Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2014
Commission File Number 000-54118
PLACER DEL MAR, LTD.
(Name of registrant as specified in its charter)
Nevada 72-1600437
(State of Incorporation) (IRS Employer ID Number)
4045 Sheridan Avenue, Suite 433
Miami Beach, FL 33140
(561) 543-8882
(Address and telephone number of principal executive offices)
651 Okeechobee Blvd., Unit 412
West Palm Beach, FL 33401
(Former Address of principal executive offices)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer, "accelerated filer,"
"non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,720,000 shares of common
stock, par value $0.001, as of June 2, 2014
ITEM 1. FINANCIAL STATEMENTS
PLACER DEL MAR,LTD.
(A Development Stage Company)
Balance Sheets
(Stated in U.S.Dollars)
--------------------------------------------------------------------------------
(Unaudited)
Nine Months Ended Year Ended
March 31, 2014 June 30, 2013
-------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ -- $ --
---------- ----------
TOTAL CURRENT ASSETS -- --
---------- ----------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 140,285 $ 101,039
Loan from related party 56,162 30,228
---------- ----------
TOTAL CURRENT LIABILITIES 196,447 131,267
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, ($0.001 par value, 50,000,000 shares Common stock,
($0.001 par value, 75,000,000 shares authorized; 1,720,000 shares
issued and outstanding at March 31, 2014 and June 30, 2013 respectively 1,720 1,720
Additional paid-in capital 42,480 42,480
Deficit accumulated during development stage (240,647) (175,467)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (196,447) (131,267)
---------- ----------
TOTAL LIABILITITES AND STOCKHOLDERS' EQUITY $ -- $ --
========== ==========
See Notes to Financial Statements
2
PLACER DEL MAR, LTD.
(A Development Stage Company)
Statements of Operations
(Stated In U.S, Dollars)
(Unaudited)
--------------------------------------------------------------------------------
Inception
Three Months Three Months Nine Months Nine Months May 13, 2005
Ended Ended Ended Ended through
March 31, 2014 March 31, 2013 March 31, 2014 March 31, 2013 March 31, 2014
-------------- -------------- -------------- -------------- --------------
REVENUES
Revenues $ -- $ -- $ -- $ -- $ 197,927
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES -- -- -- -- 197,927
---------- ---------- ---------- ---------- ----------
OPERATING COSTS
Exploration expense -- -- -- -- 58,174
Amortization of mineral rights
license -- 2,789 -- 8,367 28,818
Administrative expenses 27,278 18,327 65,180 52,705 344,974
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING COSTS 27,278 21,116 65,180 61,072 431,966
---------- ---------- ---------- ---------- ----------
OTHER EXPENSE
Interest expense -- 5,147 -- 15,553 53,290
---------- ---------- ---------- ---------- ----------
TOTAL OTHER EXPENSE -- 5,147 -- 15,553 53,290
---------- ---------- ---------- ---------- ----------
OTHER INCOME/EXPENSE
Other income
Ordinary gain from June 30,2013
liability write-off -- -- -- -- 46,682
---------- ---------- ---------- ---------- ----------
TOTAL OTHER INCOME/EXPENSE -- -- -- -- 46,682
---------- ---------- ---------- ---------- ----------
NET INCOME(LOSS) $ (27,278) $ (26,263) $ (65,180) $ (76,625) $ (240,647)
========== ========== ========== ========== ==========
BASIC AND DILUTED EARNINGS (LOSS)
PER SHARE $ (0.00) $ (0.01) $ (0.03) $ (0.04)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,720,000 1,720,000 1,720,000 1,720,000
========== ========== ========== ==========
See Notes to Financial Statements
3
PLACER DEL MAR, LTD.
(A development Stage Company)
Statements of Cash Flows
(Stated in U.S.Dollars)
(Unaudited)
--------------------------------------------------------------------------------
Inception
Nine Months Nine Months May 13, 2005
Ended Ended through
March 31, 2014 March 31, 2013 March 31, 2014
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $ (65,180) $ (76,625) $ (240,647)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Discount of long term liabilities -- 15,553 --
Amortization of mineral rights license -- 8,367 --
Changes in operating assets and liabilities:
Accounts receivable -- -- --
Accounts payable and accrued expenses 39,246 28,153 140,285
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (25,934) (24,552) (100,362)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan from shareholder and related party 25,394 23,463 56,162
Issuance of common stock -- -- 44,200
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 25,394 23,463 100,362
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH -- (1,089) --
CASH AT BEGINNING OF PERIOD -- 1,089 --
---------- ---------- ----------
CASH AT END OF PERIOD $ -- $ -- $ --
========== ========== ==========
NON-CASH INVESTING AND FINANCIAL ACTIVITIES
Increase in mining rights license
and long -term liabilities -- 311,425 --
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during year for:
Interest $ -- $ -- $ --
========== ========== ==========
Income Taxes $ -- $ -- $ --
========== ========== ==========
See Notes to Financial Statements
4
PLACER DEL MAR, LTD.
(An Exploration Stage Company)
Notes to Condensed Financial Statements
As at March 31, 2014
(Unaudited)
--------------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Placer Del Mar, Ltd.,
have been prepared in accordance with accounting principles generally accepted
in the United States of America and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial
statements and notes thereto contained in Placer Del Mar, Ltd.'s Form 10-K filed
with SEC. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Notes to
the financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for fiscal 2013 as reported in the
Form 10-K, for the year ended June 30, 2013, have been omitted. It is
management's opinion that all adjustments necessary for a fair statement of the
results of the interim periods have been made, and all adjustments are of a
normal recurring nature.
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. While the Company has reported revenue
of $197,927 during the period from May 13, 2005 (inception) to March 31, 2014,
the Company generated a net loss of $240,647 during the same period. This
condition raises substantial doubt about the Company's ability to continue as a
going concern. This condition raises substantial doubt about the Company's
ability to continue as a going concern. The Company will require additional
funding for operations; this additional funding may be raised through debt or
equity offerings. Management has yet to decide what type of offering the Company
will use or how much capital the Company will attempt to raise. There is no
guarantee that the Company will be able to raise any capital through any type of
offerings.
NOTE 3. LOAN FROM SHAREHOLDER
Loan from shareholder represents funds loaned to the company by an officer and
director. As of March 31, 2014 the loan balance is $56,162. The funds provided
to Placer Del Mar are unsecured and he has agreed to forego any penalties or
interest should Placer Del Mar be unable to repay any funds provided to the
Company.
NOTE 4. SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred after March 31,
2014 up through date the Company issued these financial statements. During this
period the following event is the only material event which occurred.
UNREGISTERED SALE OF EQUITY SECURITIES
On May 21, 2014, Placer Del Mar Ltd. (the "Registrant"), closed on the offer and
sale of $500,000 principal amount of its 10% Secured Convertible Promissory
Notes (the "Investor Notes") to two investor (the "Investors"). The Investor
Notes were offered and sold in a private placement (the "Notes Offering") to a
limited number of accredited investors and non-U.S. persons pursuant to the
exemptions from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), provided by Section 4(2) of, and Rule 506 of
Regulation D and Regulation S under, the Securities Act. There may be additional
closings on the Investor Notes, up to an aggregate principal amount of
$1,000,000.
5
PLACER DEL MAR, LTD.
(An Exploration Stage Company)
Notes to Condensed Financial Statements
As at March 31, 2014
(Unaudited)
--------------------------------------------------------------------------------
The Registrant used $400,000 of the gross proceeds derived from its issuance of
the Investor Notes to provide bridge financing ("Bridge Financing") to Urban
Cultivator Inc., a British Colombia corporation ("UC"), BC Northern Lights
Enterprises Ltd., a British Colombia corporation ("BCNL"), and W3 Metal Inc., a
British Colombia corporation ("W3," and together with UC and BCNL, "Borrowers")
for working capital purposes. The Bridge Financing is evidenced by a Secured
Bridge Loan Promissory Note from the Borrowers to the Registrant (the "Bridge
Note").
The Registrant and the Borrowers have entered into a non-binding term sheet
dated May 5, 2014 (the "Term Sheet"), pursuant to which it is contemplated that
a newly-formed, wholly-owned subsidiary of the Registrant will merge with and
into the Borrowers (the "Merger"), as a result of which the Registrant will
acquire all of the issued and outstanding capital stock of the Borrowers and the
Borrowers will become wholly-owned subsidiaries of the Registrant. The Borrowers
are private companies engaged in the business of manufacturing and selling
commercial and residential hydroponic growing systems. At this stage, no
definitive terms have been agreed to with respect to the proposed Merger.
Neither the Registrant nor the Borrowers is currently bound to proceed with the
Merger and there can be no assurance that the Merger will take place. The Bridge
Financing to the Borrowers was completed as contemplated by the Term Sheet.
The Investor Notes bear interest at a rate of 10% per annum and are for a term
of 8 months ("Maturity"). The Investor Notes are automatically convertible,
subject to a 4.99% conversion blocker, upon closing of the Merger into units
(the "Units"), at a conversion price of $0.30 per Unit. Each Unit consists of
one (1) share of the Registrant's common stock, $0.001 par value per share (the
"Common Stock"), and a warrant to purchase one (1) share of Common Stock at an
exercise price of $0.35 per share for two (2) years. The shares of Common Stock
that would be issued as a result of conversion of the Notes (and upon exercise
of the related warrants) carry certain registration rights. Upon the closing of
the Merger, the Registrant shall issue to each of the Investors warrants (the
"Bridge Warrants") to purchase a number of shares of Common Stock equal to one
hundred percent (100%) of the number of shares of Common Stock comprising the
Units, exercisable at a price of $0.35 per share, exercisable for two (2) years
from the closing of the Merger. The Bridge Warrants will have weighted average
anti-dilution protection. If the Merger does not close, the Investor Notes must
be repaid.
The Investor Notes and the Bridge Note are secured by all of the assets of the
Borrowers. This security interest is subordinated to that of a certain bank
providing an existing credit facility to the Borrowers.
The Bridge Note is for a term of 8 months from the initial closing of the Bridge
Financing, and bears interest at the rate of 10% per annum. All obligations
under the Bridge Note will be deemed repaid in full and canceled upon the
closing of the Merger.
The Investor Notes contain customary events of default and include a default by
the Borrowers under the Bridge Note. If the Registrant defaults under the
Investor Notes, the full principal amount of the Investor Notes will, at the
Investor's option, become immediately due and payable in cash. In addition, upon
an event of default, the Investor Notes will begin to bear interest at a rate of
12% per annum, or such lower maximum amount of interest permitted to be charged
under applicable law.
A default by Borrowers under the Bridge Note, including but not limited to the
failure to repay the Bridge Note at Maturity if the Merger doesn't close, will
cause the full principal amount of the Bridge Note, at the Registrant's option,
to become immediately due and payable in cash. In addition, upon an event of
default, the Bridge Note will begin to bear interest at a rate of 12% per annum,
or such lower maximum amount of interest permitted to be charged under
applicable law, which interest rate will continue until all defaults are cured.
6
PLACER DEL MAR, LTD.
(An Exploration Stage Company)
Notes to Condensed Financial Statements
As at March 31, 2014
(Unaudited)
--------------------------------------------------------------------------------
The Registrant has agreed to pay a finder a fee of $50,000 for introducing the
Investors to the Registrant.
In addition to the Notes Offering, the Registrant intends to engage in an
additional private placement of the Units for at least an additional $2,500,000
in gross proceeds to the Registrant (the "Subsequent Offering"). The closing of
the Subsequent Offering and the closing of the Merger is each a condition
precedent to the other.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. The words "believes," "anticipates,"
"plans," "seeks," "expects," "intends" and similar expressions identify some of
the forward-looking statements. Forward-looking statements are not guarantees of
performance or future results and involve risks, uncertainties and assumptions.
The factors discussed elsewhere in this Form 10-Q could also cause actual
results to differ materially from those indicated by the Company's
forward-looking statements. Placer Del Mar, Ltd. undertakes no obligation to
publicly update or revise any forward-looking statements.
GOING CONCERN
Our unaudited financial statements presented herein are prepared using
accounting principles generally accepted in the United States of America
applicable to a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. However, we dodoes
not have cash or other significant current assets, nor do we have an established
source of revenues sufficient to cover our operating costs and to allow us to
continue as a going concern.
In the course of its development activities, the Company has sustained losses
and expects such losses to continue through at least the end of fiscal 2014. The
Company expects to finance its operations primarily through one or more future
financings. However, there exists substantial doubt about the Company's ability
to continue as a going concern for at least the next twelve months, because the
Company will be required to obtain additional capital in the future to continue
its operations and there is no assurance that it will be able to obtain such
capital, through equity or debt financing, or any combination thereof, or on
satisfactory terms or at all.
Our independent auditors have included an explanatory paragraph in their report
on our consolidated financial statements included in this report that raises
substantial doubt about our ability to continue as a going concern. Our
financial statements do not include any adjustments that may result from the
outcome of this uncertainty. We have generated minimal operating revenues since
our inception. We had an accumulated deficit of $240,647 as of March 31, 2014.
Our continuation as a going concern is dependent upon future events, including
our ability to identify a suitable business combination, to raise additional
capital and to generate positive cash flows. Our consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles applicable to a going concern, which implies we will continue to meet
our obligations and continue our operations for the next twelve months.
Realization values may be substantially different from carrying values as shown,
and our consolidated financial statements do not include any adjustments
relating to the recoverability or classification of recorded asset amounts or
the amount and classification of liabilities that might be necessary as a result
of the going concern uncertainty.
8
Under the going concern assumption, an entity is ordinarily viewed as continuing
in business for the foreseeable future with neither the intention nor the
necessity of liquidation, ceasing trading, or seeking protection from creditors
pursuant to laws or regulations. Accordingly, assets and liabilities are
recorded on the basis that the entity will be able to realize its assets and
discharge its liabilities in the normal course of business.
As described in Note 2 of our accompanying financial statements, our losses to
date and our lack of any guaranteed sources of future capital create substantial
doubt as to our ability to continue as a going concern. If our business plan
does not work, we could remain as a start-up company with limited material
operations, revenues, or profits. Although management has believes their plan
for Placer Del Mar will generate revenue and profit, there is no guarantee their
past experiences will provide Placer Del Mar with similar future successes.
RESULTS OF OPERATIONS
We have generated $197,927 in revenues, have incurred $431,966 in operating
expenses from ongoing operations and $53,290 in interest expense since inception
through March 31, 2014, resulting in a net loss of $240,647.
The following table provides selected financial data about our Company for the
period ended March 31, 2014.
Balance Sheet Data: 3/31/2014
------------------- ---------
Cash $ 0
Total assets $ 0
Total liabilities $ 196,447
Shareholders' equity $(196,447)
During the three month periods ended March 31, 2014 and 2013 we generated no
revenues. During the three month period ended March 31, 2014 we incurred $27,278
in general and administrative expense. For the three month period ended March
31, 2013 we incurred $18,327 in general and administrative expenses, $5,147 in
interest expense and $2,789 in amortization expense.
During the nine month periods ended March 31, 2014 and 2013 we generated no
revenues. During the nine month period ended March 31, 2014 we incurred $65,180
in general and administrative expense. For the nine month period ended March 31,
2013 we incurred $52,705 in general and administrative expenses, $15,553 in
interest expense and $8,367 in amortization expense.
LIQUIDITY AND CAPITAL RESOURCES
Our cash in the bank at March 31, 2014 was $0. There was no cash provided by
financing activities for the period ended March 31, 2014. Cash provided by
financing since inception was $10,000 from the sale of shares to our officer and
$24,200 resulting from the sale of our common stock to 46 independent investors.
9
We estimate our general and administrative costs will require approximately
$7,500 for the remainder of fiscal year ending June 30, 2014, exclusive of any
business acquisition or combination costs. We plan to raise the necessary funds
through loans from affiliates or others.
We may be unable to secure additional financing on terms acceptable to us, or at
all, at times when we need such financing. Our inability to raise additional
funds on a timely basis could prevent us from achieving our business objectives
and could have a negative impact on our business, financial condition, results
of operations and the value of our securities.
If we raise additional funds by issuing additional equity or convertible debt
securities, the ownership percentages of existing stockholders will be reduced
and the securities that we may issue in the future may have rights, preferences
or privileges senior to those of the current holders of our Common Stock. Such
securities may also be issued at a discount to the market price of our Common
Stock, resulting in possible further dilution to the book value per share of
Common Stock. If we raise additional funds by issuing debt, we could be subject
to debt covenants that could place limitations on our operations and financial
flexibility.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we
are not required to provide disclosure under this Item 3.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and our principal financial officer, we have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as of the end of the period
covered by this report. Based on this evaluation, our principal executive
officer and principal financial officer concluded as of the evaluation date that
our disclosure controls and procedures were effective to ensure that the
information required to be included in the reports filed or submitted by us
under the Exchange Act is (i) is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms, and (ii) is
accumulated and communicated to our management, including our principal
financial and executive officers, as appropriate to allow timely decisions
regarding required disclosure
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting that
occurred during the fiscal quarter ended March 31, 2014 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings and we are not aware of
any pending or potential legal actions.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously discussed in
Item 1A of our Annual Report on Form 10-K for the year ended June 30, 2013.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We have not sold any unregistered securities during the period covered by this
report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the period covered by this
report.
ITEM 4. MINING SAFETY DISCLOSURES
The Company is not currently the operator of a mine.
ITEM 5. OTHER INFORMATION
CHANGES TO THE BOARD OF DIRECTORS
On November 30, 2013, Humberto Bravo and Mario Laguna resigned as the only
members of the Board of Directors of Placer Del Mar, Ltd. (the "Company"). To
the knowledge of the Company, the resignation of each member of the Board of
Director did not result from any disagreement with the Company on any matter
relating to the Company's operations, policies or practices.
The stockholders of the Company holding at least the requisite voting power of
the issued and outstanding stock of the Company entitled to vote, acting by
written consent without a meeting under Nevada law, appointed Frank Terzo as the
sole director of the Company, to fill the vacancy so created by the resignation
of Mr. Bravo and Mr. Laguna, effective February 27, 2014, to serve until the
next annual meeting of the stockholders of the Company, and until his successor
is duly elected or appointed and qualified, or until his prior resignation or
removal.
Effective February 27, 2014, Mr. Terzo, sole director of the Company, appointed
himself as the Company's President, Treasurer and Secretary, to serve at the
pleasure of the Board of Directors.
11
SUBSEQUENT EVENTS
UNREGISTERED SALE OF EQUITY SECURITIES
The following events were discussed in the Company's Form 8-K (including
exhibits) as filed with the Securities and Exchange Commission on May 28, 2014.
On May 21, 2014, Placer Del Mar Ltd. (the "Registrant"), closed on the offer and
sale of $500,000 principal amount of its 10% Secured Convertible Promissory
Notes (the "Investor Notes") to two investor (the "Investors"). The Investor
Notes were offered and sold in a private placement (the "Notes Offering") to a
limited number of accredited investors and non-U.S. persons pursuant to the
exemptions from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), provided by Section 4(2) of, and Rule 506 of
Regulation D and Regulation S under, the Securities Act. There may be additional
closings on the Investor Notes, up to an aggregate principal amount of
$1,000,000.
The Registrant used $400,000 of the gross proceeds derived from its issuance of
the Investor Notes to provide bridge financing ("Bridge Financing") to Urban
Cultivator Inc., a British Colombia corporation ("UC"), BC Northern Lights
Enterprises Ltd., a British Colombia corporation ("BCNL"), and W3 Metal Inc., a
British Colombia corporation ("W3," and together with UC and BCNL, "Borrowers")
for working capital purposes. The Bridge Financing is evidenced by a Secured
Bridge Loan Promissory Note from the Borrowers to the Registrant (the "Bridge
Note").
The Registrant and the Borrowers have entered into a non-binding term sheet
dated May 5, 2014 (the "Term Sheet"), pursuant to which it is contemplated that
a newly-formed, wholly-owned subsidiary of the Registrant will merge with and
into the Borrowers (the "Merger"), as a result of which the Registrant will
acquire all of the issued and outstanding capital stock of the Borrowers and the
Borrowers will become wholly-owned subsidiaries of the Registrant. The Borrowers
are private companies engaged in the business of manufacturing and selling
commercial and residential hydroponic growing systems. At this stage, no
definitive terms have been agreed to with respect to the proposed Merger.
Neither the Registrant nor the Borrowers is currently bound to proceed with the
Merger and there can be no assurance that the Merger will take place. The Bridge
Financing to the Borrowers was completed as contemplated by the Term Sheet.
The Investor Notes bear interest at a rate of 10% per annum and are for a term
of 8 months ("Maturity"). The Investor Notes are automatically convertible,
subject to a 4.99% conversion blocker, upon closing of the Merger into units
(the "Units"), at a conversion price of $0.30 per Unit. Each Unit consists of
one (1) share of the Registrant's common stock, $0.001 par value per share (the
"Common Stock"), and a warrant to purchase one (1) share of Common Stock at an
exercise price of $0.35 per share for two (2) years. The shares of Common Stock
that would be issued as a result of conversion of the Notes (and upon exercise
of the related warrants) carry certain registration rights. Upon the closing of
the Merger, the Registrant shall issue to each of the Investors warrants (the
"Bridge Warrants") to purchase a number of shares of Common Stock equal to one
hundred percent (100%) of the number of shares of Common Stock comprising the
Units, exercisable at a price of $0.35 per share, exercisable for two (2) years
from the closing of the Merger. The Bridge Warrants will have weighted average
anti-dilution protection. If the Merger does not close, the Investor Notes must
be repaid.
12
The Investor Notes and the Bridge Note are secured by all of the assets of the
Borrowers. This security interest is subordinated to that of a certain bank
providing an existing credit facility to the Borrowers.
The Bridge Note is for a term of 8 months from the initial closing of the Bridge
Financing, and bears interest at the rate of 10% per annum. All obligations
under the Bridge Note will be deemed repaid in full and canceled upon the
closing of the Merger.
The Investor Notes contain customary events of default and include a default by
the Borrowers under the Bridge Note. If the Registrant defaults under the
Investor Notes, the full principal amount of the Investor Notes will, at the
Investor's option, become immediately due and payable in cash. In addition, upon
an event of default, the Investor Notes will begin to bear interest at a rate of
12% per annum, or such lower maximum amount of interest permitted to be charged
under applicable law.
A default by Borrowers under the Bridge Note, including but not limited to the
failure to repay the Bridge Note at Maturity if the Merger doesn't close, will
cause the full principal amount of the Bridge Note, at the Registrant's option,
to become immediately due and payable in cash. In addition, upon an event of
default, the Bridge Note will begin to bear interest at a rate of 12% per annum,
or such lower maximum amount of interest permitted to be charged under
applicable law, which interest rate will continue until all defaults are cured.
The Registrant has agreed to pay a finder a fee of $50,000 for introducing the
Investors to the Registrant.
In addition to the Notes Offering, the Registrant intends to engage in an
additional private placement of the Units for at least an additional $2,500,000
in gross proceeds to the Registrant (the "Subsequent Offering"). The closing of
the Subsequent Offering and the closing of the Merger is each a condition
precedent to the other.
ITEM 6. EXHIBITS
The following exhibits are included with this quarterly filing.
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
31 Sec. 302 Certification of Principal Executive & Financial Officer
32 Sec. 906 Certification of Principal Executive & Financial Officer
101 Interactive data files pursuant to Rule 405 of Regulation S-T*
----------
* Incorporated by reference and can be found in their entirety in our
Registration Statement on Form S-1, filed under SEC File Number 333-171307,
at the SEC website at www.sec.gov.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on June 2, 2014.
Placer del Mar, Ltd.
/s/ Frank Terzo
--------------------------------------
By: Frank Terzo
(Principal Executive Officer)
1
