As filed with the Securities and Exchange Commission on July 8, 1997.
Registration No. 333-25465
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
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
________________________________________________________________________________
Proposed Proposed
Title of each class maximum maximum
class of securities Amount offering aggregate Amount of
to be registered to be price per offering registration
registered share price fee
________________________________________________________________________________
Common Stock, $.01
par value:
Issued and
outstanding 234,020 Shares $ 2.75 (1) $ 643,555 (1) $ 195.02
Issueable upon
conversion of
Debentures 2,463,334 Shares $ 1.50 (2) $3,695,001 (2) $2,052.78
Issueable upon
exercise of
options 339,000 Shares $ 2.74 (3) $ 928,860 (3) $ 281.47
________________________________________________________________________________
Totals 3,036,354 Shares $5,267,416 $2,529.27
________________________________________________________________________________
(1) Based on the average price of the Common Stock on NASDAQ's SmallCapSM
Market on April 14, 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.
(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 fee was paid with the initial filing on April 18, 1997.
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 July 8, 1997
EARTH SCIENCES, INC.
3,036,354 SHARES OF COMMON STOCK
This Prospectus relates to the public offer and sale by certain
shareholders (the "Selling Shareholders") of an aggregate of 3,036,354 shares
(the "Shares") of $0.01 par value common stock (the "Common Stock") of Earth
Sciences, Inc., a Colorado corporation (the "Company"). Of the 3,036,354 shares
of Common Stock offered by the Selling Shareholders, 234,020 shares are
currently issued and outstanding and the remaining 2,802,334 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 $____ per
share.
THE ACQUISITION AND OWNERSHIP OF THE COMMON STOCK INVOLVE A HIGH DEGREE OF RISK.
THE COMMON STOCK SHOULD BE PURCHASED ONLY BY INVESTORS WHO ARE ABLE TO AFFORD
THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT. (SEE "RISK FACTORS" BEGINNING ON
PAGE 7 OF THIS PROSPECTUS).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
Price Offering Proceeds to Sel- Proceeds to
to Public(1) Commissions(2) ling Stockholders Company(3)
- --------------------------------------------------------------------------------
By Selling
Shareholders
Per Share ...$ 2.75 $ -- $ 2.75 $ --
TOTAL .......$8,349,974 $ -- $ 8,349,974 $ --
- --------------------------------------------------------------------------------
(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
$2.75 on April 14, 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 $7,000 nor the receipt by the Company of approximately $928,000 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
$7,000 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 statement, 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 report on Form 10-QSB for the quarter ended
March 31, 1997.
3. The Company's current report on Form 8-K, as amended, dated April 30,
1997.
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 mineral exploration and chemical processing
with planned production of purified phosphate products in Calgary. The Company
was incorporated under the name of Colorado Central Mines, Inc. in Colorado in
1957. Current activities of the Company include (1) modification of its solvent
extraction facility in Calgary, Alberta for production of purified phosphate
products scheduled to commence in May 1997; (2) continued exploration activities
for gold 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 planned acquisition of
ADA Environmental Solutions LLC, 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
feasibility of conversion of the facility for the production of purified
phosphate products.
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facility to allow such production has recently been completed. Start-up
activities commenced in April 1997 and first product was available for sale at
the end of May 1997. Contracts for approximately 8,000 tons, or nearly one half
of the initial projected annual production, have been negotiated.
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 will be funded out of internally generated cash flow. Routine sales
are expected to be achieved in July and August, but there can be no
assurances that the Company will be able to achieve routine production, the
projected level of sales or cash flow.
RECENT DEVELOPMENTS
Investor Relation Services
In August 1996, the Company engaged 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 100,000 shares of Common Stock and options to purchase
300,000 shares of Common Stock at prices ranging from $2.00 to $4.00 per share.
This Prospectus includes the resale of shares of Common Stock held by CRG and
those issuable by the Company on the conversion of such options.
Sale of Convertible Debentures
In March and April 1997, the Company issued $3,645,000 of 4% convertible
debentures (the "Debentures") for which the Company received net proceeds of
approximately $3,316,000. The Debentures were issued to provide funds to
complete the revamp and start-up of the Calgary facility for production of
purified phosphate products and the initial obligations associated with the ADA
acquisition, described below. 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 recognized a
deferred financing cost of $188,000 in the first quarter of 1997 and expects to
recognize $1,044,000 of such costs in the second 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. Debentures amounting to $550,000 mature on March
31, 1998, while the balance of the Debentures issued mature on March 31, 1999.
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 $3.13 and $3.25 per share, respectively. 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.
Acquisition of ADA Environmental Solutions LLC.
On April 30, 1997, the Company acquired a 51% interest in ADA Environmental
Solutions LLC ("ADA") through the purchase of an additional 46.2% interest from
ADA. The Company had previously purchased a 4.8% interest in ADA in February
1997 by payment to ADA of $400,000. The 46.2% interest was purchased by payment
to ADA of $500,000 and a non-interest bearing promissory note in the amount of
$1,600,000. The purchase price for the transaction was negotiated among the
Company and ADA based on the future anticipated earnings and cash flow of ADA.
Funds for the purchase were from the Company's working capital. The Company
also obtained an option to acquire the remaining 49% interest in ADA exercisable
for a six month period commencing May 1, 1998. The option is exercisable by
issuance of 1,715,600 shares of Common Stock in exchange for all the
outstanding stock of ADA-ES, Inc., a Colorado corporation, whose only asset is
the remaining 49% interest in ADA.
ADA's only significant asset is its proprietary technology designed to reduce
particulate emissions from coal-fired boilers.
The Company assigned no value to the $324,000 of preproduction costs carried on
the balance sheet of ADA at the time of acquisition.
Management believes ADA's proprietary non-toxic chemical conditioner offers
both technical and economic.advantages over the hazardous chemicals
currently being used. Michael D. Durham of ADA has been elected to the
Company's Board of Directors as part of the transaction.
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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 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
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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
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 $344 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
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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 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,
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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
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 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 renewable annual supply contracts with Agrium U.S.
Inc. ("Agrium") and Farmland Industries ("Farmland") to supply the estimated
requirement of superphosphoric acid ("SPA"). The contracts with Agrium and
Farmland both contain provisions that allow extension of the contracts in the
future or termination upon a several month written notice. There can be no
assurances that the Company will be able to extend these contracts in the future
and 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.
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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 ... 8,620,051 Shares
Common Stock offered by the Selling Shareholders... 3,036,354 Shares (1)
Common Stock to be outstanding after the offering 11,422,385 Shares (2)
- -----------------------------------
(1) Of the 3,036,354 shares of Common Stock offered by the Selling
Shareholders, 234,020 shares are currently issued and outstanding, a maximum of
2,463,334 are issuable on the conversion of the Debentures, and the remaining
339,000 are issuable on exercise of options for gross proceeds to the Company,
if all such options were exercised of $928,000.
(2) Includes up to 339,000 shares of Common Stock issuable on the exercise of
outstanding options at a weighted average exercise price of $2.74 per share.
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 outstanding options, aggregating $928,000, 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.
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Shares
Owned After
Securities Owned Prior to the Offering (1) Offering(1)
Shares
Common Deben- to be
Selling Stockholders Stock (2) Options(3) tures(4) Offered Number %
________________________________________________________________________________
Augustin Chan 400 5,000 - 5,400 0 -
Glenn Coleman 100 - - 100 0 -
Corporate Relations
Group, Inc.(5) 85,500 300,000 - 385,500 0 -
Brian Donnelly 1,100 20,000 - 21,100 0 -
Charlene Donnelly 200 - - 200 0 -
Doug Falconer 100 - - 100 0 -
FT Trading Co.(6) - - 166,667 166,667 0 -
Roland Gallant 100 - - 100 0 -
John Goodhand 200 5,000 - 5,200 0 -
Frederick Hofmann 100 4,000 - 4,100 0 -
Daryl Lukan 150 - - 150 0 -
Brian Manning 100 - - 100 0 -
Keith Mazer (7) 5,000 - - 5,000 0 -
Paril Holding (8) - - 133,333 133,333 0 -
Jean Pasquali 15,000 - - 15,000 0 -
Passy Holding (9) - - 66,667 66,667 0 -
Frank Roe 150 - - 150 0 -
The Shaar Advisory
Services Ltd.(10) - - 763,333 763,333 0 -
The Shaar Fund Ltd.(11) - - 1,333,334 1,333,334 0 -
Larry Shupenio 100 - - 100 0 -
Ramon Sifontes 10,000 - - 10,000 0 -
James Spratt III 9,500 - - 9,500 0 -
Franklin J. Stermole 60,000 - - 50,000 10,000 *
Twin-Kem International,
Inc. (12) 18,520 - - 18,520 0 -
Greg Woolverton 200 - - 200 0 -
World Capital Funding,
Inc.(7) 37,100 - - 37,100 0 -
Christy Zapp 1,205 5,000 - 5,400 805 *
________________________________________________________________________________
Totals 244,825 339,000 2,463,334 3,036,354 10,805 *
================================================================================
* 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 respecting the securities owned after the offering give effect to the
exercise of all options by that Selling Shareholder.
(2) Includes 10,805 shares of Common Stock held by Selling Stockholders not
offered in this offering.
(3) Consists of (i) options to purchase 300,000 shares of Common Stock at
exercise prices ranging from $2.00 per share to $4.00 per share by an unrelated
third party; (ii) options to purchase 10,000 shares of Common Stock at an
exercise price of $1.50 by an individual performing contract services for the
Company in Calgary; and (iv) options to purchase 29,000 shares at an exercise
price of $1.69 by five individuals who are performing services for the Company
in Golden and Calgary.
(4) The Debentures are convertible at any time following 45 days after
issuance. Debentures amounting to $550,000 mature on March 31, 1998, while the
balance of the Debentures issued mature on March 31, 1999. 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 a
weighted average of $3.23 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) Corporate Relations Group, Inc. is a wholly-owned subsidiary of Stratcom
Media Ltd., a public company; its president is Roberto E. Veita.
(6) FT Trading Co. is controlled by John Porter and Brian Porter.
(7) Keith Mazer is the President and controlling shareholder of World Capital
Funding, Inc.
(8) Paril Holding is controlled by Joseph Goldenberg and Isreal Bornstein.
(9) Passy Holding is controlled by Joseph Goldenberg and Isreal Bornstein.
(10) The Shaar Advisory Services Ltd. is beneficially owned by a number
of non-US persons.
(11) The Shaar Fund Ltd. is beneficially owned by a number of non-US
persons.
(12) Twin-Kem International, Inc. is controlled by Ronald B. Johnson.
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PLAN OF DISTRIBUTION
This Prospectus relates to the public offer and sale by certain shareholders
(the "Selling Shareholders") of an aggregate of 3,036,354 shares of Common Stock
of the Company issuable on conversion of the Debentures for a maximum of
2,463,334 shares of Common Stock, upon the exercise of options to purchase
339,000 shares of Common Stock and 234,020 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 8,620,051 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 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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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 $ 1,596.19
Printing and mailing expenses $ 1,000.00
Legal fees and expenses $ 2,000.00
Accounting fees and expenses $ 2,000.00
----------
Total $ 6,596.19
========================================
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.
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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
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)
* Previously filed.
** 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.
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.
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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 July 8, 1997.
EARTH SCIENCES, INC.
Date: July 8, 1997 /s/ Ramon E. Bisque
-----------------------------------------------
Ramon E. Bisque
Principal Executive Officer
Date: July 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: July 8, 1997 /s/ Ramon E. Bisque
-----------------------------------------------
Ramon E. Bisque, Director
Date: July 8, 1997 /s/ Duane N. Bloom
-----------------------------------------------
Duane N. Bloom, Director
Date: July 8, 1997 /s/ Michael D. Durham
-----------------------------------------------
Michael D. Durham, Director
Date: July 8, 1997 /s/ Robert H. Lowdermilk
-----------------------------------------------
Robert H. Lowdermilk, Director
Date: July 8, 1997 /s/ Mark H. McKinnies
-----------------------------------------------
Mark H. McKinnies, Director
16
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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
July 8, 1997
17
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