 1,637,235 shares of our common stock at an
exercise price of $1.88 per share. The exercise price of these warrants has been
lowered to $1.25 per share. Lastly, we issued five-year warrants to the holders
of convertible debentures in April and June 2006 to purchase an aggregate of
1,346,152 shares of our common stock at an exercise price of $1.60 per share.
Both the number of warrants and the exercise price are subject to adjustments
that could make them further dilutive to our shareholders. In addition, the
warrants issued in August 2004 and the notes issued in May 2005 provide for the
issuance of additional warrants under certain circumstances.
Neither the convertible notes nor the warrants establish a "floor" that
would limit reductions in the conversion price of the convertible notes or the
exercise price of the warrants that may occur under certain circumstances.
Correspondingly, there is no "ceiling" on the number of shares that may be
issuable under certain circumstances under the anti-dilution adjustment in the
convertible notes and warrants. We also issued to the "finders" of the August
2004 and May 2005 financing transactions five-year warrants to purchase 400,000
shares of our common stock at an exercise price of $1.25 per share and 200,000
shares at an exercise price of $1.25 per share. Accordingly, our issuance of the
convertible debt and warrants could substantially dilute the interests of our
shareholders.
OUR FAILURE TO SATISFY OUR REGISTRATION, LISTING, AND OTHER OBLIGATIONS WITH
RESPECT TO THE COMMON STOCK UNDERLYING THE CONVERTIBLE DEBT AND THE WARRANTS
COULD RESULT IN ADVERSE CONSEQUENCES, INCLUDING ACCELERATION OF THE CONVERTIBLE
DEBT.
We are required to maintain the effectiveness of the registration
statement, of which this document forms a part, covering the resale of the
common stock underlying the convertible debt and warrants, until the earlier of
the date the underlying common stock may be resold pursuant to Rule 144(k) under
the Securities Act of 1933 or the date on which the sale of all the underlying
common stock is completed, subject to certain exceptions. We will be subject to
various penalties for failing to meet our registration obligations and the
related listing obligations for the
8
underlying common stock, which include cash penalties and the forced redemption
of the convertible notes at the greater of:
o 125% of the principal amount, plus accrued interest; or
o the number of shares of our common stock issuable upon
conversion, multiplied by the weighted average price of our
common stock on the trading day immediately preceding our
registration or listing default.
WE ARE OBLIGATED TO MAKE SIGNIFICANT PERIODIC PAYMENTS OF PRINCIPAL AND INTEREST
UNDER OUR CONVERTIBLE NOTES.
We have a material amount of indebtedness outstanding under the
convertible notes. We are required to make monthly principal payments of
$833,333 and accrued interest under the terms of the August 2004 and October
2004 financings, as well as quarterly payments of accrued interest under the
terms of the May 2005 financing. The holders of the 2004 notes have given us a
deferral of the monthly payments to October 2, 2006. We may make the payments in
stock, subject to meeting certain conditions. If we at any time default on our
payment, as well as non-payment, obligations the creditors will have all rights
available under the instrument, including acceleration, termination, and
enforcement of security interests. Such security interests cover all of our
assets and those of our subsidiaries.
FUTURE EQUITY TRANSACTIONS, INCLUDING EXERCISE OF OPTIONS OR WARRANTS, COULD
RESULT IN DILUTION.
From time to time, we sell restricted stock, warrants, and convertible
debt to investors in private placements. Because the stock is restricted, the
stock is sold at a greater discount to market prices compared to a public stock
offering, and the exercise price of the warrants sometimes is at or even lower
than market prices. These transactions cause dilution to existing stockholders.
Also, from time to time, options are issued to officers, directors, or
employees, with exercise prices equal to market. Exercise of in-the-money
options and warrants will result in dilution to existing stockholders. The
amount of dilution will depend on the spread between the market and exercise
price, and the number of shares involved.
THE ISSUANCE OF SHARES UPON EXERCISE OF OUTSTANDING WARRANTS MAY CAUSE IMMEDIATE
AND SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS.
The issuance of shares upon exercise of warrants may result in
substantial dilution to the interests of other stockholders since the selling
stockholders may sell the full amount issuable on exercise. In addition, such
shares would increase the number of shares in the "public float" and could
depress the market price for our common stock.
OUR OFFICERS, DIRECTORS, AND ADVISORS ARE ENGAGED IN OTHER BUSINESSES, WHICH MAY
RESULT IN CONFLICTS OF INTEREST.
Certain of our officers, directors, and advisors also serve as
directors of other companies or have significant shareholdings in other
companies. For example, Marc A. Bruner, our largest shareholder, serves as the
chairman of the board of Gasco Energy, Inc., a Nevada corporation whose stock is
traded on the American Stock Exchange, and chairman of the board, president and
chief executive officer of Falcon Oil & Gas Ltd., a British Columbia corporation
whose stock is traded on the TSX Venture Exchange ("Falcon"). He is also a
significant shareholder of Exxel Energy Corp., a British Columbia corporation
("Exxel"), whose stock is traded on the TSX Venture Exchange. Marc A. Bruner is
the father of our President, Marc E. Bruner. James Edwards, one of our
directors, is the chief operating officer of Falcon.
To the extent that such other companies participate in ventures in
which we may participate, or compete for prospects or financial resources with
us, these officers and directors will have a conflict of interest in negotiating
and concluding terms relating to the extent of such participation. In the event
that such a conflict of interest arises at a meeting of the board of directors,
a director who has such a conflict must disclose the nature and extent of his
interest to the board of directors and abstain from voting for or against the
approval of such participation or such terms.
In March 2005, we entered into an agreement to acquire an initial
58-1/3% working interest in 4,000 net undeveloped mineral acres in the Piceance
Basin in Colorado. The sellers were not willing to enter into the
9
agreement without having some agreement regarding the remaining 41-2/3% working
interest in the subject properties. Since we had previously decided that our
maximum commitment should not exceed that provided in the agreement, it was
necessary to find a third party to take the remaining working interest. Marc A.
Bruner was willing to provide a guaranteed payment to the sellers and enter into
an agreement with the sellers to acquire a 16-1/3% working interest for such
payment, with the option to acquire up to all of the then remaining 25% working
interest in the subject properties by investing an additional sum. The members
of our board of directors who did not have a conflict of interest unanimously
approved this arrangement. We entered into a participation agreement with Mr.
Bruner in March 2005.
In March 2005, Mr. Bruner assigned all of his rights and obligations
under our participation agreement to Exxel. As of August 2, 2006, Mr. Bruner
owned approximately 18.5% of the outstanding common stock of Exxel. Our
participation agreement with Exxel, as amended, establishes our working interest
at 25%, with Exxel having a 75% interest.
On August 1, 2006, we entered into a non-binding letter of intent with
Exxel to purchase our interest in our properties in the Piceance Basin. It is
proposed that Exxel's wholly-owned subsidiary, Exxel Energy USA Inc., would pay
$50 million (US) to acquire our undivided 25% working interest in the Garfield
County, Colorado, project known as Rifle Creek. Exxel USA owns the other 75%
working interest in Rifle Creek. The proposed transaction is subject to Exxel's
obtaining financing, approval by our senior lenders, and other terms and
conditions.
In June 2005, we entered into a farm-out agreement with Falcon to
evaluate the 21,538 gross acre concession held by our subsidiary in the Jiu
Valley Coal Basin in Romania, which was issued to Pannonian by the Romanian
government in October 2002. The terms of the farmout agreement were essentially
the same as those that had been negotiated with a U.K. company, which is
unaffiliated with and unrelated to either us, Falcon or any of the officers or
principal shareholders thereof. After the U.K. company declined to proceed with
the farmout, Falcon offered to accept the farmout on essentially the same terms.
The members of our board of directors who did not have a conflict of interest
unanimously approved the farmout agreement with Falcon.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference "forward-looking
statements." All statements other than statements of historical facts included
or incorporated by reference in this report, including, without limitation,
statements regarding our future financial position, business strategy, budgets,
projected costs and plans and objectives of management for future operations,
are forward-looking statements. In addition, forward-looking statements
generally can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "intend," "project," "estimate," "anticipate,"
"believe," or "continue" or the negative thereof or variations thereon or
similar terminology. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, we cannot give any assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from our expectations ("Cautionary
Statements") include, but are not limited to, our assumptions about energy
markets, production levels, reserve levels, operating results, competitive
conditions, technology, the availability of capital resources, capital
expenditure obligations, the supply and demand for oil and natural gas, the
price of oil and natural gas, currency exchange rates, the weather, inflation,
the availability of goods and services, drilling risks, future processing
volumes and pipeline throughput, general economic conditions (either
internationally or nationally or in the jurisdictions in which we are doing
business), legislative or regulatory changes (including changes in environmental
regulation, environmental risks and liability under federal, state and foreign
environmental laws and regulations), the securities or capital markets and other
factors described in "Risk Factors" above and disclosed in our reports filed
with the SEC. All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly qualified in
their entirety by the cautionary statements. We assume no duty to update or
revise our forward-looking statements based on changes in internal estimates or
expectations or otherwise.
10
USE OF PROCEEDS
We will not receive any of the proceeds from the selling stockholders
of shares of our common stock. However, we may receive the sale price of any
common stock we sell to the selling stockholders upon exercise of the warrants.
We expect to use the proceeds received from the exercise of warrants, if any,
for general working capital purposes. The warrants contain a provision for
cashless exercise under certain circumstances. If that provision is utilized, we
will not receive any proceeds.
SELLING STOCKHOLDERS
This prospectus relates to the resale of 9,770,830 shares of common
stock issuable upon conversion of or as interest on the convertible debentures
issued in April and June 2006 and upon exercise of warrants issued in connection
with these debentures. We are registering the shares in order to permit the
selling stockholders to offer the shares of common stock for resale from time to
time. Except for the ownership of these convertible debentures and warrants, and
the ownership of common stock in the case of Messrs. Sauter and Mathys, the
selling stockholders have not had any material relationship with us within the
past three years.
This prospectus also relates to the resale of 19,771,319 shares of
common stock issuable upon conversion of or as interest on the convertible notes
issued in 2004. We previously registered the shares issuable upon conversion of
the notes, but the conversion prices at which shares have been issued have been
lower than originally anticipated, making it necessary to register additional
shares. We are registering the additional shares in order to permit the selling
stockholders to offer the shares of common stock for resale from time to time.
Except for the ownership of these convertible notes and warrants issued in 2004
and convertible notes issued in May 2005, the selling stockholders have not had
any material relationship with us within the past three years.
The table below lists the selling stockholders and other information
regarding the beneficial ownership of the common stock by the selling
stockholders. The second column lists for each selling stockholder the number of
shares of common stock held, plus the number of shares of common stock, based on
its ownership of all of the convertible debt and the warrants, that would have
been issuable to such selling stockholders as of September 1, 2006, assuming
conversion of all convertible debt plus accrued interest thereon as of such date
and exercise of the warrants held by such selling stockholders on that date,
without regard to any limitations on conversions or exercise. The third column
lists the shares of common stock being offered by this prospectus by each
selling stockholder. We will file a new registration statement to cover the
resale of any shares beyond the amounts included in this prospectus. The fourth
column assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus and sales pursuant to prospectuses under other
registration statements and sale of all shares under the convertible notes
issued in May 2005.
Under the terms of the convertible debentures, convertible notes and
the warrants, the selling stockholders may not convert the convertible
debentures or convertible notes, or exercise the warrants, to the extent such
conversion or exercise would cause the selling stockholder, together with its
affiliates, to have acquired a number of shares of common stock which would
exceed 4.99% of our then outstanding common stock, excluding for purposes of
such determination shares of common stock issuable upon conversion of the
convertible debt which have not been converted and upon exercise of the warrants
which have not been exercised. The number of shares in the second column does
not reflect this limitation. The selling stockholders may sell all, some or none
of their shares in this offering. See "Plan of Distribution."
11
NAME OF SELLING STOCKHOLDER NUMBER OF SHARES OWNERSHIP AFTER OFFERING
SHARES
BENEFICIALLY REGISTERED FOR NUMBER OF
NAME OF SELLING STOCKHOLDER OWNED (1)<F1> RESALE SHARES PERCENT
UNDER CONVERTIBLE DEBENTURES AND WARRANTS
ISSUED IN 2006:
Bruno Sauter (2)<F2> 1,127,153 1,395,832 53,436 (3)<F3>
Nicolas Mathys (2)<F2> 1,300,035 1,395,832 226,318 (3)<F3>
Eversource Group Limited (2)<F2> (4)<F4> 2,684,295 3,489,583 0 0%
Asset Protection Fund Limited (2)<F2> (5)<F5> 2,684,295 3,489,583 0 0%
UNDER CONVERTIBLE NOTES AND WARRANTS ISSUED
IN 2004:
HFTP Investment L.L.C (6)<F6> (7)<F7> 10,346,063 10,018,691 0 0%
Gaia Offshore Master Fund, Ltd. (6)<F6> (7)<F7> 2,669,952 2,585,470 0 0%
Caerus Fund Ltd. (6)<F6> (7)<F7> 333,744 323,185 0 0%
AG Offshore Convertibles, Ltd. (6)<F6> (8)<F8> 3,435,885 5,562,029 0 0%
- ------------------
<FN>
(1)<F1> The shares of common stock considered beneficially owned by each
selling stockholder include that number of shares of our common stock
that such selling stockholder could acquire by converting its
convertible debentures at the conversion price, taking into account
accrued but unpaid interest as of September 1, 2006, and by exercising
its warrants, if any.
(2)<F2> The selling stockholders may sell up to 9,770,830 shares of our common
stock under this prospectus. The selling stockholders may convert the
convertible debentures into shares of our common stock at any time at
their respective initial conversion prices, subject to certain
adjustments and so long as such conversion does not violate the terms
of any provisions of the debt instruments and agreements with the
holders of our senior debt. The conversion price of the debentures is
$1.56.
The number of shares registered is at 130% of the shares of our common
stock underlying the convertible debentures at $1.56 and underlying
warrants issued to the selling stockholders.
(3)<F3> Less than 1%.
(4)<F4> Cecilia Chow may be deemed to own beneficially the shares held of
record by Eversource Group Limited through her control of that entity.
(5)<F5> David Dawes may be deemed to own beneficially the shares held of record
by Asset Protection Fund Limited through his control of that entity.
(6)<F6> The selling shareholders may sell up to 18,489,375 shares of our common
stock under this prospectus. As discussed in footnote (1) above, the
selling shareholders may convert the convertible notes into shares of
our common stock at any time at the current conversion price of $1.25
per share, subject to certain adjustments. Subject to satisfying
certain conditions, we may elect to satisfy our obligation to make
payments under the convertible notes, and under certain circumstances
we may be obligated to satisfy such obligations, by requiring partial
conversions of the convertible notes into shares of our common stock.
If such a partial conversion takes place, the conversion price, subject
to certain anti-dilution adjustments, would be the lower of:
o $1.25; or
o 93% of the average of the weighted average trading price of
our common stock on the trading day prior to conversion during
the time period to which the installment relates.
The number of shares registered is at least 175% of the shares of our
common stock underlying the convertible notes at the lower of the
conversion prices discussed above, based on the average of the weighted
average trading prices of our common stock during the five trading days
ended September 8, 2006, less the number of shares covered by prior
registration statements.
12
(7)<F7> Promethean Asset Management, LLC, a New York limited liability company
("Promethean"), serves as investment manager to HFTP Investment L.L.C.
("HFTP"), Gaia Offshore Master Fund, Ltd. ("Gaia"), and Caerus Fund
Ltd. ("Caerus") and may be deemed to share beneficial ownership of the
shares beneficially owned by HFTP, Gaia, and Caerus. The ownership
information for each of these three selling shareholders does not
include the ownership information for the others. Promethean disclaims
beneficial ownership of the shares beneficially owned by HFTP, Gaia,
and Caerus and each of HFTP, Gaia, and Caerus disclaims beneficial
ownership of the shares beneficially owned by the others. James F.
O'Brien, Jr. indirectly controls Promethean. Mr. O'Brien disclaims
beneficial ownership of the shares beneficially owned by Promethean,
HFTP, Gaia, and Caerus.
(8)<F8> Angelo, Gordon & Co., L.P., a Delaware limited partnership, serves as
director of AG Offshore Convertibles, Ltd. John M. Angelo and Michael
L. Gordon are the principal executive officers of Angelo, Gordon & Co.,
L.P. Each of Angelo, Gordon & Co., L.P. and Messrs. Angelo and Gordon
disclaim beneficial ownership of the shares held by AG Offshore
Convertibles, Ltd.
</FN>
PLAN OF DISTRIBUTION
We are registering the resale of shares of common stock held by selling
stockholders, and shares of common stock issuable upon conversion of the
convertible notes and upon exercise of the warrants to permit the resale of the
shares of common stock by the holders of the convertible notes and the warrants
from time to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the selling stockholders of the shares of common
stock. We will bear all fees and expenses incident to our obligation to register
the shares of common stock.
The selling stockholders may sell all or a portion of the common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the common stock
is sold through underwriters or broker-dealers, the selling stockholders will be
responsible for underwriting discounts or commissions or agent's commissions.
The common stock may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
(1) on the American Stock Exchange or any other national securities
exchange or quotation service on which the securities may be
listed or quoted at the time of sale,
(2) in the over-the-counter market,
(3) in transactions otherwise than on these exchanges or systems or in
the over-the-counter market, (4) through the writing of options,
whether such options are listed on an options exchange or
otherwise, or
(5) through the settlement of short sales.
If the selling stockholders effect such transactions by selling shares
of common stock to or through underwriters, broker-dealers or agents, such
underwriters, brokers-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, brokers-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the common stock or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the common stock in the course of hedging in positions they assume. The
selling stockholders may also sell shares of common stock short and deliver
shares of common stock covered by this prospectus to close out short positions,
provided that the short sale is made after the registration statement is
declared effective and a copy of this prospectus is delivered in connection with
the short sale. The selling stockholders may also loan or pledge shares of
common stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in
some or all of the convertible notes, warrants, or shares of common stock owned
by them and, if they default in the performance of their secured
13
obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time pursuant to the prospectus. The selling
stockholders also may transfer or donate the shares of common stock in other
circumstances, in which case the transferees, donees or other successors in
interest will be the selling beneficial owners for purposes of the prospectus.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions paid, or any
discounts or concessions allowed to any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of shares of common stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.
Each of the selling stockholders has advised us that it purchased the
convertible debentures in the ordinary course of its business and at the time
such selling stockholder purchased the convertible notes it was not a party to
any agreement or other understanding to distribute the securities, directly or
indirectly.
Under the securities laws of some states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of common stock may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
There can be no assurance that any selling stockholder will sell any or
all of the shares of common stock registered pursuant to the registration
statement of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M of the Exchange Act, which may limit the timing of purchases and sales of any
of the shares of common stock by the selling stockholders and any other
participating person. Regulation M may also restrict the ability of any person
engaged in the distribution of the shares of common stock to engage in
market-making activities with respect to the shares of common stock. All of the
foregoing may affect the marketability of the shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common
stock pursuant to the registration rights agreement, estimated to be $25,000 in
total, including, without limitation, Commission filing fees and expenses of
compliance with state securities or "blue sky" laws; provided, however, that the
selling stockholders will pay all underwriting discounts and selling
commissions, if any. In connection with sales made pursuant to this prospectus,
we will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, or the selling stockholders will be
entitled to contribution, in accordance with the registration rights agreement.
We will be indemnified by the selling stockholders against civil liabilities and
legal fees, including investor legal fees, that may arise from any written
information furnished to us by the selling stockholders for use in this
prospectus, or we will be entitled to contribution, in accordance with the
registration rights agreement.
Once sold under the registration statement of which this prospectus
forms a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.
LEGAL MATTERS
Dill Dill Carr Stonbraker & Hutchings, P.C., Denver, Colorado, has
given an opinion on the validity of the securities.
14
EXPERTS
The financial statements as of and for the years ended November 30,
2005 and 2004 incorporated by reference in this prospectus and registration
statement have been audited by Hein & Associates LLP, an independent registered
public accounting firm, to the extent and for the periods indicated in their
report also incorporated by reference, and are included in reliance upon such
report and upon the authority of such firm as experts in accounting and
auditing.
The financial statements for the year ended November 30, 2003
incorporated by reference in this prospectus and registration statement have
been audited by Wheeler Wasoff, P.C., an independent registered public
accounting firm, to the extent and for the periods indicated in their report
also incorporated by reference, and are included in reliance upon such report
and upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting and other requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith file or
furnish reports, proxy statements and other information with the SEC. These
reports, proxy statements and other information may be read and copied at the
Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. Reports, proxy and information statements and
other information about us that we file or furnish electronically with the SEC
are available at the SEC's website at www.sec.gov or at our website at
www.galaxyenergy.com.
The information in this prospectus itself may not contain all the
information that may be important to your decision whether to invest in the
common stock. You should read the entire prospectus, including the documents
incorporated by reference into the prospectus (as well as the exhibits to those
documents), before making an investment decision.
Any statement contained in any document included herein shall be deemed
to be modified or superseded, for purposes of this prospectus, to the extent
that a statement contained in or omitted from this prospectus, or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We disclose important information to you by referring you to documents
that we have previously filed with the SEC or documents we will file with the
SEC in the future. We hereby incorporate by reference the following documents
into this prospectus:
o our Annual Report on Form 10-K for the fiscal year ended
November 30, 2005, filed with the SEC on March 15, 2006;
o our Quarterly Reports on Form 10-Q for the quarters ended
February 28, 2006 (filed April 19, 2006), and May 31, 2006
(filed July 17, 2006);
o our Current Reports on Form 8-K dated April 25, 2006 (filed
April 26, 2006), June 20, 2006 (filed June 26, 2006), July 7,
2006 (filed July 11, 2006), August 1, 2006 (filed August 1,
2006), August 4, 2006 (filed August 4, 2006), and August 22,
2006 (filed August 23, 2006); and
o the description of our common stock contained in our
registration statement on Form 10SB12G/A filed with the SEC on
March 2, 2001, and all amendments and reports filed by us to
update that description.
15
Additionally, all documents filed by us with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
after the date of this prospectus and before the termination or completion of
this offering shall be deemed to be incorporated by reference into this
prospectus from the respective dates of filing of such documents. Any
information that we subsequently file with the SEC that is incorporated by
reference as described above will automatically update and supersede any
previous information that is part of this prospectus.
Upon written or oral request, we will provide you without charge, a
copy of any or all of the documents incorporated by reference, other than
exhibits to those documents unless the exhibits are specifically incorporated by
reference in the documents. Please send requests to Galaxy Energy Corporation,
Attn: Investor Relations, 1331 - 17th Street, Suite 1050, Denver, Colorado
80202, or call (303) 293-2300.
16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the registrant in connection with the
securities being registered are as follows:
Securities and Exchange Commission filing fee........$ 1,179
Accounting fees and expenses......................... 5,000
Blue sky fees and expenses........................... 1,000
Legal fees and expenses.............................. 10,000
Transfer agent fees and expenses..................... 1,000
Printing expenses.................................... 2,000
Miscellaneous expenses............................... 4,821
------------
Total................................................$ 25,000
============
All amounts are estimates except the SEC filing fee. Under the terms of
the registration rights agreement with the selling stockholders, the registrant
has agreed to pay all reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with the registration.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Colorado Business Corporation Act, the registrant has broad
powers to indemnify its directors and officers against liabilities they may
incur in such capacities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). The registrant's Bylaws also provide
for mandatory indemnification of its directors and executive officers, and
permissive indemnification of its employees and agents, to the fullest extent
permissible under Colorado law.
ITEM 16. EXHIBITS
- --------------------------------------------------------------------------------
REGULATION S-K
NUMBER EXHIBIT
- --------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization dated as of November 1,
2002 by and among Galaxy Investments, Inc., Dolphin
Acquisition Corporation and Dolphin Energy Corporation (1)
- --------------------------------------------------------------------------------
2.2 Share Exchange Agreement by and between Galaxy Investments,
Inc. and Pannonian International, Ltd. (2)
- --------------------------------------------------------------------------------
5.1 Opinion of Dill Dill Carr Stonbraker & Hutchings, P.C.
- --------------------------------------------------------------------------------
23.1 Consent of Dill Dill Carr Stonbraker & Hutchings, P.C.
Reference is made to Exhibit 5.1
- --------------------------------------------------------------------------------
23.2 Consent of Wheeler Wasoff, P.C.
- --------------------------------------------------------------------------------
23.3 Consent of Hein & Associates LLP
- --------------------------------------------------------------------------------
- -----------------
(1) Incorporated by reference to the exhibits to the registrant's current
report on Form 8-K dated November 13, 2002, filed December 6, 2002,
file number 0-32237.
(2) Incorporated by reference to the exhibits to the registrant's current
report on Form 8-K dated May 7, 2003, filed May 13, 2003, file number
0-32237.
II-1
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, That paragraphs (a)(1)(i), (a)(1)(ii) and
(1)(1)(iii) of this section do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for the purpose of determining liability under the Securities
Act of 1933 to any purchaser, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as
of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-2
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado on September 12, 2006.
GALAXY ENERGY CORPORATION
By: /s/ MARC E. BRUNER
----------------------------------------
Marc E. Bruner, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated:
SIGNATURE TITLE DATE
President and Director (Principal Executive
/s/ MARC E. BRUNER Officer) September 12, 2006
- ------------------------------------
Marc E. Bruner
Senior Vice President, Chief Financial
Officer, Secretary, and Treasurer (Principal
/s/ CHRISTOPHER S. HARDESTY Financial Officer) September 12, 2006
- ------------------------------------
Christopher S. Hardesty
Vice President - Administration and
/s/ RICHARD E. KURTENBACH Controller (Principal Accounting Officer) September 12, 2006
- ------------------------------------
Richard E. Kurtenbach
/s/ NATHAN C. COLLINS Director September 12, 2006
- ------------------------------------
Nathan C. Collins
Director September __, 2006
- ------------------------------------
Dr. James M. Edwards
Director September __, 2006
- ------------------------------------
Robert Thomas Fetters, Jr.
/s/ CECIL D. GRITZ Director September 12, 2006
- -----------------------------------------
Cecil D. Gritz
II-4