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As
filed December 3, 2007
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File
No. 333-142150
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UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 1 to
Form
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Galaxy
Energy Corporation
(Exact
name of registrant as specified in its charter)
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Colorado
(State
or jurisdiction of
incorporation
or organization
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98-0347827
(I.R.S.
Employer Identification No.)
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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. [ ]
CALCULATION
OF REGISTRATION FEE
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Title
of each class of
securities
to be
registered
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Amount
to be
registered
(1)
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Proposed
maximum
offering
price
per unit (2)
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Proposed
maximum
aggregate
offering
price
(2)
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Amount
of
registration
fee
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Common
stock, $0.001
par
value per share
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2,000,000 shares
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$0.15
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$30,000.00
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$0.92
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_________________
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(1)
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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.
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|
(2)
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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 April 13, 2007, as reported by the
American
Stock Exchange.
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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 December 3, 2007
Galaxy
Energy Corporation
Up
to 2,000,000 Shares of Common Stock
Unless
the context otherwise requires, the terms “we”, “our” and “us” refers to Galaxy
Energy Corporation and its wholly-owned subsidiaries.
This
prospectus relates to the resale by selling shareholders of up to 2,000,000
shares of common stock. We will not receive any proceeds from sale of
any of the shares offered by the selling shareholders. We will pay
the expenses of registering these shares.
Our
common stock is traded on the American Stock Exchange under the symbol
“GAX.” On November 28, 2007, the closing price for our common stock
was $0.05 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.
_________________________,
2007
TABLE
OF CONTENTS
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Page
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PROSPECTUS
SUMMARY
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3
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RISK
FACTORS
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6
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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12
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USE
OF PROCEEDS
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13
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SELLING
SHAREHOLDERS
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13
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PLAN
OF DISTRIBUTION
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14
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LEGAL
MATTERS
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16
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EXPERTS
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16
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WHERE
YOU CAN FIND MORE INFORMATION
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16
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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17
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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:
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·
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The
Piceance Basin of western Colorado
. We are in the process
of drilling our first wells in the basin. Our leasehold
locations are located in close proximity to natural gas pipelines
and the
roads needed for efficient development. As of March 1, 2007 we
had interests in three producing wells and five wells in various
stages of
completion in the basin. During 2006 we drilled, as operator,
four wells in the basin, one of which has been completed and is awaiting
a
pipeline connection, one of which has been partially completed, one
on
which completion work has not been commenced, and one of which was
abandoned after encountering technical difficulties during the drilling
phase. Each of the four operated wells was drilled in
accordance with a participation agreement with our partner, Exxel
Energy
Corp. (“Exxel”), a related party, under which Exxel paid the first $14
million of operational expenditures and paid us a management fee
for
operating the project. In August 2006 Exxel reached the $14
million expenditure point and we began to pay our proportionate 25%
share
of costs incurred thereafter.
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·
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The
Powder River Basin located in Wyoming and Montana
. Over
the last few years we have acquired leasehold interests in and
are
developing five different coal bed methane project areas in the
basin. As of October 5, 2007, we had interests in 176 completed
wells (26 of which were delivering natural gas into sales pipelines),
61
wells in various stages of completion and 8 water disposal
wells. We are seeking to sell all or a part of our interests in
the Powder River Basin.
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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:
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·
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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
reached total depth in late January 2006. Production casing was
set, and testing operations were conducted from several zones of
interest
in the well. Based on results obtained, the joint venture group
decided to plug and abandon this first well and undertake a seismic
program to help identify priority areas on the prospect for further
drilling. Our interest in this project could drop to 24%,
depending upon the outcome of the future drilling
program.
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·
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Jiu
Valley of Romania
. This is a 21,500-acre coal bed methane
project. The initial test well in this project finished
drilling in September 2005. The core analyses and preliminary
desorption measurements in the field indicated the potential presence
of
coal bed methane in multiple horizons, but gave no indication at
the time
of the potential gas production rates or recoverable reserves to
be
expected. Based on gas shows during the drilling of the well
and the core information, the partners in the project determined
to
commence completion and testing operations. A fracture
stimulation treatment was completed in the lower zones penetrated,
and it
was determined to plug and abandon this test well. Our partner
in this play is Falcon Oil & Gas Ltd. (“Falcon”), a related
party. We and Falcon are determining whether to commence
drilling a second well in 2007.
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We
also hold leases on 1,560
undeveloped net acres in Texas. These leases cover six identified
prospects in Rusk and Nacogdoches counties. We do not currently have
the financial resources to drill these properties and will allow the leases
to
expire during this 2007 calendar year.
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.
Recent
Developments
Sale
of Powder River Basin
Assets.
We entered into a purchase and sale agreement
on December 29, 2006 with PetroHunter, a related party, under which PetroHunter
agreed to purchase of all of our oil and gas interests in the Powder River
Basin
of Wyoming and Montana (the “Powder River Basin Assets”). PetroHunter
is a related party because Marc A. Bruner, a 14.1% beneficial shareholder
of the
company, is the 75% owner of MAB Resources, LLC, which is PetroHunter’s largest
shareholder. In addition, Marc A. Bruner is the father of Marc E.
Bruner, our president and chief executive officer and a
director.
PetroHunter
agreed to pay a total purchase price of $45 million to acquire all of the
Powder
River Basin Assets. As required under the agreement, PetroHunter
placed an initial earnest money deposit with us in the amount of $2
million. Originally, either party could terminate the agreement if
the closing had not occurred by February 28, 2007. While this date
was extended several times to allow PetroHunter to raise the necessary cash
portion of the purchase price, the agreement expired by its terms on August
31,
2007.
PetroHunter
assumed control of the operation of the Powder River Basin Assets, in the
capacity of a contract operator, as of January 1, 2007. At closing,
the operating expenses incurred by PetroHunter were to be credited toward
the
purchase price. Since the closing did not take place, we delivered
subordinated unsecured promissory note to PetroHunter in the amount of
$2,493,777 for the earnest money deposit and the operating expenses incurred
by
PetroHunter. The note accrues interest at the rate of 8% per annum
and is due upon the earlier of December 29, 2007 or the date that all of
our
senior debt is paid in full.
We
are
now seeking other buyers for the sale of all or a part of our Powder River
Basin
Assets. As of the date of this prospectus, we do not have any
agreements or understandings in place. If we are successful in
selling any of these assets, the proceeds of the sale would be used to repay
our
senior secured debt.
Loans
from Bruner Family
Trust.
Since September 2006, we have been dependent
upon loans from Bruner Family Trust to provide the funds necessary for operating
expenses and payments to our secured lenders. Through November 20,
2007, we have borrowed a total of $13,425,000. Each of the related
promissory notes is subordinated and unsecured. Interest accrues at
the rate of 8% per annum and the notes mature on the later of 120 days from
the
date of the loans or the time at which our senior indebtedness has been paid
in
full. In connection with these loans, we and the lender executed
subordination agreements with the holders of the senior
indebtedness. One of the trustees of the Bruner Family Trust UTD
March 28, 2005 is Marc E. Bruner, the president and a director of the
company.
Piceance
Basin
.
On March 12, 2007, we, through our
wholly-owned subsidiary, Dolphin Energy Corporation, entered into a Combined
Amendment to Lease Acquisition and Development Agreements and to Participation
Agreement with Exxel, Apollo Energy LLC, a Colorado limited liability company
(“Apollo”), ATEC Energy Ventures, LLC, a Texas limited liability company
(“ATEC”), and the nominees identified in the Lease Acquisition and Development
Agreement, dated February 23, 2005, between Exxel and Apollo. The
nominees, Apollo and ATEC are collectively referred to as
“Sellers.”
The
agreement amends the Lease Acquisition and Development Agreement, dated February
22, 2005, with the Sellers (the “Dolphin/Apollo Agreement”) through which we
acquired an initial 58-1/3% working interest in unevaluated oil and gas
properties in the Piceance Basin in Colorado, and the Participation Agreement
through which Exxel acquired its interest in the property.
We
hold
25% of the available working interest in the wells that we and Exxel drill
in
the basin, and Exxel holds the remaining 75% of available working
interest. The Sellers had reserved in the assignments of the leases
either a reserved production payment or a reserved overriding royalty interest,
each equal to the difference between 20% and existing burdens, but never
less
than 2%. At project payout, Sellers were to be vested with an
undivided
12-1/2%
of Exxel’s/Dolphin’s interest in the leases. Exxel and Dolphin agreed
to purchase a portion of this back-in working interest from Sellers so
that it
would be reduced from 12-1/2% to 10%.
The
agreement effected the purchase of
the back-in working interest and formally terminated Section 5.1 of the
Dolphin/Apollo Agreement, which pertained to our drilling commitments, as
such
commitments have been fulfilled. Our portion of the purchase price
for the back-in working interest was $325,000, to be paid in four equal
installments of $81,250 on or before April 2, 2007, May 1, 2007, June 1,
2007,
and July 2, 2007. As all of the payments were made, our working
interest at project payout has been increased by
0.625%.
We
also agreed to pay the Sellers
$14,474.53 for a top lease covering property in the Area of Mutual Interest
(“AMI”) designated in the Dolphin/Apollo Agreement.
The
agreement clarifies that the
Sellers have a nonexclusive right to identify and acquire additional interests
in the AMI. We and Exxel shall have the right of first refusal, but
no obligation, to purchase such additional interests at the actual cost incurred
by the Sellers, after the Sellers have provided a written offer accompanied
by
certain information about the additional interests. If Dolphin
acquires any interests in the AMI, the Sellers are still entitled to assignment
of all overriding royalty interests and after project payout working interests
that the Sellers are otherwise entitled to under the Dolphin/Apollo
agreement.
Proposed
Debt Repayment and
Restructure.
We have filed a preliminary proxy
statement, which discloses our intention to obtain shareholder approval for
(1)
a 1-for-20 reverse stock split of our issued and outstanding common stock
and
(2) the issuance of shares of common stock to repay our subordinated
debt. If we are able to obtain such shareholder approval and if we
can successfully negotiate with our subordinated debt holders to accept shares
of common stock as repayment, we anticipate that we would issue a number
of
shares greater than the number of shares that is currently issued and
outstanding.
The
Offering
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Securities
offered
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2,000,000
shares of common stock owned by selling shareholders.
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Use
of proceeds
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We
will not receive any of the proceeds from the selling shareholders
of
shares of our common stock.
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Securities
outstanding
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83,661,968
shares of common stock as of November 20, 2007.
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Plan
of distribution
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The
offering is made by the selling shareholders 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.”
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Risk
factors
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An
investment is subject to a high degree of risk. See “Risk
Factors.”
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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. The report on our financial
statements contains a paragraph relating to our ability to continue as a
going concern.
We
are a
development stage oil and gas company and have earned very limited production
revenue. We have generated proved resources on only a few of our
properties and those properties are proposed to be sold. Our
principal activities have been raising capital through the sale of our
securities and identifying and evaluating potential oil and gas
properties.
The
report of our independent registered public accounting firm on the financial
statements for the year ended November 30, 2006, includes an explanatory
paragraph indicating that there is substantial doubt as to our ability to
continue as a going concern. From inception to August 31, 2007, we
have an accumulated deficit of $78,241,164. For the 2007 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 acquire and we may not achieve profitability from operations
in
the near future or at all.
Our
short-term cash commitments require us to sell a significant portion of our
assets, which leaves us with fewer assets to develop for our future
growth.
At
August
31, 2007, our working capital deficit was $4,068,451. As of August
31, 2007, we had contractual obligations due by August 31, 2008 totaling
$29,961,340. To meet these obligations and working capital needs, we
are actively seeking to sell some or all of our oil and gas interests in
the
Powder River Basin of Wyoming and Montana (the “Powder River Basin
Assets”).
If
we
cannot find one or more buyers for the Powder River Basin Assets, we may
be
forced to seek the protection of bankruptcy laws.
We
are currently dependent upon loans from related parties to provide working
capital.
Through
November 20, 2007, we have borrowed $13,425,000 from Bruner Family Trust
UTD
March 28, 2005. The related promissory notes are subordinated and
unsecured. Interest accrues at the rate of 8% per annum and the notes
mature on the later of 120 days from the date of the loans or the time at
which
our senior indebtedness has been paid in full. In connection with
these loans, we and the lender executed subordination agreements with the
holders of the senior indebtedness. One of the trustees of the Bruner
Family Trust UTD March 28, 2005 is Marc E. Bruner, the president and a director
of the company.
The
lack of production and established reserves for our properties impairs our
ability to raise capital.
As
of
August 31, 2007, we had established very limited production of natural gas
from
a limited number of wells, and limited proved reserves. We propose to
sell most of these wells. While we expect production to commence from
our Piceance basin wells during 2007, until that actually occurs it will
be
difficult for us 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 shareholders.
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. This overriding royalty interest continues after the
repayment of the notes. The note holders also retain, 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 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:
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·
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the
timing of the drilling and recompleting of
wells;
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·
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the
timing and amounts of production;
and
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·
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the
development and operating costs.
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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.
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 effectively
compete 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 shareholders.
Through
shares owned individually and by Resource Venture Management and Bruner Group,
LLP, Marc A. Bruner beneficially owned approximately 14.0% of our stock as
of
November 20, 2007. In addition, he is the father of our president,
Marc E. Bruner. This control by Marc A. Bruner could have a
substantial impact on matters requiring the vote of the shareholders, 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
shareholders and us. This control could adversely affect the voting
and other rights of our other shareholders 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:
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worldwide
or regional demand for energy;
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·
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domestic
and foreign supply of natural gas and
oil;
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·
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domestic
and foreign governmental
regulations;
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|
·
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political
conditions in natural gas or oil producing
regions;
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·
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price
and availability of alternative fuels;
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·
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availability
and cost of drilling equipment;
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·
|
our
ability to establish and maintain key relationships with lessors,
drilling
partners and drilling funds;
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·
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the
amount and timing of operating costs and capital expenditures relating
to
maintaining our business, operations, and infrastructure;
and
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|
·
|
general
economic conditions and economic conditions specific to the energy
sector.
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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.
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 notes and warrants could substantially dilute the
interests of shareholders.
We
issued
convertible notes in May 2005 that have an outstanding principal balance
of $12
million at November 20, 2007. We also issued $7.695 million in notes
in March 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. We
issued $7.0 million in 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.
We
are
seeking shareholder approval to issue shares of our common stock to repay
the
March 2005 and 2006 debt, as well as the Bruner Family Trust debt. If
we issue shares based on the current market price, we will issue a number
of
shares that is greater than the number of shares currently
outstanding.
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 a current exercise price of $1.25 per share and 200,000 shares at a current
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 notes and the warrants could
result in adverse consequences, including acceleration of the convertible
notes.
We
are
required to maintain the effectiveness of the registration statement 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
underlying common stock, which include cash penalties and the forced redemption
of the convertible notes at the greater of:
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·
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125%
of the principal amount, plus accrued interest;
or
|
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·
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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.
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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 $500,000
and quarterly payments of accrued interest, as well as a principal reduction
of
$6,000,000 by March 1, 2008 under the amended terms of the May 2005
financing. If we at any time default on our 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 may 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
shareholders. 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 shareholders. 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 shareholders.
The
issuance of shares upon exercise of warrants may result in
substantial dilution to the interests of other shareholders since the selling
shareholders 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. Further, we have engaged in several
related party transactions.
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 the controlling shareholder of PetroHunter Energy Corporation, a Maryland
corporation whose stock is traded on the OTC Bulletin Board (“PetroHunter”), and
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 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.
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.
In
August
2006, we entered into a non-binding letter of intent with Exxel to purchase
our
interest in our properties in the Piceance Basin. It was 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. The purchase amount
was later reduced to $40 million in an amended letter of
intent. Exxel USA owns the other 75% working interest in Rifle
Creek. The proposed transaction was subject to Exxel’s obtaining
financing, approval by our senior lenders, and other terms and
conditions. In October 2006, we announced our intention not to
proceed with this transaction.
In
December 2006, we entered into a purchase and sale agreement with PetroHunter
to
purchase our properties in the Powder River Basin for $45
million. This transaction was never completed, resulting in our
delivering an unsecured subordinated promissory note to PetroHunter on August
31, 2007 in the amount of $2,493,777 for the return of the earnest money
deposit
and operating costs incurred by PetroHunter.
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.
USE
OF PROCEEDS
We
will
not receive any of the proceeds from the selling shareholders of shares of
our
common stock. However, we may receive the sale price of any common
stock we sell to the selling shareholders 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
SHAREHOLDERS
This
prospectus relates to the resale of 2,000,000 shares of common stock that we
issued to investors that hold a security interest in the Powder River Basin
Assets. The shares were issued to obtain their consent to the sale of
such Assets. We issued these securities in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act
of
1933 and Regulation D thereunder, as each of the investors represented that
it
was an “accredited investor,” and we deemed each investor 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 shareholders to offer the shares of common stock for resale from time
to
time. Except for the ownership of these shares, the convertible notes
and warrants issued in 2004 and convertible notes issued in May 2005 and the
overriding royalty interests and related matters, the selling shareholders
have
not had any material relationship with us within the past three
years.
The
table
below lists the selling shareholders and other information regarding the
beneficial ownership of the common stock by the selling
shareholders. The second column lists for each selling shareholder
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 notes and warrants,
that
would have been issuable to such selling shareholders as of April 13, 2007,
assuming conversion of all convertible notes plus accrued interest thereon
as of
such date and exercise of the warrants held by such selling shareholders 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 shareholder. The fourth
column assumes the sale of all of the shares offered by the selling shareholders
pursuant to this prospectus and sales pursuant to prospectuses under other
registration statements of all shares under the convertible notes and
warrants.
Under
the
terms of the convertible notes and warrants, the selling shareholders may not
convert the convertible notes, or exercise the warrants, to the extent such
conversion or exercise would cause the selling shareholder, 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 notes 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
shareholders may sell all, some or none of their shares in this offering and
in
the offerings under the prospectuses relating to the shares underlying the
convertible notes and warrants. See “Plan of
Distribution.”
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Ownership
After Offering
|
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Name
of Selling Shareholder
|
|
Number
of
Shares
Beneficially
Owned
(1)
|
|
|
Shares
Registered
for Resale
|
|
|
Number
of
Shares
|
|
|
Percent
|
|
|
HFTP
Investments LLC (2)
Promethean
I Master Ltd. (2)
Promethean
II Master, L.P. (2)
Caerus
Partners LLC (2)
AG
Offshore Convertibles, Ltd. (3)
Leonardo,
L.P. (3)
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|
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5,987,724
2,592,632
4,058,727
324,081
2,462,000
3,853,824
|
|
|
|
578,422
269,562
466,132
33,696
147,268
504,920
|
|
|
|
0
0
0
0
0
0
|
|
|
|
0%
0%
0%
0%
0%
0%
|
|
_____________
|
(1)
|
The
shares of common stock considered beneficially owned by each selling
shareholder include that number of shares of our common stock that
such
selling shareholder could acquire by converting its
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convertible
debentures at the conversion price, taking into account accrued
but unpaid
interest through April 13, 2007, and by exercising its warrants,
if
any.
|
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(2)
|
Promethean
Asset Management, LLC, a New York limited liability company
(“Promethean”), serves as investment manager to HFTP Investments LLC
(“HFTP”), Promethean I Master Ltd. (“Promethean I”), Promethean II Master,
L.P. (“Promethean II”) and Caerus Partners LLC (“Caerus”) and may be
deemed to share beneficial ownership of the shares beneficially owned
by
HFTP, Promethean I, Promethean II 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, Promethean
I, Promethean II, and Caerus and each of HFTP, Promethean I, Promethean
II
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, Promethean I, Promethean
II, and Caerus. Each of HFTP, Promethean I, Promethean II and
Caerus has advised us that (i) it is not a registered broker-dealer,
(ii)
it does not control and is not controlled by a registered broker-dealer,
(iii) it is an affiliate of a registered broker-dealer due solely
to its
being under common control with a registered broker-dealer, (iv)
the
broker-dealer that is an affiliate of such selling security holder
was not
involved in the purchase, and will not be involved in the ultimate
sale,
of the securities, (v) it purchased the securities in the ordinary
course
of business, and (vi) at the time such selling security holder purchased
the securities, it was not a party to any agreement or other understanding
to distribute the securities, directly or
indirectly.
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(3)
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Angelo,
Gordon & Co., L.P., a Delaware limited partnership, serves as director
of AG Offshore Convertibles, Ltd. Angelo, Gordon & Co.,
L.P. also serves as director of Leonardo Capital Management, Inc.,
the
general partner of Leonardo, L.P. 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. and Leonardo, L.P. Each of AG Offshore
Convertibles, Ltd. and Leonardo, L.P. has advised us that (i) it
is not a
registered broker-dealer, (ii) it does not control and is not controlled
by a registered broker-dealer, (iii) it is an affiliate of a registered
broker-dealer due solely to its being under common control with a
registered broker-dealer, (iv) the broker-dealer that is an affiliate
of
such selling security holder was not involved in the purchase, and
will
not be involved in the ultimate sale, of the securities, (v) it purchased
the securities in the ordinary course of business, and (vi) at the
time
such selling security holder purchased the securities, it was not
a party
to any agreement or other understanding to distribute the securities,
directly or indirectly.
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PLAN
OF DISTRIBUTION
We
are
registering the resale of shares of common stock held by selling shareholders,
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 shareholders 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 shareholders 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 shareholders 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,
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(1)
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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,
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(2)
|
in
the over-the-counter market,
|
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(3)
|
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market,
|
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(4)
|
through
the writing of options, whether such options are listed on an options
exchange or otherwise, or
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(5)
|
through
the settlement of short sales.
|
If
the selling shareholders 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 shareholders 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 shareholders 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
shareholders 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 shareholders may also loan or pledge shares
of common stock to broker-dealers that in turn may sell such
shares.
The
selling shareholders 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 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 shareholders 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 shareholders 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 shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
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 shareholder 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 shareholders 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 shareholders 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 $15,000 in total, including,
without limitation, Commission filing fees and expenses of compliance with
state
securities or “blue sky” laws; provided, however, that the selling shareholders
will pay all underwriting discounts and selling commissions, if
any. In connection with sales made pursuant to this prospectus, we
will indemnify the selling shareholders against liabilities, including some
liabilities under the
Securities
Act, or the selling shareholders will be entitled to contribution, in accordance
with the registration rights agreement. We will be indemnified by the
selling shareholders against civil liabilities and legal fees, including
investor legal fees, that may arise from any written information furnished
to us
by the selling shareholders 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.
EXPERTS
The
financial statements as of November
30, 2006 and 2005, for each of the three years in the period ended
November 30, 2006, and for the period from inception through November 30,
2006,
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.
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:
|
·
|
our
Annual Report on Form 10-K for the fiscal year ended November 30,
2006,
filed with the SEC on March 15, 2007 and as amended on November
__,
2007;
|
|
·
|
our
Quarterly Report on Form 10-Q for the quarter ended February 28,
2007,
filed with the SEC on April 16,
2007;
|
|
·
|
our
Quarterly Report on Form 10-Q for the quarter ended May 31, 2007,
filed
with the SEC on July 16,
2007;
|
|
·
|
our
Quarterly Report on Form 10-Q for the quarter ended August 31,
2007, filed
with the SEC on October 22,
2007;
|
|
·
|
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;
and
|
|
·
|
the
following Current Reports on Form 8-K filed since November 30,
2006 (the
end of our last fiscal year) and prior to the filing of the registration
statement of which this prospectus is a
part:
|
|
Date
of 8-K
|
Date
Filed with SEC
|
|
November
30, 2006
|
December
1, 2006
|
|
December
29, 2006
|
January
4, 2007 (1)
|
|
February
1, 2007
|
February
1, 2007
|
|
February
26, 2007
|
February
27, 2007
|
|
March
12, 2007
|
March
14, 2007
|
|
March
30, 2007
|
April
2, 2007
|
______________
|
|
(1)
|
Amended
on March 1, 2007, April 2, 2007, May 1, 2007, June 1, 2007, July
2, 2007,
and August 1, 2007.
|
|
·
|
and
the following Current Reports on Form 8-K filed after the filing
of the
registration statement of which this prospectus is a
part:
|
|
Date
of 8-K
|
Date
Filed with SEC
|
|
April
25, 2007
|
April
27, 2007
|
|
May
4, 2007
|
May
8, 2007
|
|
May
22, 2007
|
May
25, 2007 (1)
|
|
May
31, 2007
|
June
29, 2007
|
|
June
29, 2007
|
July
2, 2007
|
|
August
22, 2007
|
August
23, 2007
|
|
August
24, 2007
|
August
28, 2007
|
|
August
29, 2007
|
August
29, 2007
|
|
September
4, 2007
|
September
4, 2007
|
|
September
28, 2007
|
October
2, 2007
|
|
October
11, 2007
|
October
15, 2007
|
|
October
15, 2007
|
October
18, 2007
|
|
October
31, 2007
|
November
6, 2007
|
|
November
2, 2007
|
November
8, 2007
|
|
November
9, 2007
|
November
15, 2007
|
|
November
16, 2007
|
November
19, 2007
|
___________________
(1) Amended
on August 13, 2007
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 the
initial registration statement and prior to effectiveness of the registration
statement, and 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 – 17
th
Street,
Suite
1050, Denver, Colorado 80202, or call (303) 293-2300.
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
|
|
|
Accounting
fees and expenses
|
|
|
5,000
|
|
|
Blue
sky fees and expenses
|
|
|
1,000
|
|
|
Legal
fees and expenses
|
|
|
5,000
|
|
|
Transfer
agent fees and expenses
|
|
|
1,000
|
|
|
Printing
expenses
|
|
|
1,000
|
|
|
Miscellaneous
expenses
|
|
|
1,999
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,000
|
|
All
amounts are estimates except the
SEC filing fee. Under the terms of the registration rights agreement
with the selling shareholders, 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
|
Purchase
and Sale Agreement Between Dolphin Energy Corporation, and Galaxy
Energy
Corporation and PetroHunter Operating Company, and PetroHunter Energy
Corporation Dated December 29, 2006 (1)
|
|
2.2
|
Second
Amendment to Purchase and Sale Agreement dated February 28, 2007
(2)
|
|
2.3
|
Third
Amendment to Purchase and Sale Agreement dated March 30, 2007
(3)
|
|
2.4
|
Fourth Amendment to Purchase and Sale Agreement dated April 30, 2007
(4)
|
|
2.5
|
Fifth Amendment to Purchase and Sale Agreement dated May 31, 2007
(5)
|
|
2.6
|
Sixth Amendment to Purchase and Sale Agreement dated June 30, 2007
(6)
|
|
2.7
|
Seventh Amendment to Purchase and Sale Agreement dated July 31, 2007
(7)
|
|
5.1
|
Opinion of Dill Dill Carr Stonbraker & Hutchings, P.C.
(8)
|
|
23.1
|
Consent of Dill Dill Carr Stonbraker & Hutchings, P.C. Reference
is made to Exhibit 5.1
|
II-2
|
Regulation
S-K
Number
|
Exhibit
|
|
|
|
|
23.2
|
Consent of Hein & Associates
LLP
|
______________
|
(1)
|
Incorporated
by reference to the exhibit to the registrant's current report on form
8-K
dated December 29, 2006, filed January 4, 2007, file number
0-32237.
|
|
(2)
|
Incorporated
by reference to the exhibits to amendment no. 1 to the registrant’s
current report on Form 8-K dated December 29, 2006, filed March 1,
2007.
|
|
(3)
|
Incorporated
by reference to the exhibits to amendment no. 2 to the registrant’s
current report on Form 8-K dated December 29, 2006, filed April 2,
2007.
|
|
(4)
|
Incorporated
by reference to the exhibits to amendment no. 3 to the registrant's
current report on Form 8-K dated December 29, 2006, filed May 1,
2007.
|
|
(5)
|
Incorporated
by reference to the exhibits to amendment no. 4 to the registrant's
current report on Form 8-K dated December 29, 2006, filed June 1,
2007.
|
|
(6)
|
Incorporated
by reference to the exhibits to amendment no. 5 to the registrant's
current report on Form 8-K dated December 29, 2006, filed July 2,
2007.
|
|
(7)
|
Incorporated
by reference to the exhibits to amendment no. 6 to the registrant's
current report on Form 8-K dated December 29, 2006, filed August 1,
2007.
|
|
(8)
|
Filed
as an exhibit to this registration statement on April 16,
2007.
|
(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 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.
|
II-2
|
|
(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.
|
|
(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 November 29, 2007.
|
|
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
|
|
|
|
|
|
|
|
/s/
Marc E.
Bruner
|
|
President
and
Director (Principal Executive Oficer)
|
|
November
29,
2007
|
|
Marc
E.
Bruner
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Christopher
S. Hardesty
|
|
Senior
Vice
President, Chief Financial Officer, Secretary, and Treasurer (Principal
Financial and Accounting Officer)
|
|
November
29,
2007
|
|
Christopher
S.
Hardesty
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Nathan C.
Collins
|
|
Director
|
|
November
29,
2007
|
|
Nathan
C.
Collins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
Dr.
James M. Edwards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
Robert
Thomas Fetters, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Cecil D. Gritz
|
|
Director
|
|
November
29, 2007
|
|
Cecil
D. Gritz
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Ronald P. Trout
|
|
Director
|
|
November
29, 2007
|
|
Ronald
P. Trout
|
|
|
|
|
|
|
|
|
|
|
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