As filed with the Securities and Exchange Commission on August 25, 1998.
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 connection 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
Title of each class Proposed maximum aggre-
of securities to be Amount to be maximum offer gate offering Amount of
registered registered ing price per price registration
share fee
________________________________________________________________________________
Common Stock, $.01
par value:
Issued and out-
standing 731,300 Shares $ .81 (1) $ 592,353 (1) $ 174.74
________________________________________________________________________________
(1) Based on the average price of the Common Stock on NASDAQ's SmallCapSM
Market on August 24, 1998. The resulting fee is calculated pursuant to section
(c) 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 August 25, 1998
EARTH SCIENCES, INC.
731,300 SHARES OF COMMON STOCK
All of the shares of Common Stock, par value $0.01 per share ("Common
Stock") of Earth Sciences, Inc., a Colorado corporation (the "Company"), offered
hereby are being offered for resale by certain selling shareholders (the
"Selling Stockholders") as described more fully below under "SELLING
STOCKHOLDERS". The shares of Common Stock offered hereby by the Selling
Stockholders consist of 731,300 shares of Common Stock currently issued and
outstanding. This presentation is not intended, and should in no way be
construed, to constitute a prediction as to the future market price of the
Common Stock. See "RISK FACTORS - Dilutive Effect of Issuance of Additional
Shares on Current Shareholders" and "SELLING STOCKHOLDERS".
The Selling Stockholders 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 Stockholders. Any such sale
of Common Stock by Selling Stockholders 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 Stockholder elects to rely
on Rule 144 or another exemption from the registration requirements in
connection with a particular transaction. The Selling Stockholders and any
broker, dealer, or agent that participates with the Selling Stockholders 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
August 17, 1998, the closing bid price of the Common Stock on Nasdaq was $1.03
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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- --------------------------------------------------------------------------------
Underwriting Proceeds to
Price Discounts and Selling Proceeds to
to Public(1) Commissions(2) Stockholders Company (3)
- --------------------------------------------------------------------------------
By Selling Stockholders
Per Share.............. $ .81 $ -- $ .81 $ 0.00
TOTAL ................ $592,353 $ -- $ 592,353 $ 0
- --------------------------------------------------------------------------------
1) The price per share for the securities offered by the Selling Stockholders
is estimated at the closing sales price quoted by Nasdaq for the Common Stock at
$.81 on August 24, 1998. 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 by the Selling Stockholders.
(3) Does not reflect expenses of this offering payable by the Company estimated
at $4,800.
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders. (See "USE OF PROCEEDS"). In connection with this
offering, the Company estimates that it will incur costs of approximately $4,800
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, 1997.
2. The Company's quarterly reports on Forms 10-QSB for the quarters ended
March 31, 1998 and June 30, 1998.
3. The Company's current report on Form 8-K dated May 12, 1998 reporting
the acquisition of the remaining 49% interest in 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 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 (3) flue gas
conditioning technology for coal-fired boilers and other applications provided
through ADA Environmental Solutions LLC ("ADA"), a wholly-owned subsidiary, and
(4) maintenance of its position in several mineral resources 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. Revamp of the facility to allow
production of purified phosphate products was completed in 1997. The Calgary
facility is routinely producing technical grade phosphoric acid and steps are
being evaluated for production of food grade product later in 1998.
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RECENT DEVELOPMENTS
Acquisition of ADA Environmental Solutions LLC
In May 1998, the Company acquired the remaining 49% interest in ADA
Environmental Solutions LLC through the issuance of approximately 1,715,000 of
its common stock a portion of which shares are offered for sale under this
prospectus. ESCI's initial 51% interest was purchased in 1997 by payments to ADA
totaling $2,500,000. At that time ESCI obtained the option to acquire the
remaining 49%. The Company believes ADA can capture a significant portion of the
utility and industrial flue gas conditioning market with its nontoxic
conditioner, which offers both technical and economical advantages over the
hazardous chemicals currently being used. ESCI's Calgary plant will provide ADA
with purified phosphoric acid (PPA), the main chemical ingredient in the
process.
Exploration of Diamond Concession
In January 1998, the Company signed a letter agreement with CODSA 14 S.A. to
acquire exclusive rights to explore and mine it's diamond concession. Located
in southeastern Venezuela near the Brazil border, the concession covers 6,177
acres (2,500 hectares). The Company has made payments of cash and stock valued
at a total of $50,000 during the 6 month exploration period. Exploration
performed has indicated the lack of sufficient diamond bearing alluvial material
on the concession to support mechanical mining operations. The Company gave
notice to terminate the agreement effective July 21, 1998. The Company is
evaluating other potential concessions in the area.
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, in 1996, and 1997. 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.
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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. 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 (where mining
operations have been terminated as described below in "Termination of Mining at
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 $280 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
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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. The Secretary of the Interior has directed
the BLM to propose amendments to surface management regulations that impose more
stringent reclamation and environmental protection requirements on mining
operations. The extent of the changes, if any, which may be made by the BLM is
not presently known, and the potential impact on the Company as a result of
future regulatory action is difficult to predict. 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. At present
there is a statutory moratorium in effect prohibiting the Department of Interior
from accepting and processing new applications for purchase of fee title to
mining claims. The moratorium is likely to continue indefinitely but does not
affect the ability to hold and develop valuable deposits by means of unpatented
mining claims.
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 July 31, 1998, 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 $300 per ounce, would have an approximated $9 to $12
per ounce impact on the Company's costs of any production from unpatented mining
claims.
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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, to date, 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
during the period from 1990 through 1996. The mine was 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 continuing 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 continuing 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 is 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 future sales efforts.
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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 ..... 21,890,144 Shares
Common Stock offered by the Selling Shareholders.... 731,300 Shares (1)
Common Stock to be outstanding after the offering .. 21,890,144 Shares
- -----------------------------------
(1) Of the 731,300 shares of Common Stock offered by the Selling Stockholders
all such shares are currently issued and outstanding,
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the 731,300
outstanding common shares covered by the prospectus.
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
Securities Owned Prior to the Offering (1) After Offering (1)
Common Shares to
Selling Stockholders Stock be Offered Number %
________________________________________________________________________________
ADA Technologies, Inc. (2) 654,500 654,500 0 -
CODSA 14 S.A. (3) 12,800 12,800 0 -
Twin Kem Int'l, Inc. (4) 50,000 50,000 0 -
Pedro A. Perez (5) 6,000 6,000 0 -
Christopher J. Whitley (6) 8,000 8,000 0 -
________________________________________________________________________________
Totals 731,300 731,300 0 -
================================================================================
(1) Shares owned prior to the offering include all shares of Common Stock owned
by the Selling Stockholders. Shares owned after the offering assume the
sale of all shares of Common Stock offered pursuant to this offering.
(2) ADA Technologies, Inc. is a private US company whose president is Judith
Armstrong.
(3) CODSA 14 S.A. is a Venezuelan company controlled by Pedro A. Perez.
(4) Twin Kem Int'l, Inc. is a U.S. company controlled by Ronald B. Johnson.
(5) Pedro A. Perez is president and controlling shareholder of CODSA 14 S.A and
received shares of Common Stock being offered in the table as compensation
for services to the Company.
(6) Christopher J. Whitley is corporate controller of the Company and received
shares of Common Stock being offered in the table as compensation for
services to the Company.
PLAN OF DISTRIBUTION
This Prospectus relates to the public offer and sale by certain shareholders
(the "Selling Stockholders") of 731,300 shares of Common Stock currently held by
Selling Stockholders.
The Common Stock to be sold by the Selling Stockholders may be sold by them
from time to time directly to purchasers. Alternatively, the Selling
Stockholders may, from time to time, offer the Common Stock through dealers or
brokers, who receive compensation in the form of commissions from the Selling
Stockholders and/or the purchasers of the Common Stock for whom they act as
agents. As of the date hereof, no Selling Stockholders have advised the Company
that they have entered into any agreement or understanding with any dealer or
broker for the offer or sale of the Common Stock. The Selling Stockholders may
enter into such agreements or understandings in the future. The Selling
Stockholders 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 Stockholders 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.
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<PAGE>
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 21,890,144 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, 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, 1997, 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.
12
<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 $ 174.74
Printing and mailing expenses $ 500.00
Legal fees and expenses $ 2,000.00
Accounting fees and expenses $ 2,000.00
-------------
Total $ 4,674.74
=========================================
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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<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 Parcel, Mauro & Spaanstra, P.C. as to legality of the
shares
23.1* Consent of Hein + Associates LLP
23.2* Consent of Parcel Mauro 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.
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 August 24, 1998.
EARTH SCIENCES, INC.
Date: August 24, 1998 /s/ Ramon E. Bisque
-----------------------------------------------
Ramon E. Bisque
Principal Executive Officer
Date: August 24, 1998 /s/ Mark H. McKinnies
-----------------------------------------------
Mark H. McKinnies
President, Principal Financial and
Accounting Officer
14
<PAGE>
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: August 24, 1998 /s/ Ramon E. Bisque
-----------------------------------------------
Ramon E. Bisque, Director
Date: August 24, 1998 /s/ Duane N. Bloom
-----------------------------------------------
Duane N. Bloom, Director
Date: August 24, 1998 /s/ Michael D. Durham
-----------------------------------------------
Michael D. Durham, Director
Date: August 24, 1998 /s/ Robert H. Lowdermilk
-----------------------------------------------
Robert H. Lowdermilk, Director
Date: August 24, 1998 /s/ Mark H. McKinnies
-----------------------------------------------
Mark H. McKinnies, Director
15
<PAGE>
Exhibit 5.1
Parcel Mauro, P.C.
Attorneys at Law
Suite 3600
1801 California Street
Denver, Colorado 80202-2636
Telephone (303) 292-6400
Telecopier (303) 295-3040
August 25, 1998
Earth Sciences, Inc.
910 12th Street
Golden, Colorado 80401
Re: Registration Statement on Form S-3
Covering the Registration of 731,300
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 731,300 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 August 25, 1998, (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 duly and validly issued and
outstanding and fully paid and nonassessable shares of the Company under the
Colorado Business Corporation Act.
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, P.C.
Parcel Mauro, P.C.
16
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference of our report dated March 24, 1998
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 LLP
Denver, Colorado
August 20, 1998
17
<PAGE>
Earth Sciences, Inc.
910 12th Street
Golden, Colorado 80401
Telephone (303) 279-7641
Telecopier (303) 279-1180
August 25, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Registration Statement on Form S-3
Covering the Registration of 731,300
Common Shares of Earth Sciences, Inc.
Gentlemen and Ladies:
On behalf of Earth Sciences, Inc., a Colorado Corporation (the "Company"),
we transmit through EDGAR, pursuant to the Securities Act of 1933, as amended
(the "1933 Act"), a registration statement on Form S-3 (the "Registration
Statement") covering 731,300 shares of Common Stock, par value $.01 per share
(the "Securities").
The Securities are being registered in connection with sale by selling
shareholders of common shares of the Company for 731,300 shares currently held
are issued and outstanding.
In connection with the foregoing, the following is being transmitted:
1. One copy of the Registration Statement; and
2. Copies of the exhibits listed beneath the caption "Item 16. Exhibits"
contained in Part II of the Registration Statement.
The registration fee in the amount of $ 174.74 has been wired transferred
to the SEC by the Company.
The following supplemental information is supplied in order to facilitate
timely review of the Registration Statement by the Staff:
(1) The Company desires that the Registration Statement become effective
as soon as practicable and, therefore, if it would be of any assistance we would
welcome the opportunity to discuss with the Staff by telephone such comments as
it may have prior to actual drafting and dispatch of its letter of comment. In
this way we could draft in response to any comment prior to formal receipt and
thereby expedite preparation and review of any amendment and commencement of the
offering.
18
<PAGE>
Securities and Exchange Commission
August 25, 1998
Page 2
(2) The Company has reviewed the various criteria for eligibility for use
of Form S-3 and we believe that such criteria are satisfied. Moreover, we
believe that the Registration Statement is in compliance with the applicable
Form, instructions and rules pertaining thereto and (except as otherwise
indicated herein) is complete.
(3) With regard to preparation of any comments by the Staff and the impact
thereof upon declaration of effectiveness, please be advised that we would be
satisfied by receipt of oral comments by the Staff for transcription by us.
(4) We undertake to furnish the Staff with copies of any letter of comment
or other documents received from the staff of National Association of Securities
Dealers, Inc.
(5) Based on the provisions of Rule 174, no legend regarding prospectus
delivery requirement has been included because the Company has been a reporting
company under the Securities Act of 1934 prior to the filing of the Registration
Statement.
The Staff is requested to address any correspondence, comment or inquiry to
the undersigned, at the address or telephone number, as the case may be, set
forth above.
Very truly yours,
Earth Sciences, Inc.
/s/ Mark H. McKinnies
Mark H. McKinnies
President
