As filed with the Securities and Exchange Commission on September 8, 1997.
Registration No. ___-_____
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Earth Sciences, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-0503749
(State of incorporation) (IRS Employer Identification No.)
910 12th Street, Golden, Colorado 80401
(Address of principal executive offices, including Zip Code)
(Registrant's telephone number, including area code): (303) 279-7641
Mark H. McKinnies
910 12th Street, Golden, Colorado 80401
(303) 279-7641
(Name, address, including zip code and telephone number,
including area code, of agent for service of process)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in conjunction with dividend or
interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
[ ]
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CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
Title of each Proposed
class of Proposed maximum
securities to Amount to be maximum offer- aggregate Amount of
registered registered ing price per offering registration
share price fee
______________________________________________________________________________
Common Stock, $.01
par value:
Issued and
outstanding 399,750 Shares $ 2.35 (1) $ 939,413 (1) $ 284.67
Issueable upon
conversion of
Debentures 1,326,667 Shares $ 1.50 (2) $1,990,000 (2) $ 944.75
Issueable upon
exercise of
options 50,000 Shares $ 2.50 (3) $ 125,000 (3) $ 37.88
______________________________________________________________________________
Totals 1,776,417 Shares $3,054,413 $ 1,267.30
______________________________________________________________________________
(1) Based on the average price of the Common Stock on NASDAQ's SmallCapSM
Market on September 5, 1997. The resulting fee is calculated pursuant to
section (c) of Rule 457 of Regulation C.
(2) Based on the maximum number of shares that could be issued pursuant this
Registration Statement and the terms of the Debentures with respect to the
conversion price. The resulting fee is calculated pursuant to section (g) of
Rule 457 of Regulation C using a price of $2.35 per share.
(3) Based on the weighted average exercise price of the options. The
resulting fee is calculated pursuant to section (g) of Rule 457 of Regulation
C.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED September 8, 1997
EARTH SCIENCES, INC.
1,776,417 SHARES OF COMMON STOCK
This Prospectus relates to the public offer and sale by certain
shareholders (the "Selling Shareholders") of an aggregate of 1,776,417 shares
(the "Shares") of $0.01 par value common stock (the "Common Stock") of Earth
Sciences, Inc., a Colorado corporation (the "Company"). Of the 1,776,417
shares of Common Stock offered by the Selling Shareholders, 399,750 shares are
currently issued and outstanding and the remaining 1,376,667 are issuable on
exercise of options and conversion of convertible debentures. (See "SELLING
STOCKHOLDERS").
The Selling Shareholders will offer their Common Stock through or to
securities brokers or dealers designated by them in the over-the-counter
market or in other transactions negotiated by the Selling Shareholders. Any
such sale of Common Stock by Selling Shareholders must be accompanied by, or
follow the delivery of, a prospectus filed with a current registration
statement relating to the Common Stock being offered, unless a Selling
Shareholder elects to rely on Rule 144 or another exemption from the
registration requirements in connection with a particular transaction. The
Selling Shareholders and any broker, dealer, or agent that participates with
the Selling Shareholders in the sale of Common Stock offered hereby may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended ( the "Securities Act"), and any commission or discounts received by
them and any profit on the resale of the Common Stock purchased by them may be
deemed to be underwriting commissions under the Securities Act. (See "SELLING
STOCKHOLDERS" and "PLAN OF DISTRIBUTION").
The Company's Common Stock is traded in the over-the-counter market and is
quoted on NASDAQ's SmallCapSM Market ("Nasdaq") under the symbol "ESCI". On
_______, 1997, the closing price of the Common Stock on Nasdaq was $____ per
share.
THE ACQUISITION AND OWNERSHIP OF THE COMMON STOCK INVOLVE A HIGH DEGREE OF
RISK. THE COMMON STOCK SHOULD BE PURCHASED ONLY BY INVESTORS WHO ARE ABLE TO
AFFORD THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT. (SEE "RISK FACTORS"
BEGINNING ON PAGE 6 OF THIS PROSPECTUS).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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Price to Offering Selling Proceeds to
Public(1) Commissions(2) Stockholders Company (3)
By Selling Shareholders
Per Share .........$ 2.35 $ -- $ 2.35 $ --
TOTAL ............$ 4,174,580 $ -- $ 4,174,580 $ --
(1) The price per share for the securities offered by the Selling
Shareholders is estimated at the closing sales price quoted by Nasdaq for the
Common Stock at $2.35 on September 5, 1997. The Common Stock may be offered
at the current market price, which may vary through the period during which
the securities may be offered, or at such other prices as may be negotiated by
the Selling Shareholder and the purchaser at the time of sale.
(2) The securities to be sold by Selling Stockholders may be sold by them or
through or to securities brokers or dealers, which sales may involve the
payment of commissions to the Selling Stockholders.
(3) Does not reflect expenses of this offering payable by the Company
estimated at $6,000 nor the receipt by the Company of approximately $125,000
on exercise of options. (See "PLAN OF DISTRIBUTION" below).
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders. However, the Company would receive proceeds upon
exercise of options held by Selling Stockholders prior to the sale of Common
Stock issuable on such exercise. (See "USE OF PROCEEDS"). In connection with
this offering, the Company estimates that it will incur costs of approximately
$6,000 for legal, accounting, printing, and other costs. Any separate costs
of Selling Stockholders will be borne by them. Commissions or discounts paid
in connection with the sale of securities by the Selling Stockholders will be
determined by negotiations between them and the broker-dealer through or to
which the securities are to be sold and may vary depending on the broker-
dealers' commission or mark up schedule, the size of the transaction, and
other factors. (See "PLAN OF DISTRIBUTION" below.)
The Selling Stockholders and any broker, dealer, or agent that
participates with the Selling Stockholders in the sale of the Common Stock
offered hereby may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended ( the "Securities Act"), and any commission
or discounts received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting commissions under the
Securities Act. (See "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION").
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, and accordingly files reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements, and other information
filed with the Commission are available for inspection and copying at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street N.W., Judiciary Plaza, Washington, D.C. 20549, and at certain of
the Commission's regional offices located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60604; and 7 World Trade
Center, New York, New York 10048, upon payment of the charges prescribed
therefor by the Commission.
The Company is also subject to the electronic filing requirements of the
Commission. The commission maintains a Web site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically. The address of the Web site is http://www.sec.gov.
The Common Stock of the Company is currently traded in the over-the-counter
market and is quoted on NASDAQ, SmallCap Market. Reports, proxy statements
and other information filed by the Company therewith can be inspected at the
National Association of Securities Dealers, Inc. 1735 K Street N.W.,
Washington , D.C. 20006.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 0-6088) with the
Commission are incorporated herein by reference.
1. The Company's annual report on Form 10-KSB, as amended, for the year
ended December 31, 1996 ("1996 10-KSB").
2. The Company's quarterly reports on Form 10-QSB for the quarters ended
March 31, 1997 and June 30, 1997.
3. The Company's current report on Form 8-K, as amended, dated April 30,
1997 reporting the acquisition of ADA Environmental Solutions LLC.
4. A description of the Company's Common Stock contained in the
Registration Statement on Form 8-A as declared effective by the Securities and
Exchange Commission.
5. All documents filed by the Company pursuant to Section 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, (i) a copy of the Company's annual and quarterly
reports as filed with the Commission, and/or (ii) a copy of any or all of the
documents which are incorporated by reference herein, other than exhibits to
such documents which are not specifically incorporated by reference therein.
The annual reports on Form 10-KSB include audited financial statements of the
Company. Requests should be directed to Earth Sciences, Inc., 910 12th
Street, Golden, Colorado 80401, Attention: Investor Relations (telephone
303-279-7641).
_________________________________
No person is authorized to give any information or make any representation not
contained in this prospectus and, if given or made, such information should
not be relied upon as having been authorized.
THE COMPANY
Earth Sciences, Inc. (the "Company") is a diversified mineral exploration and
development company specializing in chemical processing, air pollution control
and mineral exploration. Production of purified phosphate products in Calgary
commenced in June 1997. The Company was incorporated under the name of
Colorado Central Mines, Inc. in Colorado in 1957. Current activities of the
Company include (1) the start-up and progress toward routine operation of its
recently modified solvent extraction facility in Calgary, Alberta for
production of purified phosphate products; (2) continued exploration
activities for gold and diamond resources in Venezuela including its land
contract covering approximately 1200 acres; (3) drilling and further geologic
evaluation of the Cerro Gordo property in Inyo County, California (4) the
recent acquisition of ADA Environmental Solutions LLC ("ADA"), a company that
provides flue gas conditioning technology for coal-fired boilers and other
applications, and (5) maintenance of its position in several mining deposits
and prospects in the Western US.
The Company's solvent extraction facility in Calgary, Alberta, recovered
uranium from phosphoric acid during the period from 1983 through 1987.
Uranium oxide production was suspended in the fall of 1987 when the adjacent
fertilizer plant from which the facility received its feed stock suspended
operations. The contract under which the uranium was sold was modified in
1990 to allow unrestricted alternative use of the facility. An in-house
feasibility study, completed in 1995, confirmed the technical and financial
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feasibility of conversion of the facility for the production of purified
phosphate products. Revamp of the facility to allow such production has
recently been completed. The Calgary facility is currently in the start-up
phase for the production of purified phosphate products, and met certain
technical parameters to demonstrate the capability of a planned initial annual
production rate of 18,400 tons of product in late May 1997. Shake-down of
various unit operations is underway and routine production is expected to be
achieved during the third quarter of 1997. Sales of products are keeping pace
with the current less than routine production. The Company intends to pursue
the recovery of other valuable elements in the feed stock once routine
production and cash flow are achieved. Initial investigation of such recovery
potential is estimated to cost between $20,000-$50,000 and is expected to be
funded out of internally generated cash flow. Routine sales are expected to be
achieved in September and October, but there can be no assurances that the
Company will be able to achieve routine production, or the projected level of
sales or cash flow.
RECENT DEVELOPMENTS
Investor Relation Services
In August 1997, the Company renewed its engagment with Corporate Relations
Group, Inc. ("CRG") of Winter Park, Florida to provide investor relation
services for the Company over a 5 year period. The services include wide
circulation advertising, broker relations and direct marketing. In addition
to certain cash payments, the Company issued CRG 320,000 shares of Common
Stock. This Prospectus includes the resale of shares of Common Stock held by
CRG.
Sale of Convertible Debentures
In August and September 1997, the Company issued $1,990,000 of 4% convertible
debentures (the "Debentures") for which the Company received net proceeds of
approximately $1,830,000. The Debentures were issued to provide working
capital for the Calgary facility for production of purified phosphate products
and obligations associated with the recently completed ADA acquisition.
Interest on the Debentures is payable quarterly. Due to the difference
between the fair market value of the Common Stock on the date the Debentures
were sold and the conversion price, the Company will recognize a deferred
financing cost of $663,000 in the third quarter of 1997. The Debentures are
convertible at any time following 45 days after the issuance thereof. The
deferred financing cost is being amortized over the 45 day period ending when
the Debentures are convertible. The Debentures mature on August 31, 1998. The
Debentures are convertible into shares of Common Stock based on a 25% discount
from the market price of the Common Stock at the time of conversion, but not
in excess of $2.50 per share. The Company may repurchase the Debentures at a
25% premium if the market price of the Common Stock is below $1.50 per share
for any two trading days out of a five trading day period. This Prospectus
includes the resale of shares of Common Stock issuable by the Company on the
conversion of the Debentures.
The principal executive offices of the Company are located at 910 12th Street,
Golden, Colorado 80401, and its telephone number is (303) 279-7641.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Prospectus and the documents
incorporated herein by reference contain forward-looking statements. The
forward-looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in the section entitled "RISK
FACTORS" set forth below. Investors are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's analysis only
as of the date of such statements. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date of such statements.
RISK FACTORS
An investment in the Shares is speculative and involves a high degree of risk.
In analyzing the offering, prospective investors should read this entire
Prospectus and the information incorporated herein by
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reference, and carefully consider, among others, the following risk factors
in addition to the other information set forth elsewhere in this Prospectus.
Specifics Risks Related to the Company
No Dividends. The Company has paid no cash dividends on its Common Stock and
has no present intention of paying cash dividends in the foreseeable future.
It is the present policy of the Board of Directors to retain all earnings to
provide for the growth of the Company. Payments of cash dividends in the
future will depend, among other things, upon the Company's future earnings,
requirements for capital improvements, the operating and financial conditions
of the Company and other factors deemed relevant by the Board of Directors.
Lack of Profitability. While the Company reported net income in fiscal 1995,
the Company's operating history has resulted in losses from operations in the
fiscal years ending December 31, 1988 through 1994 and in 1996. While certain
of the Company's operations may be profitable during a given fiscal year, the
Company's operations as a whole may be unprofitable due to exploration and
development costs on properties from which no revenue is derived, to
continuing corporate general and administrative costs and to interest expense
associated with long term debt.
Dilutive Effect of Issuance of Additional Shares on Current Shareholders. The
Board of Directors has the authority to authorize the offer and sale of
additional securities without the vote of or notice to existing shareholders,
and it is likely that additional securities will be issued to provide future
financing or in connection with acquisitions. The issuance of additional
securities could dilute the percentage interests and per share book value of
existing shareholders, including persons purchasing securities in this
offering.
Volatility of Price for Common Stock. The market price for shares of the
Company's Common Stock may be highly volatile depending on news announcements
or changes in general market conditions. In recent years the stock market has
experienced extreme price and volume fluctuations.
Risks Related to the Exploration and Development of Minerals
Nature of Mineral Exploration and Development; No Proven Commercially Viable
Reserves Yet Discovered on the Company's Mineral Properties (with the
exception of the San Luis gold mine). Exploration for minerals is highly
speculative and may involve greater risks than many other businesses. Many
exploration programs, including those which have been conducted by the
Company, do not result and have not resulted in the discovery of
mineralization and any mineralization discovered may not be of sufficient
quantity or quality to be profitably mined. The Company's mineral exploration
and development activities are subject to all of the operating hazards and
risks normally incident to such activities, such as encountering unusual or
unexpected formations, environmental pollution, personal injury and flooding.
All of these factors may result in losses in relation to the amounts spent
which are not recoverable. With the exception of the San Luis gold mine, no
commercially viable reserves have yet been discovered on the Company's mineral
properties.
Competition and Scarcity of Mineral Lands. Many companies and individuals are
engaged in mineral exploration and development, including large, established
mining companies with substantial capabilities and long earnings records.
There is a limited amount of desirable mineral lands available for claim
staking, lease or other acquisition in the United States ("US"), Venezuela and
other areas where the Company contemplates conducting exploration activities.
The Company may be at a competitive disadvantage in acquiring mineral
properties since it must compete with these individuals and companies, many of
which have greater financial resources and larger technical staffs than the
Company. From time to time, specific properties or areas which would
otherwise be attractive to the Company for exploration or acquisition are
unavailable due to their previous acquisition by other companies.
Fluctuation in the Price of Minerals. The market price of minerals is
extremely volatile and beyond the control of the Company. Gold prices are
generally influenced by basic supply/demand fundamentals. The market dynamics
of supply/demand can be heavily influenced by economic policy, i.e., central
banks
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sales/purchases, political unrest, conflicts between nations, and general
perceptions about inflation. Fluctuating metal prices may have a significant
impact on the Company's results of operations and operating cash flow.
Furthermore, if the price of a mineral should drop dramatically, the value of
the Company's properties which are being explored or developed for that
mineral could also drop dramatically, and the Company might not be able to
recover its investment in those properties. The decision to put a mine into
production, and the commitment of the funds necessary for that purpose, must
be made long before the first revenues from production will be received.
During the last five years, the average annual market price of gold has
fluctuated between $330 per ounce and $384 per ounce. Price fluctuations
between the time that such a decision is made and the commencement of
production can change completely the economics of the mine. Although it is
possible to protect against price fluctuations by hedging in certain
circumstances, the volatility of mineral prices represents a substantial risk
in the mining industry generally which no amount of planning or technical
expertise can eliminate. The Company is not involved in, nor does it expect
to enter into any hedging activities
Environmental Controls. Compliance with environmental quality requirements
and reclamation laws imposed by federal, state, provincial, and local
governmental authorities may necessitate significant capital outlays, may
materially affect the economics of a given property, or may cause material
changes or delays in the Company's intended activities. New or different
environmental standards imposed by any governmental authority in the future
may adversely affect the Company's activities.
Uncertainty of Title. Several of the Company's mining properties which are in
the United States are unpatented mining claims to which the Company, or those
under which the Company holds its rights, has only possessory title. Because
title to unpatented mining claims is subject to inherent uncertainties, it is
difficult to determine conclusively ownership of such claims. Since a
substantial portion of all mineral exploration, development and mining in the
United States now occurs on unpatented mining claims, this uncertainty is
inherent in the mining industry. In addition, in order to retain title to an
unpatented mining claim, a claim holder must have met annual assessment work
requirements ($100 per claim) through September 1, 1992 and must have complied
with stringent state and federal regulations pertaining to the filing of
assessment work affidavits. Moreover, after September 1, 1992, the right to
locate or maintain a claim generally is conditional upon payment to the United
States of a rental fee of $100 per claim per year for each assessment year
instead of performing assessment work. State law may, in some instances,
still require performance of assessment work.
The present status of the Company's properties as unpatented mining claims
located on public lands of the U.S. allows the claimant the exclusive right to
mine and remove valuable minerals, such as precious and base metals and
industrial minerals, found therein, and also to use the surface of the land
solely for purposes related to mining and processing the mineral-bearing ores.
However, legal ownership of the land remains with the U.S. Accordingly, with
an unpatented claim, the U.S. retains many of the incidents of ownership of
land, the U.S. regulates use of the surface, and the Company remains at risk
that the claims may be forfeited either to the U.S. or to rival private
claimants due to failure to comply with statutory requirements as to locations
and maintenance of the claims. If there exists a valuable deposit of
locatable minerals (which is the requirement for the unpatented claim to be
valid in the first place), and provided certain levels of work and
improvements have been performed on an unpatented mining claim, the Mining Law
of 1872 authorizes claimants to then seek to purchase the full title to the
claim, thereby causing the claim to become the private property of the
claimant. Such full ownership expands the claimant's permissible uses of the
property (to any use authorized for private property) and eliminates the need
to comply with maintenance and reporting requirements necessary to protect
rights in an unpatented claim.
Proposed Legislation Affecting the Mining Industry. For the last several
Congressional sessions, bills have been repeatedly introduced in the U.S.
Congress which would supplant or radically alter the provisions of the Mining
Law of 1872. As of March 31, 1997, no such bills have passed, although a
number of differing and sometimes conflicting bills are now pending. If
enacted, such legislation could substantially increase the cost of holding
unpatented mining claims and could impair the ability of
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companies to develop mineral resources on unpatented mining claims. Under the
terms of certain proposed legislation, the ability of companies to obtain a
patent on unpatented mining claims would be nullified or substantially
impaired. Moreover, certain forms of such proposed legislation contain
provisions for the payment of royalties to the federal government in respect
of production from unpatented mining claims, which could adversely affect the
potential for development of such claims and the economics of operating
existing mines on federal unpatented mining claims. The Company's financial
performance could therefore be affected adversely by passage of such
legislation. It is impossible to predict at this point what any legislated
royalties might be, but a potential three to four percent gross royalty,
assuming a gold price of $400 per ounce, would have an approximated $12 to $16
per ounce impact on the Company's costs of any production from unpatented
mining claims.
Uncertainty of Funding for Exploration. The Company has funded much of its
exploration and acquisition activities through joint venture arrangements,
which minimize the cost of such activities to the Company and allow it to
explore and acquire a greater number of properties than it would otherwise be
able to explore or acquire on its own. The Company has also funded a portion
of its exploration activities without joint venture participation, resulting
in increased costs to the Company. The Company has been successful in raising
such funds for its exploration activities. Additional funding from existing
partners or third parties, however, may be necessary to conduct detailed and
thorough evaluations of, and to develop certain properties. The Company's
ability to obtain this financing will depend upon, among other things, the
price of gold and the industry's perception of its future price. Therefore,
availability of funding is dependent largely upon factors outside of the
Company's control, and cannot be accurately predicted. The Company does not
know from what sources it will derive any required funding. If the Company is
not able to raise additional funds (as to which there can be no assurance), it
will not be able to fund certain exploration activities on its own.
Uncertainty of Development and Operating Property Economics and Ore Grades at
Development Properties. Decisions as to whether any of the mineral
development properties which the Company now holds or which it may acquire in
the future contain commercially minable deposits, and whether such properties
should therefore be sold or brought into production, depend upon the results
of exploration programs and/or feasibility analyses and the recommendations of
duly qualified engineers or geologists. Such decisions involve consideration
and evaluation of several significant factors, including, but not limited to,
the (a) costs of bringing a property into production, including exploration
and development work, preparation of production feasibility studies and
construction of production facilities, (b) availability and costs of
financing, (c) ongoing costs of production, (d) market prices for the mineral
to be produced, and (e) the amount and grades of reserves or mineralized
material. There can be no assurance that any of the development properties
now held by the Company, or which may be acquired by the Company, contains a
commercially minable mineral deposit, and therefore no assurance that the
Company will ever generate a positive cash flow from the sale of or production
operations on such properties. In addition, once a property is sold with a
retained royalty or placed into production, risks still exist that the amount
and grade of its reserves will not actually be as predicted. To the extent
that lower amounts and/or grades of reserves are experienced, costs per unit
produced and profitability can be adversely affected. Depending upon the
extent of such an effect in any of the Company's properties, the Company could
incur a writedown on its investment in any such property.
Termination of Mining at the San Luis Gold Mine. Royalty income from the San
Luis gold mine has been the only significant source of income for the Company
for the last five years. The mine is leased to and operated by Battle
Mountain Gold Co. ("BMGC"). As reported to the Company by BMGC, mining was
completed at the end of October, 1996. The Company's royalty income from the
property ceased shortly after that time.
Risks Related to the Production and Sale of Purified Phosphate Products and
ADA
Uncertain Commercial Viability of Solvent Extraction Process. The solvent
extraction process developed by the Company for the production of purified
phosphoric acid ("PPA") has not been proven on a
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commercial basis at the Calgary plant. Although the Company has performed
numerous bench-scale and pilot plant test of the process, there can be no
assurances that the process will yield satisfactory results when employed on a
commercial scale.
Limited Experience in Marketing Industrial Chemicals and Lack of Long-term
Sales Contracts. The growth and profitability of operations at the Company's
solvent extraction facility in Calgary will be dependent upon, among other
things, the sale of purified phosphate products to chemical distributors and
customers. The Company has limited experience in marketing industrial
chemicals and will be relying on consultants and others to initiate and
maintain sales contacts. PPA is not typically sold under long-term contracts,
and the Company does not have any long-term commitments to purchase its
planned products. There can be no assurances that the Company will be
successful in its sales efforts.
Supply of Raw Materials. The growth and profitability of operations at the
Company's solvent extraction facility in Calgary will be dependent upon, among
other things, the availability of sufficient raw materials at reasonable
prices. The Company has negotiated a renewable annual supply contract with
Farmland Industries ("Farmland") and a supply arrangement with Agrium U.S.
Inc. ("Agrium") to supply the estimated requirement of superphosphoric acid
("SPA"). The contract with Farmland contains provisions that allow extension
of the contract in the future or termination upon a 90 day written notice.
There can be no assurances that the Company will be able to extend this
contract and supply arrangement in the future and/or obtain sufficient
quantities of SPA at reasonable prices.
Ability to Expand Geographically. The growth and profitability of operations
at the Company's solvent extraction facility in Calgary will be dependent
upon, among other things, the ability to become the predominate supplier of
PPA in the geographic region surrounding Calgary and on the US West Coast, and
to sell on an increasing basis to the Minneapolis/Chicago area. There can be
no assurance that the Company's efforts to expand sales can be accomplished on
a profitable basis.
Competition. The Company's purified phosphate products will be sold in
markets that are highly competitive. The principal competitive factors
include product quality, price and distribution capabilities. There can be no
assurances that the Company will be able to compete successfully against
current and future competitors based on these factors. The Company will
compete with several domestic and international producers, many of whom have
substantially greater financial, production, distribution and marketing
resources than the Company. Increased competition could result in price
reductions, reduced margins and loss of market share, all of which could have
a material adverse affect on the Company's business, financial condition and
results of operations.
Effect of Potential Lack of Demand for ADA's Services. If there is no demand,
or the demand is less than projected, for ADA's services for flue gas
conditioning, the Company will not recognize the synergies expected from its
acquisition, because ADA will not be able to utilize the Company's purified
phosphate products.
THE OFFERING
Common Stock outstanding prior to the offering ...... 9,420,385 Shares
Common Stock offered by the Selling Shareholders..... 1,776,417 Shares(1)
Common Stock to be outstanding after the offering... 10,797,052 Shares(2)
- -----------------------------------
(1) Of the 1,776,417 shares of Common Stock offered by the Selling
Shareholders, 399,750 shares are currently issued and outstanding, a maximum
of 1,326,667 are issuable on the conversion of the Debentures, and the
remaining 50,000 are issuable on exercise of options for gross proceeds to the
Company, if all such options were exercised, of $125,000.
(2) Includes up to 50,000 shares of Common Stock issuable on the exercise of
outstanding options at a exercise price of $2.50 per share.
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USE OF PROCEEDS
The options held by Selling Shareholders must be exercised into shares of
Common Stock prior to the resale of the Common Stock offered by the Selling
Shareholders pursuant to this offering. Proceeds received by the Company on
the exercise of options, aggregating $125,000, if all options held by Selling
Shareholders are exercised, will be used by the Company to pay general and
administrative expenses, to the extent not funded from operating revenue, and
for additional mineral exploration and development. There can be no
assurances that any of the outstanding options will be exercised to provide
any proceeds therefrom to the Company.
SELLING STOCKHOLDERS
The following table provides certain information, as of the date of this
prospectus, respecting the Selling Stockholders, the shares of Common Stock
held by them or to be held, to be sold, and to be held following the offering,
assuming the sale by such Selling Stockholders of all Shares of Common Stock
offered.
Shares Owned
Securities Owned Prior to the Offering (1) After Offering(1)
Shares
Common to be
Selling Stockholders Stock(2) Options(3) Debentures(4)Offered Number %
______________________________________________________________________________
Arcadia Mutual
Fund, Inc.(5) - - 333,333 333,333 0 -
James F. Cool - - 100,000 100,000 0 -
Corporate Relations
Group, Inc.(6) 405,500 - - 320,000 85,500 *
Jimmy D. Dowda - - 33,333 33,333 0 -
Gulf Atlantic
Publishing Inc.(7) 60,000 - - 60,000 0 -
Matthew P.T.
Holstein (8) - - 46,667 46,667 0 -
Philip M. Holstein(9) - - 76,667 76,667 0 -
Charkles Kerr - - 26,667 26,667 0 -
Bruce R. Knox - - 33,333 33,333 0 -
Russell G. Kraus - - 16,667 16,667 0 -
Frederick A. Lenz - - 33,333 33,333 0 -
Keith A. Mazer (10) 5,000 - 50,000 50,000 5,000 *
Pegasus Investment
Holdings Ltd. (11) - - 150,000 150,000 0 -
Thomas W. Richardson - - 26,667 26,667 0 -
Barry Seidman - - 266,667 266,667 0 -
Joseph Sloves - - 33,333 33,333 0 -
Toron Co. Ltd. (12) - - 100,000 100,000 0 -
World Capital
Funding, Inc.(10) 56,850 50,000 - 69,750 37,100 *
______________________________________________________________________________
Totals 527,350 50,000 1,326,667 1,776,417 127,600 1.4%
==============================================================================
* Less than one percent
(1) Shares owned prior to the offering include all shares of Common Stock
owned by the Selling Shareholder. Shares owned after the offering assume the
sale of all shares of Common Stock offered pursuant to this offering.
Percentage figures representing the securities owned after the offering give
effect to the exercise of all options by that Selling Shareholder.
(2) Includes 127,600 shares of Common Stock held by Selling Stockholders not
offered in this offering.
(3) Consists of options to purchase 50,000 shares of Common Stock at an
exercise price of $2.50 per share.
(4) The Debentures are convertible at any time following 45 days after
issuance. The Debentures mature on August 31, 1998. The Debentures are
convertible into shares of Common Stock based on a 25% discount from the
market price of the Common Stock at the time of conversion, but not in excess
of $2.50
11
<PAGE>
per share. The Debentures must be converted into shares of Common Stock
before resale of the Common Stock offered by the Selling Stockholder pursuant
to this offering.
(5) Arcadia Mutual Fund, Inc. is beneficially owned by a number of non-US
persons.
(6) Corporate Relations Group, Inc. is a wholly-owned subsidiary of Stratcom
Media Ltd., a public company; its president is Joseph H. Landis.
(7) Gulf Atlantic Publishing Inc. is a wholly-owned subsidiary of Stratcom
Media Ltd., a public company; its president is Joseph H. Landis.
(8) Included in the shares shown are 13,333 for which Mr. Matthew Holstein is
the trustee of the Matthew Holstein Pension Plan.
(9) Included in the shares shown are 16,667 for which Mr. Philip Holstein is
the trustee of the Castle Creek Valley Ranch Defined Benefit Pension Plan.
(10) Keith Mazer is the President and controlling shareholder of World Capital
Funding, Inc.
(11) Pegasus Investment Holdings Ltd. is beneficially owned by a number of non-
US persons.
(12) Toron Co. Ltd. is beneficially owned by a number of non-US persons.
PLAN OF DISTRIBUTION
This Prospectus relates to the public offer and sale by certain shareholders
(the "Selling Shareholders") of an aggregate of 1,776,417 shares of Common
Stock of the Company issuable on conversion of the Debentures for a maximum of
1,326,667 shares of Common Stock, upon the exercise of options to purchase
50,000 shares of Common Stock and 399,750 shares of Common Stock currently
held by Selling Shareholders.
The Common Stock to be sold by the Selling Shareholders may be sold by them
from time to time directly to purchasers. Alternatively, the Selling
Shareholders may, from time to time, offer the Common Stock through dealers or
brokers, who receive compensation in the form of commissions from the Selling
Shareholders and/or the purchasers of the Common Stock for whom they act as
agents. As of the date hereof, no Selling Shareholder has advised the Company
that it has entered into any agreement or understanding with any dealer or
broker for the offer or sale of the Common Stock. The Selling Shareholders
may enter into such agreements or understandings in the future. The Selling
Shareholders may also offer some or all of the Common Stock through market
transactions on Nasdaq, on which the Company's Common Stock is traded. Sales
of the Common Stock through brokers may be made by any method of trading
authorized by Nasdaq, including block trading in negotiated transactions.
Without limiting the foregoing, such brokers may act as dealers purchasing any
or all of the Common Stock covered by this Prospectus. Sales of Common Stock
are, in general, expected to be made at the market price prevailing at the
time of each such sale; however, prices in negotiated transactions may differ
considerably. No Selling Shareholder has advised the Company that it
anticipates paying any consideration, other than usual and customary broker's
commissions, in connection with sales of the Common Stock. The Selling
Shareholders are acting independently of the Company in making decisions with
respect to the timing, manner and size of each sale.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, $0.01 par value per share. All of the issued and outstanding
stock of the Company is fully paid and nonassessable. Holders of Common Stock
are entitled to receive dividends, when and if declared by the Board of
Directors, out of funds legally available therefore and to share ratably in
the net assets of the Company upon liquidation. Holders of Common Stock do
not have preemptive rights to subscribe for additional shares, nor are there
any redemption or sinking fund provisions associated with the Common Stock.
There are currently 9,420,385 shares of Common Stock outstanding owned by
approximately 3,000 persons and/or entities.
Holders of Common Stock are entitled to one vote per share on all matters
requiring a vote of the shareholders. Since the Common Stock does not have
cumulative voting rights in electing directors, the holders of more than a
majority of the outstanding shares of Common Stock voting for the election of
directors can elect all of the directors whose terms expire that year, if they
so choose.
LEGAL MATTERS
Certain legal matters with respect to the legality of the securities offered
hereby and the organization and existence of the Company have been passed upon
for the Company by Parcel, Mauro, Hultin & Spaanstra, P.C., 1801 California
Street, Suite 3600, Denver, Colorado 80202.
EXPERTS
The consolidated financial statements which are incorporated by reference in
this prospectus by reference from the Company's Annual Report on Form 10-KSB,
as amended, for the year ended December 31, 1996, have been audited by Hein +
Associates LLP, certified public accountants, as stated in their report, which
are incorporated herein by reference, and have been so incorporated in
reliance upon such report given the authority of that firm as experts in
accounting and auditing.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities
being registered. All of the amounts shown are estimated except for the
Securities and Exchange Commission registration fee. The Selling Shareholders
will not be paying any of these expenses.
SEC registration fee $ 1,267.30
Printing and mailing expenses $ 500.00
Legal fees and expenses $ 2,000.00
Accounting fees and expenses $ 2,000.00
----------
Total $ 5,767.30
==========
Item 15. Indemnification of Directors and Officers.
Article 7-109 of the Colorado Business Corporation Act authorizes the
indemnification of directors and officers against liability incurred by reason
of being a director or officer and against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement and reasonably incurred
in connection with any action seeking to establish such liability, in the case
of third-party claims, if the officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and in the case of actions by or in the right of the
corporation, if the officer or director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and if such officer or director shall not have been adjudged
liable to the corporation, unless a court otherwise determines.
Indemnification is also authorized with respect to any criminal action or
proceeding where the officer or director also had no reasonable cause to
believe his conduct was unlawful.
The above discussion of the Colorado Business Corporation Act is only a
summary and is qualified in its entirety by the full text of the foregoing.
Article VIII of the Registrant's Bylaws provides as follows:
Each past, present and future director and officer of the corporation
shall be indemnified by the corporation against all expenses, penalties, and
liabilities, including attorneys' fees, reasonably incurred by or imposed upon
him in connection with any actual or threatened claim, demand, action or
proceeding, whether civil or criminal, or in connection with any settlement
thereof, to which he may be made a party, or in which he may become involved,
by reason of his being or having been a director or officer of the
corporation, whether or not he is a director or officer at the time such
expenses, penalties or liabilities are incurred, except in cases where he
shall be finally adjudged in such action or proceeding to be liable for
willful misconduct in the performance of his duties as such director or
officer. The right of indemnification herein provided shall be in addition
to, and not exclusive of, all other rights to which such director or officer
may be entitled and the right of indemnification herein provided shall inure
to the benefit of the personal representatives of deceased directors and
officers.
14
<PAGE>
Item 16. Exhibits.
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation of the Company (1)
3.2 Bylaws of the Company, as amended (2)
4.1 Specimen Common Stock Certificate (3)
5.1** Opinion of by Parcel, Mauro, Hultin & Spaanstra, P.C. as to legality
of the shares
23.1** Consent of Hein + Associates LLP
23.2* Consent of by Parcel, Mauro, Hultin & Spaanstra, P.C. (contained in
Exhibit 5.1)
.
** Filed herewith.
- ------------------------------------------------------------------------------
(1) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996.
(2) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1993.
(3) Incorporated by reference from the Company's Form S-3 Registration
Statement, Registration No. 333-25465 declared effective July 23, 1997.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purposes of determining any liability under the
Securities Act of 1933 (the "Act"), each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining liability under the Act, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and where applicable, each
filing of an employee benefit plan's annual report pursuant to section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) That, insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant hereby certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement and any amendment thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Golden,
State of Colorado on September 8, 1997.
EARTH SCIENCES, INC.
Date: September 8, 1997 /s/ Ramon E. Bisque
-----------------------------------------------
Ramon E. Bisque
Principal Executive Officer
Date: September 8, 1997 /s/ Mark H. McKinnies
----------------------------------------------
Mark H. McKinnies
President, Principal Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1933, as
amended, this Registration Statement and any amendment thereto has been signed
below by the following persons in the capacities and on the dates indicated.
Date: September 8, 1997 /s/ Ramon E. Bisque
-----------------------------------------------
Ramon E. Bisque, Director
Date: September 8, 1997 /s/ Duane N. Bloom
-----------------------------------------------
Duane N. Bloom, Director
Date: September 8, 1997 /s/ Michael D. Durham
-----------------------------------------------
Michael D. Durham, Director
Date: September 8, 1997 /s/ Robert H. Lowdermilk
-----------------------------------------------
Robert H. Lowdermilk, Director
Date: September 8, 1997 /s/ Mark H. McKinnies
-----------------------------------------------
Mark H. McKinnies, Director
16
<PAGE>
Exhibit 5.1
Parcel, Mauro, Hultin & Spaanstra, P.C.
Attorneys at Law
Suite 3600
1801 California Street
Denver, Colorado 80202-2636
Telephone (303) 292-6400
Telecopier (303) 295-3040
September 8, 1997
Earth Sciences, Inc.
910 12th Street
Golden, Colorado 80401
Re: Registration Statement on Form S-3
Covering the Registration of 1,776,417
Common Shares of Earth Sciences, Inc.
Gentlemen and Ladies:
We have acted as counsel for Earth Sciences, Inc., a Colorado corporation
(the "Company"), in connection with the registration for sale of 1,776,417
shares of the Company's Common Stock (the "Securities") in accordance with the
registration provisions of the Securities Act of 1933, as amended.
In such capacity we have examined, among other documents, the Articles of
Incorporation and By Laws of the Company, records of corporate proceedings,
the Registration Statement on Form S-3 filed by the Company with the
Securities and Exchange Commission on or about September 8, 1997, (as may be
further amended from time to time, the "Registration Statement"), covering the
registration of the Securities. We have also made such other investigations
and reviewed such other documents as we have deemed necessary in order to
express the opinions set forth below.
Based upon the foregoing and upon such further examinations as we have
deemed relevant and necessary, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Colorado.
2. The Securities have been legally and validly authorized under the
Company's Articles of Incorporation, as amended, and constitute (or will
constitute upon due exercise of the options or convertible debentures as
described in the Registration Statement) duly and validly issued and
outstanding and fully paid and nonassessable shares of the Company under the
Colorado Business Corporation Act.
<PAGE>
Earth Sciences, Inc.
September 8, 1997
Page 2
We hereby consent to the use of our name beneath the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement and to
the filing of a copy of this opinion as Exhibit 5.1 thereto.
Very truly yours,
/s/ Parcel, Mauro, Hultin & Spaanstra, P.C.
Parcel, Mauro, Hultin & Spaanstra, P.C.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference of our report dated February 3,
1997 accompanying the financial statements of Earth Sciences, Inc. to Form S-3
Registration Statement of Earth Sciences, Inc. and to the use of our name and
the statements with respect to us, as appearing under the heading "Experts" in
the Registration Statement.
/s/ Hein + Associates LLP
HEIN + ASSOCIATES
Denver, Colorado
September 4, 1997
<PAGE>
