[LETTERHEAD OF DILL DILL CARR STONBRAKER & HUTCHINGS, PC]
Christopher W. Carr
Daniel W. Carr
John J. Coates
Kevin M. Coates
H. Alan Dill
455 Sherman Street, Suite 300 Robert A. Dill
Denver, Colorado 80203 Thomas M. Dunn
Phone: 303-777-3737 John A. Hutchings
Fax: 303-777-3823 Stephen M. Lee
www.dillanddill.com Fay M. Matsukage*
Robert S. McCormack
Adam P. Stapen
Jon Stonbraker
Patrick D. Tooley
*Also licensed in Nevada
October 12, 2006
H. Roger Schwall, Assistant Director
Division of Corporation Finance
Mail Stop 7010
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
RE: GALAXY ENERGY CORPORATION
REGISTRATION STATEMENT ON FORM S-3
FILED SEPTEMBER 12, 2006
FILE NO. 333-137260
Dear Mr. Schwall:
On behalf of Galaxy Energy Corporation (the "Company"), we are responding to the
comments of the Staff in its letter dated October 6, 2006. The comments are set
forth below, followed by the Company's responses.
1. WE NOTE THE REFERENCE IN THE SECURITIES PURCHASE AGREEMENTS FILED FOR
THE APRIL 2006 AND JUNE 2006 PRIVATE PLACEMENTS TO THE ESCROW OF THE
PROCEEDS FROM THOSE PLACEMENTS. PLEASE FILE AS EXHIBITS EACH OF THOSE
ESCROW AGREEMENTS.
RESPONSE: The Company used the client trust account of its oil and gas
counsel, Welborn Sullivan Meck & Tooley, P.C., for the escrow
arrangements. There were no written escrow agreements for these
transactions. The investors sent the purchase amounts by wire transfer
to that client trust account, and the funds were not released to the
Company until all of the items specified for closing in the Securities
Purchase Agreements were provided.
2. PLEASE STATE THE EXEMPTION RELIED UPON TO SELL THE SECURITIES ISSUED IN
APRIL 2006 AND JUNE 2006 PRIVATE PLACEMENTS, AND THE BASIS FOR YOUR
CONCLUSION THAT YOU COULD RELY UPON SUCH EXEMPTIONS.
H. Roger Schwall, Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
October 12, 2006
Page 2
RESPONSE: The Company relied upon the exemption from registration
contained in Section 4(2) of the Securities Act of 1933. A total of
four purchasers were involved in these financing transactions, and two
of the purchasers had invested in the Company previously. Accordingly,
these two purchasers were deemed to be sophisticated with respect to
the investment in the securities due to their financial condition and
involvement in the registrant's business. The other two purchasers were
deemed to be sophisticated with respect to the investment due to their
financial condition and due to the fact they had made similar types of
investments. Restrictive legends were placed on the debenture and
warrants evidencing the securities issued in the transactions.
The Company believes that disclosure of the exemption can be added to
the "Selling Stockholders" section in the final prospectus filed
pursuant to Rule 424(b)(3). A copy of the proposed disclosure
addressing this comment is attached.
Please contact the undersigned if you have any further questions.
Sincerely,
/s/ FAY M. MATSUKAGE
Fay M. Matsukage
Enclosures
Cc: Galaxy Energy Corporation
Hein & Associates LLP
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 sold these securities in reliance upon the exemption
from registration contained in Section 4(2) of the Securities Act of 1933, as
the four purchasers were deemed sophisticated with regard to an investment in
our securities due to their financial condition, prior involvement with our
business, and/or specific knowledge of this type of investment. 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."