U.S. private placement volume improves; Galaxy Energy finishes $20 million financing

By Sheri Kasprzak

Atlanta, Oct. 28 - U.S. private placement volume picked up Thursday with companies issuing smaller deals.

The role of earnings season in the depression of U.S. issuance of private placements was debated by some sell-side sources.

"I think it does play some role," said one source. "Companies obviously have their hands full with earnings and we could see volume improve once that's over."

Another source, however, disagreed.

"I honestly think it has more to do with the markets than with earnings reports," the source said. "I just think so many of the markets that are conducive to these types of deals just aren't doing that well."

Heading up U.S. private placement action was Galaxy Energy Corp.'s $5 million in senior secured convertible notes.

The deal is the second tranche of a financing that raised $20 million for the company.

"This financing is the largest in Galaxy's history and represents an important step forward in the company's ambitious growth plan in the Powder River Basin," said Galaxy chairman and president Marc E. Bruner in a statement when the deal was announced. "With these funds, we will be able to establish a solid production base, which will serve as a foundation for future growth. We believe that the company, our shareholders and our new lenders will all benefit from this important transaction."

All told, Galaxy sold $20 million in notes and three-year purchase warrants for 5,194,806 shares at $1.54 per share.

In the first tranche of the deal, completed Aug. 19, the company issued $15 million in notes under the same terms, secured by Galaxy's assets. The notes may be converted into shares at $1.87 per share.

Galaxy, a Denver-based oil and natural gas exploration and production company, plans to use the money from the financing for its coal bed methane-development program in the Powder River Basin of Wyoming. Its stock closed down $0.01 at $1.56 Thursday.

CardioGenesis raises $6 million

CardioGenesis Corp. finished a $6 million convertible financing with Laurus Master Fund Ltd. Thursday, the company said.

The company plans to use the funds from the financing to launch its angina-relieving Transmyocardial Revascularization business and to fund research and development.

"The completion of this financing from Laurus Funds has provided us with additional balance sheet strength to enable the timely and effective launch of these important new products, which we believe can dramatically increase the number of TMR procedures being performed worldwide," said CardioGenesis chairman, president and chief executive officer Michael J. Quinn in a news release.

The three-year convertible note bears an interest of Prime plus 200 basis points and is convertible into common shares at $0.50 per share.

Laurus also received warrants to buy 2.64 million shares.

CardioGenesis is a Foothill Ranch, Calif.-based medical device company specializing in cardiac disease treatment. Its stock closed unchanged at $0.505 Thursday.

On2 gets $4 million

On2 Technologies Inc. said Thursday it has raised $4 million through a private placement.

The company sold 5,714,286 shares of series D convertible preferred shares with a conversion price of $0.70 to Midsummer Investment Ltd. and one other institutional investor.

The investors also received a one-year warrant to buy 2,993,197 shares at $0.65 and a five-year warrant for 2,993,197 shares at $0.76.

Holders of the series D stock will receive an 8% annual dividend, payable in cash or shares of common stock.

H.C. Wainwright & Co. Inc. served as placement agent in the deal.

"This financing strengthens On2's institutional shareholder base, cash position and balance sheet and puts us in a stronger position both to complete an accretive strategic transaction and continue to increase our market share in the digital video space," said Doug McIntyre, On2's chairman, president and chief executive officer, in a news release. "We are pleased with the fact that Midsummer was willing to invest in the preferred stock a 23% premium to the current market price."

On2 is a video compression technology company based in New York. On Thursday, the company's stock closed unchanged at $0.57 Oct. 27, its last trade.

NovaGold greenshoe exercised

NovaGold Resources Inc. said the placement agents for its offering of flow-through shares exercised the greenshoe, raising the size of the deal to C$20 million from C$15 million.

With the upsizing, the deal consisted of 1,980,200 flow-through shares at C$10.10 per share.

Placement agents were Salman Partners Inc., Canaccord Capital Corp. and Dundee Securities Corp.

Directors, officers and employees of NovaGold bought 79,600 flow-through shares in the deal.

NovaGold is a Vancouver, B.C.-based precious metals exploration company. It plans to use the proceeds from the deal to advance its Galore Creek project in British Columbia.

NovaGold's stock closed down C$0.11 at C$8.28 Thursday.

Kangaroo's C$5.15 million deal

Kangaroo Media Inc. received C$5.15 million in a private placement, the company said Thursday.

The company sold 12.882 million units of one share and one share purchase warrant at C$0.40 for a total of C$5,152,800.

The warrants allow for the purchase of an additional share at C$0.50 for two years.

Agents CIBC World Markets and Dundee Securities Inc. have the option to buy an additional 901,740 units at C$0.40 per unit for two years.

On Thursday, Kangaroo's stock closed unchanged at C$0.55.

Kangaroo, based in Montreal, is a media company that provides a handheld spectator device. The company plans to use the funds from the financing for partnership development, research and working capital.

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