By Devika Patel
Knoxville, Tenn., April 2 - Reclamation Consulting and Applications, Inc. amended its agreement with Pala Investments Holdings Ltd. in regards to a $5 million private placement of convertible debentures that priced in December, according to an 8-K filed Wednesday with the Securities and Exchange Commission.
The deal priced for $5 million on Dec. 12, and the company settled a $3 million debenture on that day. The remaining $2 million was to settle if Reclamation achieved certain performance benchmarks by December 2008.
Under the new agreement, which was reached on March 28, the deal has been lifted to $7.5 million, and a $2.5 million debenture settled immediately.
The principal and interest of this third tranche are convertible into common shares at a conversion price of $0.07 per share. With the debenture, Pala also received three-year warrants for 2.5 million common shares that are exercisable at $0.21.
Both of the debentures mature on Dec. 11, 2010 and bear interest at 12% per year, compounded quarterly.
Reclamation is required to conduct a one-for-two reverse split of its common stock and to increase its authorized shares to 200 million from 150 million.
Beginning on the effective date of the share reorganization, the debenture will be convertible into common stock at $0.14 per share and the warrants from this third tranche will have a strike price of $0.42.
The company also changed the terms of the second tranche. In consideration for Pala granting the company this third tranche, Reclamation has decided that the $2 million second tranche will be convertible into common shares at $0.07 per share, rather than at $0.14 per share, as originally planned.
The benchmarks for the second tranche are:
• The sale of at least 1 million gallons of Reclamation's Alderox product during 2008;
• Signed orders or contracts for the sale of at least 1 million gallons of Alderox during 2009 or a reasonable expectation of selling at least 1 million gallons during 2009 based on existing customer accounts and signed orders; and
• A gross profit margin of $5.00 per gallon on total sale of Alderox in 2008.
About $2 million of the proceeds will be used to repay debt. The rest will be used for working capital and repayment of other debt as it becomes due.
Reclamation is an industrial supply company based in San Clemente, Calif.
| Issue: | Secured convertible debentures
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| Amount: | $7.5 million
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| Maturity: | Dec. 11, 2010
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| Coupon: | 12%
|
| Price: | Par
|
| Yield: | 12%
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| Conversion price: | $0.14 (post-reverse split)
|
| Warrants: | For one share per dollar invested
|
| Warrant expiration: | Three years
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| Warrant strike price: | $0.21 (pre-reverse split); $0.42 (post-reverse split)
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| Investor: | Pala Investments Holdings Ltd.
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| Pricing date: | Dec. 12
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| Revised: | March 28
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| Settlement date: | Dec. 12 (for $3 million), March 18 (for $2.5 million)
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| Stock symbol: | OTCBB: RCAAE
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| Stock price: | $0.12 at close Oct. 17 (last trade)
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