UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 30, 2007
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(Exact name of registrant as specified in its charter)
Colorado
(State or other jurisdiction of incorporation)
000-26017 58-2222646
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(Commission File Number) (IRS Employer Identification No.)
940 Calle Amanecer Suite E
San Clemente, California 92673
Telephone: (949) 542-7440
(Address and telephone number of principal executive offices and
place of business)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Reclamation Consulting and Applications, Inc. ("we", "us" or the "Company")
files this report on Form 8-K to report the following:
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On May 30, 2007, we issued Secured Convertible Debentures (each, a "Debenture"
and collectively, "Debentures") in the aggregate amount of $1,160,000 to three
accredited investors, Paul Hughes, Eat-Me Foods, Ltd. and 0761291 B.C. Ltd.
(each, an "Investor" and collectively, "Investors"). The Debentures carry simple
interest of 12% per annum and mature on November 29, 2008 (the "Maturity Date").
Interest is payable monthly, with the principal due on the Maturity Date.
At any time prior to the Maturity Date, each Investor has the option to convert
the outstanding balance of principal, unpaid interest, and/or up to six months
of future interest into shares of our common stock (the "Shares") at a price
that is the lower of (i) $0.20 per share or (ii) the simple moving average of
our common stock on the OTC Bulletin Board over 10 consecutive trading days
commencing on May 25, 2007.
Under the terms they negotiated, the Investors will receive differing amounts of
warrants to purchase shares of our common stock (the "Warrants") in any
conversion of their Debentures. If they convert their Debentures, Mr. Hughes and
Eat-Me Foods, Ltd. will receive Warrants in a number equal to 245% and 50%,
respectively, of the Shares received by each in any such conversion. 0761291
B.C. Ltd. is not entitled to any Warrants on conversion of its Debenture.
Fifty percent of the Warrants issued in any conversion will have an exercise
price of $0.22 per share while the remaining Warrants will have an exercise
price of $0.24 per share. The Warrants expire three years after issuance. In the
event that the closing price of our common stock equals or exceeds $0.80 per
share for twenty consecutive trading days, we have the option to cancel the
unexercised Warrants after providing the Investors with 45-days prior written
notice.
As of June 1, 2007 and based on a conversion price of $0.20 per share, the
amount of common stock which would have been issuable upon full conversion of
the aggregate principal of the Debentures plus six months of future interest is
6,148,000 Shares or approximately 11%] of our outstanding common stock. With the
issuance of these Shares, the Investors would also receive Warrants for the
purchase of 5,800,00 of our shares of common stock, or 9.5% of our outstanding
common stock. In the event that the simple moving average price of our common
stock on the OTC Bulletin Board from May 25, 2007 to June 8 is less than $0.20
per share, then the number of Shares and Warrants issuable upon full conversion
and exercise of Warrants would be more.
The obligations under the Debentures are secured by a security interest in all
of our assets. On the occurrence of any of the following events, each Investor
may accelerate the Maturity Date, commence legal action against us, foreclose on
our assets:
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o our failure to make payments under the Debentures when due;
o we become insolvent or make a general assignment for the benefit of
our creditors;
o any dissolution or termination of our existence; or
o our failure to fulfill our obligations under the Debenture for at
least 14 days after written notice of such failure by the Investor.
Both our CEO, Michael C. Davies, and our President, Gordon W. Davies, provided
personal guaranties of our obligations under the Debenture to 0761291 B.C. Ltd.
The guaranties make our CEO and President personally responsible to the
Investors for satisfaction of our obligations under the Debenture issued to the
Investors. Bandit Yacht Investments, Ltd., a company controlled by Fred Davies,
who is the father of our CEO and our President and a shareholder of our company,
also granted a mortgage and provided a guaranty of our obligations under the
Debenture to 0761291 B.C. Ltd. In addition, it is our understanding that Mr.
Hughes has provided a guaranty of our obligations under the Debentures to
0761291 B.C. Ltd. and Eat-Me Foods, Ltd., pursuant to an arrangement between the
Investors to which we are not a party.
The Debentures have been offered and sold to the Investors in reliance upon
exemptions from registration pursuant to Regulation S and Regulation D
promulgated under the Securities Act of 1933, as amended. Each of the Investors
is a non-U.S. person as defined in Rule 502 of Regulation S and an accredited
investor as defined by Rule 501 of Regulation D.
On June 1, 2007, we used the proceeds from the sale of the Debentures to
repurchase certain convertible notes and warrants held by AJW Partners, LLC, AJW
Offshore, Ltd., AJW Qualified Partner, LLC and New Millennium Capital Partners
II, LLC (the "Note Holders"). As previously disclosed in Current Reports on Form
8-K, on February 1, 2007, we entered into an Securities Repurchase Agreement
with the Note Holders for the repurchase of secured convertible notes with an
aggregate principal amount of $2,000,000 and warrants to purchase 8,000,000
shares of the our common stock. We paid the Note Holders an aggregate cash
purchase price of $1,161,018.94 and 3,250,000 shares of our common stock for the
repurchase of the notes and warrants.
To the extent the Investors do not convert their Debentures, we will need
additional capital to make the interest and principal payments due under the
Debentures. If needed, we plan to raise such funds through the private placement
of debt or equity. We can offer no assurance that we will be able to raise all
or any portion of the funds necessary to repay the Investors on terms favorable
to us or at all.
A copy of the Secured Convertible Debentures and Personal Guaranties
(collectively, the "Loan Documents") are attached as Exhibits 10.1 thorough 10.5
to this Current Report on Form 8-K. Included in the exhibits of the Debentures,
is the form of promissory note to the Investors and the forms of Warrant to be
received by Investors pursuant to a conversion. The foregoing summary of the
Loan Documents are qualified in its entirety by the complete text of the Loan
Documents.
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On May 30, 2006, we also issued a promissory note to each Investor evidencing
the loan each Investor provided to us under the Debentures.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF- BALANCE SHEET ARRANGEMENT.
Our discussion under Item 1.01 of this Current Report is hereby incorporated by
this reference.
ITEM 3.02 UNREGISTERED SALE OF EQUITY SECURITIES.
Our discussion under Item 1.01 of this Current Report is hereby incorporated by
this reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No. Description
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10.1 Secured Convertible Debenture, dated May 30, 2007, issued to
Paul Hughes
10.2 Secured Convertible Debenture, dated May 30, 2007, issued to
Eat-Me Foods, Ltd.
10.3 Secured Convertible Debenture, dated May 30, 2007, issued to
0761291 B.C. Ltd.
10.4 Personal Guaranty issued by Gordon W. Davies to 0761291 B.C.
Ltd.
10.5 Personal Guaranty issued by Michael C. Davies to 0761291 B.C.
Ltd.
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SIGNATURES:
Pursuant to the requirement of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Reclamation Consulting and Applications, Inc.
By: /s/ Michael Davies
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Michael Davies, CEO
Dated: June 4, 2007
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