U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
__ TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 0-6088
EARTH SCIENCES, INC.
-------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado
--------------------------------------------------------------
(State of other jurisdiction of incorporation or organization)
84-0503749
----------------------------------------
(I.R.S. Employer Identification No.)
910 12th Street, Golden, Colorado 80401
-------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303)279-7641
-------------
(Issuer's telephone number)
Not Applicable
------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reported required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 past 90 days. Yes X ; No_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 1, 1996: 8,415,911 Shares of Common Stock, one
cent par value.
Transitional Small Business Disclosure Format: Yes _____; No X
FINANCIAL STATEMENTS
Earth Sciences, Inc. and Subsidiaries
Consolidated Balance Sheet
September 30, 1996
UNAUDITED
<TABLE>
<CAPTION>
Assets (amounts in thousands)
Current assets:
<S> <C>
Cash, and cash equivalents $ 1,077
Certificates of deposit 283
Receivables 149
Prepaid expenses and other 1,131
------
Total current assets 2,640
Property, plant and equipment, at cost 16,764
Less accum. depr. and amort. (4,986)
------
Net property and equipment 11,778
Other assets 372
------
$14,790
======
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current
installments of long-term debt $ 15
Accounts payable 3
Accrued expenses 185
------
Total current liabilities 203
Long-Term Liabilities:
Deferred revenues 9,382
Long-term debt, excluding current installments 914
Other liabilities 461
Accrued decommissioning liability 221
------
10,978
Stockholders' equity:
Common stock $.01 par value 80
Additional paid-in capital 8,148
Retained deficit (2,855)
Cumulative translation adjustments (1,763)
Treasury stock (1)
------
Total stockholders' equity 3,609
------
$ 14,790
======
</TABLE>
See accompanying notes.
Earth Sciences, Inc. and Subsidiaries
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1996 and 1995
UNAUDITED
<TABLE>
<CAPTION>
1996 1995
Qtr. 9 Mos. Qtr. 9 Mos.
(amounts in thousands, except per share and shares outstanding)
REVENUES:
<S> <C> <C> <C> <C>
Royalty income $ 202 632 254 728
Other 42 73 14 39 246 461
---- --- --- ---
244 705 268 767
EXPENSES:
Operating 121 298 92 249
General and administrative 83 311 30 180
Interest expense 28 62 19 61
Depreciation and amortization 59 176 60 175
---- --- --- ---
291 847 201 665
---- --- --- ---
Net earnings (loss) $ (47) (142) 67 102
==== === === ===
Net earnings (loss) per
common share $(.01) (.02) .01 .02
==== === === ===
Weighted average common
shares outstanding 7,606,776 6,670,857 6,355,456 6,355,456
========= ========= ========= =========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
Earth Sciences, Inc. and Subsidiaries
Consolidated Statements of Accumulated Deficit
Nine Months Ended September 30, 1996 and 1995
<TABLE>
UNAUDITED
<CAPTION> 1996 1995
(amounts in thousands)
<S> <C> <C>
Retained deficit as of January 1 $ (2,713) (2,851)
Net earnings (loss) for the period (142) 102
----- -----
Retained deficit as of September 30 $ (2,855) (2,749)
===== =====
</TABLE>
See accompanying notes.
Earth Sciences, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
<TABLE>
UNAUDITED
<CAPTION> 1996 1995
(amounts in thousands)
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 722 716
Cash paid to suppliers and employees (590) (436)
Dividends and interest received 18 21
Interest paid (22) (30)
---- ----
Net cash provided by operating
activities 128 271
Cash flows from investing activities:
Collection on notes receivable 22 60
Notes receivable funded (70) (130)
Capital expenditures (253) (17)
Purchase of CD's and marketable
securities (714) (190)
Increase in other assets (287) -
----- ----
Net cash used (1,186) (120)
Cash flow from financing activities:
Proceeds from convertible debt 900 -
Payments on and conversion of debt (676) (139)
Sale of common stock 1,774 -
Additional paid in capital - 2
----- ----
Net cash provided (used) 1,989 (137)
----- ----
Net increase (decrease) in cash and
cash equivalents 815 (143)
Cash and cash equivalents at beginning
of period 262 323
----- ----
Cash and equivalents at end of period $ 1,077 180
===== ====
</TABLE>
<TABLE>
Reconciliation of net earnings (loss) to net cash provided by operating
activities:
<S> <C> <C>
Net earnings (loss) $ (142) 102
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization 176 175
(Increase) decrease in receivables 70 (30)
(Increase) decrease in other assets 58 (2)
Increase in payables 82 22
--- ---
Net cash provided (used) by
operating activities $ 128 271
==== ===
</TABLE>
See accompanying notes.
Earth Sciences, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1996
(1) General
The accompanying consolidated financial statements were prepared in accordance
with generally accepted accounting principles and reflect all adjustments which
are, in the opinion of management, necessary for fair representation of the
financial results for the interim periods shown. Such statements should be
considered in conjunction with Registrant's 1995 Form 10-KSB.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
In the first nine months of 1996, a net of $1,921,000 was raised from
placements of equity and convertible debt with a number of foreign investors.
Management believes that existing working capital and the continuing royalty
income from the San Luis gold mine are sufficient to fund existing operations,
and a portion of the anticipated equipment and construction costs for conversion
of the Calgary facility for the production of purified phosphate products.
Additional funds will be required to initiate start-up, for inventory and for
other working capital.
Based on current estimates, the Calgary facility will require approximately $5
million to re-start for the production of purified phosphoric products, planned
for the first quarter of 1997. Registrant expects to finance those requirements
through existing working capital, further equity placements and through
participation of customers.
Registrant is funding the majority of cash costs of the Venezuelan gold
exploration activities. Activities planned on the existing concession and on
those concessions expected to be acquired in the future can be met through
existing working capital. Registrant plans to raise the additional capital,
if and when needed, for increased activities in Venezuela, through further
private placements of stock and joint venture arrangements, if appropriate.
Cash flow from operations totaled $128,000 for the first nine months of 1996
as compared to $271,000 for the same period in 1995. Cash flow from investing
activities included collection on and funding notes receivable of $22,000 and
($70,000), respectively, capital expenditures of $253,000, purchase of CD's and
marketable securities of $714,000, and increase in other assets of $287,000.
Cash flow from financing activities included proceeds from convertible debt
of $900,000, payment on and conversions of debt of $676,000 and proceeds from
conversion of debtand issuance of stock of $1,774,000.
Results of Operations
Total revenues for the 1st nine month of 1996 were $62,000 less than the same
period in 1995, primarily due to lower total ounces of gold produced (47,340
oz. in 1996 vs. 54,360 in 1995) by Battle Mountain Gold Company (BMGC) at the
San Luis gold mine from which Registrant receives a 3 1/2% gross royalty.
Although BMGC has targeted 1996 production at 72,000 ounces, it appears unlikely
that they will achieve their target.
Expenses for the 1st nine months of 1996 were greaterr than for the same period
in 1995 due primarily to planning and construction activities in Calgary
and costs associated with equity placements made in the second and third
quarters of 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reported in Item 3 of Registrant's 1995 Form 10-KSB.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At a Special Meeting of the shareholders on August 15, 1996, the Registrant's
Article of Incorporation were amended to increase in the authorized common
stock from 10,000,000 shares of $.01 par value Common Stock to 25,000,000
shares. A total of 5,768,343 shares were voted: 5,531,529 For; 201,926
Against; and 34,888 Abstaining.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
No change from Item 13 of Registrant's 1995 Form 10-KSB.
Exhibit 27 - Financial Data Schedule for electric data filing purposes only.
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.
Earth Sciences, Inc.
Registrant
Date: November 1, 1996 /s/ Mark H. McKinnies
---------------------
Mark H. McKinnies
President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1077
<SECURITIES> 0
<RECEIVABLES> 149
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2640
<PP&E> 16764
<DEPRECIATION> 4986
<TOTAL-ASSETS> 14790
<CURRENT-LIABILITIES> 203
<BONDS> 914
0
0
<COMMON> 80
<OTHER-SE> 3609
<TOTAL-LIABILITY-AND-EQUITY> 14790
<SALES> 0
<TOTAL-REVENUES> 705
<CGS> 0
<TOTAL-COSTS> 847
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> (142)
<INCOME-TAX> 0
<INCOME-CONTINUING> (142)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
