UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 27, 2008
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(Exact name of registrant as specified in its charter)
Colorado 000-26017 58-2222646
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
940 Calle Amanecer Suite E
San Clemente, California 92673
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(Address of Principal Executive Offices) Zip Code)
Registrant's telephone number, including area code: (949) 542-7440
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:
|_| 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
OMNIBUS AMENDMENT
On March 28, 2008 we entered into an Omnibus Amendment (the "Omnibus Amendment")
with Pala Investments Holdings Limited ("Pala") that amended the terms of a
Secured Convertible Debenture (the "Debenture") and related agreements entered
into on December 12, 2007 and which were previously disclosed on a Current
Report on Form 8-K dated December 12, 2007 and filed with the Securities and
Exchange Commission on December 18, 2007.
The Debenture originally provided for us to receive $5,000,000 in two tranches:
a first tranche of $3,000,000 which funded immediately on closing, and a second
tranche of $2,000,000 which we were entitled to receive if we met certain
performance benchmarks by December 31, 2008, or which may otherwise be provided
at Pala's discretion. The Debenture carries interest of 12% per annum,
compounding quarterly, and matures on December 11, 2010 (the "Maturity Date").
In connection with the funding of the first tranche, Pala received warrants for
the purchase of 3,000,000 shares of common stock. Pala is also entitled to
warrants for the purchase of 2,000,000 shares of common stock on the funding of
the second tranche.
Pala and its affiliated companies together have over 1.7 billion dollars under
management and focus on investing in the mining and natural resources sector.
Pala is based in Jersey in the United Kingdom. Its exclusive advisor, Pala
Investments AG, is based in Zug, Switzerland.
THIRD TRANCHE
Under the Omnibus Amendment, the maximum amount to which we are entitled to
receive under the Debenture was raised to $7,500,000 and we immediately received
a third tranche of $2,500,000 in funding pursuant to the Debenture. The
principal and interest of the third tranche are convertible into shares of our
common stock at a conversion price of $0.07 per share. As is the case with the
first and second tranches, the conversion price is subject to proportional
adjustment for any forward or reverse stock splits or for the distribution of
any share dividends. Pala's conversion rights commence on the effective date of
our planned Share Reorganization (as described below) and continue until the
Maturity Date.
WARRANTS FOR THIRD TRANCHE
In connection with the third tranche, Pala received warrants for the purchase of
2,500,000 shares of our common stock. These warrants have a term of three years
and an exercise price of $0.21 per share.
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In the 1 for 2 reverse split to be effected as part of our planned Share
Reorganization and in any future reverse split, the number of warrants is not
subject to adjustment, but the warrant exercise price will be adjusted upwards.
As adjusted for our planned Share Reorganization, the 2,500,000 warrants with an
exercise price of $0.21 will become 2,500,000 warrants with an exercise price of
$0.42 per share.
CHANGES TO SECOND TRANCHE
Pursuant to the Omnibus Amendment, and in consideration of Pala providing us
with the third tranche, the $2,000,000 second tranche, which is to be funded in
the event we reach certain benchmarks, will also be convertible into shares of
our common stock at a conversion price of $0.07 per share, rather than $0.14
share as originally provided in the Debenture.
Additionally, the benchmarks for the funding of the second tranche were amended
to require we meet both of the following requirements before Pala is obligated
to provide the second tranche (although Pala may otherwise provide us with the
second tranche at its discretion):
o We have signed orders or contracts for the sale of at least 1,000,000
gallons of Alderox during calendar year 2009; and
o We have generated positive net cash provided from operating
activities (as defined under U.S. GAAP) for the second quarter of our
2009 fiscal year.
CONSULTING AGREEMENT
Pursuant to the Omnibus Amendment, we agreed to enter into a consulting
agreement with Melior AG, an indirect wholly-owned subsidiary of Pala, for the
provision of certain management and consultancy services to be described in
detail in the final consulting agreement. The consulting agreement is to have a
term of two years from the date of its execution. Melior AG's compensation for
the first year of the agreement is to be $200,000, payable in shares of Company
stock. For the second year of the agreement, Melior AG's compensation is to be
$350,000, payable either in shares of Company stock or cash, at the option of
the Company. Payments in stock would be made using a conversion price of $0.07
per share, as proportionately adjusted for any forward or reverse stock splits
or share dividends.
OTHER PROVISIONS
The Debenture originally required us to effect a 2 for 1 reverse split of our
outstanding common stock and to increase our authorized shares of common stock
from 150,000,000 to 200,000,000 (the "Share Reorganization)" by April 10, 2008.
The Omnibus Agreement formalized a subsequent understanding by Pala and the
Company to allow the Share Reorganization to take place no later than May 25,
2008.
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The Debenture originally allowed us to obtain additional advances on our
existing line of credit from Canvasback, provided that the outstanding balance
did not exceed $500,000. Pursuant to the Omnibus Amendment, the outstanding
balance of the Canvasback line of credit cannot exceed $230,000
A promissory note was issued for the third tranche.
The Registration Rights Agreement was amended to provide for all shares
underlying the warrants received in connection with the third tranche or
received on the conversion of the third tranche to have the registration rights
provided by this agreement.
The Security Agreement was amended to clarify that the third tranche is secured
by all of our assets.
USE OF PROCEEDS FROM THIRD TRANCHE
We have used $1,207,532 of the proceeds from the third tranche to repay three
secured convertible debentures held by Paul Hughes, our Chief Financial Officer,
Eat-Me Foods, Ltd. and 0761291 B.C. Ltd. We plan to use the remaining funds for
the operation of our business.
To the extent Pala does not convert the Debenture and we are unable to repay the
Debenture from our revenues, we will need additional capital to make the
interest and principal payments due under the Debenture. We can offer no
assurance that we will be able to raise all or any portion of the funds
necessary to repay Pala on terms favorable to us or at all.
SALE OF UNREGISTERED SECURITIES
The securities receivable by Pala, and its indirect subsidiary, Melior AG,
pursuant to the Omnibus Amendment have been offered and sold to Pala in reliance
upon exemptions from registration pursuant to Regulation S and Regulation D
promulgated under the Securities Act of 1933, as amended. Pala 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.
REDUCTION OF REVOLVING LINE OF CREDIT BALANCE
On March 27, 2008, we reduced the balance of our revolving line of credit from
Canvasback Company Limited ("Canvasback") by $450,000 in order to remain in
compliance with the terms of the Debenture. This debt reduction was structured
as follows: Two of our officers and directors, Michael Davies and Gordon Davies,
agreed along with a third individual, Anthony Wilson, to repay $450,000 to
Canvasback pursuant to the terms which would have applied to the Company. In
return, Canvasback requested, and the Company agreed, to apply $450,000 owed to
Canvasback on the line of credit towards the exercise of previously issued
options and warrants by Michael Davies, Gordon Davies and Anthony Wilson
immediately following our planned Share Reorganization for an aggregate of
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2,700,000 shares of common stock (as adjusted for the 1 for 2 reverse stock
split which is to be completed as part of the Share Reorganization).
On a post-reverse split basis, Michael Davies and Gordon Davies will each
receive 350,000 shares at an exercise price of $0.30 per share and Anthony
Wilson will receive 2,000,000 shares at an exercise price of $0.12 per share.
These securities are being issued by the Company in reliance upon exemptions
from registration pursuant to Section 3(a)(9) of the Securities Act of 1933, as
amended.
EXHIBITS
Copies of the Omnibus Amendment and its associated warrant certificate and
promissory note are attached as Exhibits 4.1 through 4.3, respectively, to this
Current Report. The foregoing summary of these documents is qualified in its
entirety by the complete text of the documents.
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 7.01 REGULATION FD DISCLOSURE
Subsequent to the filing of this Current Report, we plan to issue a press
release. A copy of the press release is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
ITEM 8.01 OTHER EVENTS
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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4.1 Omnibus Amendment, dated March 28, 2008, between
Reclamation Consulting and Applications, Inc. and
Pala Investments Holdings Limited.
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4.2 Warrant Certificate, dated March 28, 2008, issued to
Pala Investments Holdings Limited.
4.3 Promissory Note, dated March 28, 2008, issued to Pala
Investments Holdings Limited.
99.1 Press Release.
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: April 2, 2008
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