As filed with the Securities and Exchange Commission on April 12, 1999.
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. [ ]
CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
Proposed Proposed Amount
Title of each class maximum maximum of
of securities to be Amount to be offering price aggregate registra-
registered registered per share offering tion fee
price
______________________________________________________________________________
Common Stock, $.01
par value:
Issued and outstanding 1,360,623 Shares $ .66(2) $ 898,011(2) $ 249.65
Issuable upon notice
Of sale of certain
Common Stock (1) 909,089 Shares $ .66(3) $ 599,999(3) $ 166.80
______________________________________________________________________________
Totals 2,269,712 Shares $1,498,010 $ 416.45
______________________________________________________________________________
(1) Includes a presently indeterminate but limited number of shares issuable
upon notice to Registrant's of the sale of Common Stock by certain Selling
Stockholders, as such number may be adjusted in accordance with Rule 416.
(2) Based on the average price of the Common Stock on NASDAQ's SmallCapSM
Market on April 5, 1999. The resulting fee is calculated pursuant to section
(c) of Rule 457 of Regulation C.
(3) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c), based on the last sales price
reported on NASDAQ's SmallCapSM Market on April 5, 1999. The resulting fee is
calculated pursuant to section (c) of Rule 457 of Regulation C using a price
of $.66 per share.
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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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PROSPECTUS
SUBJECT TO COMPLETION, DATED April 12, 1999
EARTH SCIENCES, INC.
2,269,712 SHARES OF COMMON STOCK
This Prospectus relates to shares of our Common Stock, par value $0.01 per
share 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 by the Selling Stockholders consist of (i)
1,360,623 shares of Common Stock currently issued and outstanding, and (ii) a
presently indeterminate number of shares issuable upon notice to us of the
sale by the Selling Stockholders in respect of the original 1,360,623 shares
of Common Stock (the "Additional Shares"). For purposes of determining the
number of shares of Common Stock to be registered, the number of Additional
Shares calculated to be issuable is based on an assumed average closing bid
price of the Common Stock on the five trading days preceding the date of such
notice of $.6563 per share (which price is equal to the last sales price of
the Common Stock as of April 5, 1999, and has been arbitrarily selected). The
number of Additional Shares available for resale is limited to a maximum of
3,151,558 shares, is subject to adjustment, and could be materially less or
more than the estimated 909,089 shares included above depending on the future
market price of the Common Stock which cannot be predicted by us at this time.
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 may 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. For
details of how the Selling Stockholders may offer their shares, please see the
section of this prospectus entitled "PLAN OF DISTRIBUTION" on page 10.
THE ACQUISITION AND OWNERSHIP OF OUR COMMON STOCK INVOLVE A HIGH DEGREE OF
RISK. ONLY INVESTORS WHO ARE ABLE TO AFFORD THE RISK OF LOSS OF THEIR ENTIRE
INVESTMENT SHOULD PURCHASE OUR COMMON STOCK. SEE "RISK FACTORS" BEGINNING ON
PAGE 2 OF THIS PROSPECTUS.
Our Common Stock is traded in the over-the-counter market and is quoted on
NASDAQ SmallCapSM Market ("Nasdaq") under the symbol "ESCIC". On April 5,
1999, the last sales price of the Common Stock on Nasdaq was $.6563 per share.
_____________________________________________________________________________
Offering Price Proceeds to Proceeds to
to Public(1) Commissions(2 Selling Stockholders Company(3)
- -----------------------------------------------------------------------------
By Selling Stockholders
- -----------------------------------------------------------------------------
Per Share ......$ .6563 $ -- $ .6563 $ --
TOTAL ........$ 1,489,612 $ -- $ 1,489,612 $ --
- ------------------------------------------------------------------------------
(1) The price per share for the securities offered by the Selling
Stockholders is estimated at the last sales price quoted by Nasdaq for the
Common Stock at $.6563 on April 5, 1999. 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 $4,000. (See "PLAN OF DISTRIBUTION" below).
Our principal executive offices are located at 910 12th Street, Golden,
Colorado 80401, and our telephone number is (303) 279-7641.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This prospectus is dated April __, 1999.
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You should rely only on the information incorporated by reference or provided
in this prospectus or any prospectus supplement. Neither the Selling
Stockholders nor we have authorized anyone else to provide you with different
information. The Selling Stockholders are not making an offer of these
securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of those documents.
RISK FACTORS
An investment in our common shares is speculative and involves a high degree
of risk. You should carefully review the information set forth below, the
information incorporated by reference, as well as other information appearing
elsewhere in this prospectus, before making an investment in our common
shares. The following are the most significant risk factors that we believe
are material to investors who purchase or own our common shares.
Specifics Risks Related to Us
We Have Not Paid Dividends. We have paid no cash dividends on our Common
Stock and have no present intention of paying cash dividends in the
foreseeable future. It is the present policy of our Board of Directors to
retain all earnings to provide for our growth. Payments of cash dividends in
the future will depend, among other things, upon our future earnings,
requirements for capital improvements, our operating and financial conditions
and other factors that are considered important by the Board of Directors.
We Do Not Have a History of Profitability. While we reported net income in
fiscal 1995, our operating history has shown losses from operations in the
fiscal years ending December 31, 1988 through 1994, in 1996 through 1998, and
thus far in 1999. While certain of our operations may be profitable during a
given fiscal year, our operations as a whole may be unprofitable due the start
up nature of our major activities, 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.
The Issuance of Additional Shares Will Dilute 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.
The Price of Our Common Stock May Be Volatile. The market price for shares of
our 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.
Our Continued Listing on the Nasdaq SmallCap Market is Uncertain. Our Common
Stock is currently listed on the Nasdaq SmallCap Market under an exemption
from the minimum bid price requirement, which is $1.00. The exemption has
been granted until June 30, 1999. Our Board of Directors is evaluating a
reverse stock split as a means to achieve compliance in the event the bid
price of our Common Stock does not increase to the minimum level.
Nevertheless, there can be no assurances of our continued listing on the
Nasdaq SmallCap Market.
Risks Related to Our Mineral Exploration and Development Activities
The Nature of Mineral Exploration and Development is Risky; We Have Not Yet
Discovered Any Proven Commercially Viable Reserves on Our Mineral Properties.
Exploration for minerals is highly speculative and may involve greater risks
than many other businesses. Many exploration programs, including those, which
we have conducted, 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. Our 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. No commercially viable reserves are presently
known to exist on our mineral properties.
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Risk of 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 we contemplate conducting exploration
activities. We may be at a competitive disadvantage in acquiring mineral
properties since we must compete with these individuals and companies, many of
which have greater financial resources and larger technical staffs than ours.
From time to time, specific properties or areas, which would otherwise be
attractive to us for exploration or acquisition, are unavailable due to their
previous acquisition by other companies.
The Price of Minerals Fluctuates. The market price of minerals is extremely
volatile and beyond our control. Mineral 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 our
results of operations and operating cash flow. Furthermore, if the price of a
mineral should drop dramatically, the value of our properties which are being
explored or developed for that mineral could also drop dramatically, and we
might not be able to recover our 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 $285 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. We are not involved in, nor do we
expect to enter into any hedging activities
Environmental Controls are Increasing and Costly. Compliance with
environmental quality requirements and reclamation laws imposed by federal,
state, provincial, and local governmental authorities may require significant
capital outlays, may materially affect the economics of a given property, or
may cause material changes or delays in our 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 us 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 our activities.
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United States Federal and state environmental laws and regulations potentially
applicable to mining exploration, development and operations of Registrant
include: (a) the assessment of environmental impacts pursuant to the National
Environmental Policy Act and its state counterparts; (b) the Endangered
Species Act and any comparable state laws; (c) water quality laws and
regulations which address impacts on waters of the United States or a state;
(d) solid, and possibly hazardous, waste laws and regulations to the extent
that waste is generated as a result of activities on the property; (e) air
quality laws and regulations if air emissions result from site operations; and
(f) mined land operational and reclamation requirements. In addition to the
imposition of requirements which may impact operations, a number of these
environmental laws and regulations impose permitting requirements related both
to the initiation of certain mining activities as well as to the ongoing
operation once mining commences. Local regulations in the U.S. typically are
land use related rather than environmental. Although environmental regulatory
costs to date and those expected in 1999 are not significant, they may become
substantial in the future. Such costs are considered a part of the ordinary
costs of our business.
The Title to Mineral Properties Can be Uncertain. Several of our mineral
properties which are in the United States are unpatented mining claims to
which we, or those under which we hold our rights, have 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 our 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 we remain 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.
Legislation Has Been Proposed That Would Significantly Affect 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 December 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.
Our 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 our costs of any production from unpatented
mining claims.
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Our Funding for Exploration is Uncertain. We have funded much of our
exploration and acquisition activities through joint venture arrangements,
which minimize the cost of such activities to us and allow us to explore and
acquire a greater number of properties than we would otherwise be able to
explore or acquire on our own. We have also funded a portion of our
exploration activities without joint venture participation, resulting in
increased costs to us. We have been successful in raising such funds for our
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. Our ability to obtain this
financing will depend upon, among other things, mineral prices and the
industry's perception of their future prices. Therefore, availability of
funding is dependent largely upon factors outside of our control, and cannot
be accurately predicted. We do not know from what sources we will derive any
required funding. If we are not able to raise additional funds (as to which
there can be no assurance), we will not be able to fund certain exploration
activities on our own.
The Uncertainty of Development and Operating Property Economics and Ore Grades
at Future Development Properties. Decisions as to whether any of the mineral
development properties which we now hold or which we may acquire in the future
contain commercially minable deposits, and whether such properties should
therefore be sold or brought into production, will depend upon the results of
exploration programs and/or feasibility analyses and the recommendations of
duly qualified engineers or geologists. Such decisions will 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 we now hold, or which we may acquire, will contain a
commercially minable mineral deposit, and therefore no assurance that we 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 our properties, we could incur a writedown on our investment
in any such property.
Risks Related to the Production and Sale of Purified Phosphate Products and
ADA
Our Solvent Extraction Process Has Not Been Proven Commercially Viable. The
solvent extraction process we developed for the production of purified
phosphoric acid ("PPA") has not been proven on a continuing commercial basis
at the Calgary plant. Although we have performed numerous bench-scale and
pilot plant tests of the process, there can be no assurances that the process
will yield satisfactory results when employed on a continuing commercial
scale.
We Have Limited Experience in Marketing Industrial Chemicals and Lack Long-
term Sales Contracts. The growth and profitability of operations at the ESEC
facility in Calgary are dependent upon, among other things, the sale of
purified phosphate products to chemical distributors and customers. ESEC
signed a letter of intent with Chemical Interchange Company ("CIC") to sell
6,000-8,000 tons per year of PPA for distribution in the US primarily east of
the Rocky Mountains and is presently negotiating a similar contract with
another group. However, we have limited experience in marketing industrial
chemicals and we are relying on consultants and others to initiate and
maintain other sales contacts. PPA is not typically sold under long-term
contracts, and we do not have any other significant long-term commitments to
purchase our products. There can be no assurances that we will be successful
in our future sales efforts.
The Supply of Raw Materials is Critical. The growth and profitability of
operations at the our solvent extraction facility in Calgary is dependent
upon, among other things, the availability of sufficient raw materials at
reasonable prices. We modified the facility to purify superphosphoric acid
("SPA") to produce a technical grade PPA and by-products. We purchase SPA from
a variety of US suppliers under different supply arrangements and have been
able to acquire sufficient quantities to supply our estimated requirements of
SPA. There can be no assurances that we will be able to obtain sufficient
quantities of SPA at reasonable prices in the future.
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Our Future Profitability is Dependent Upon Our Ability to Expand
Geographically. The growth and profitability of operations at our solvent
extraction facility in Calgary will be dependent upon, among other things, our
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. Although the contract with CIC will
move products into the Midwest, there can be no assurance that our efforts to
expand sales can be accomplished on a profitable basis.
Competition for Purified Phosphate Products. Our purified phosphate products
are being sold in markets that are highly competitive. The principal
competitive factors include product quality, price and distribution
capabilities. There can be no assurances that we will be able to compete
successfully against current and future competitors based on these factors.
We compete with several domestic and international producers, many of whom
have substantially greater financial, production, distribution and marketing
resources than ours. Increased competition could result in price reductions,
reduced margins and loss of market share, all of which could have a material
adverse affect on our business, financial condition and results of operations.
Ill 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, we will not recognize the synergies expected from its
acquisition, because ADA will not be able to utilize our purified phosphate
products.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and, therefore, file reports, proxy statements and
other information with the SEC. You can inspect and copy all of this
information at the Public Reference Room maintained by the SEC at 450 Fifth
Street, NW, Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains a web site that contains reports, proxy
statements and information statements and other information regarding issuers,
such as us, that file electronically with the SEC. The address of this web
site is http:\\www.sec.gov.
This prospectus, which constitutes a part of a registration statement on Form
S-3 filed by us with the SEC under the Securities Act of 1933, omits certain
of the information set forth in the registration statement. Accordingly, you
should reference the registration statement and its exhibits for further
information with respect to our common stock and us. Copies of the
registration statement and its exhibits are on file at the offices of the SEC.
Furthermore, statements contained in this prospectus concerning any document
filed as an exhibit are not necessarily complete and, in each instance, we
refer you to the copy of such document filed as an exhibit to the registration
statement. You should rely only on the information or representations provided
in this prospectus and the registration statement. We have not authorized
anyone to provide you with different information.
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 NW, Washington
, D.C. 20006.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede the information in this
prospectus. Accordingly, we incorporate by reference the documents listed
below and any future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act:
1. Our annual report on Form 10-KSB, as amended, for the year ended
December 31, 1998 ("1998 10-KSB").
2. A description of our Common Stock contained in the Registration
Statement on Form 8-A as declared effective by the Securities and
Exchange Commission.
All reports and other documents we subsequently file pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and before the filing of a post-effective amendment which indicates
that all securities offered under this prospectus have been sold or which
deregisters all securities remaining unsold, shall be deemed to be part of
this prospectus from the date of the filing of such reports and documents.
We will provide without charge to each person, including any beneficial owner,
to whom a Prospectus is delivered, upon written or oral request a copy of our
annual and quarterly reports as filed with the Commission, and/or a copy of
any or all of the documents which are incorporated by reference in this
document The annual reports on Form 10-KSB include our audited financial
statements. Requests should be directed to Earth Sciences, Inc., 910 12th
Street, Golden, Colorado 80401, Attention: Investor Relations (telephone
303-279-7641).
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed in
this prospectus contains or incorporates certain forward-looking information.
Statements containing terms such as "believes," "does not believe," "no reason
to believe," "expects," "plans," "intends," "estimates," "anticipates" are
considered to contain uncertainty and are forward-looking statements. Forward
looking statements involve risks and uncertainties that could cause results to
differ materially, including changing market conditions and other risks
detailed in this prospectus and other documents filed by us with the
Securities and Exchange Commission from time to time. Factors that might cause
such a difference include, but are not limited to, those discussed in the
section entitled "RISK FACTORS" above. You are cautioned that no forward-
looking statement is a guarantee of future performance and you should not
place undue reliance on any forward-looking statement, which reflect
management's analysis only as of the date of such statements.. These
securities are speculative and involve a high degree of risk. You should only
purchase these securities if you can afford to lose your entire investment.
You should carefully consider the risks set forth above under the title "RISK
FACTORS" prior to purchasing our common stock. We are not taking on the
obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date of this prospectus.
THE COMPANY
We are a chemical processing, air pollution control and mineral exploration
company. We commenced production of purified phosphate products in Calgary in
June 1997. We were originally incorporated under the name of Colorado Central
Mines, Inc. in Colorado in 1957. Our major activities include the operation of
our solvent extraction facility in Calgary, Alberta for production of purified
phosphate products; flue gas conditioning technology for coal-fired boilers
and other applications provided through ADA Environmental Solutions LLC
("ADA"), a wholly-owned subsidiary; and continued exploration activities for
diamond and gold resources in Venezuela.
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Our 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 1999.
In May 1998, we acquired the remaining 49% interest in ADA through the
issuance of approximately 1,715,000 of its common stock. Our initial 51%
interest was purchased in 1997 by payments to ADA totaling $2,500,000. At that
time we obtained the option to acquire the remaining 49%. We believe 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.
Our Calgary plant will provide ADA with purified phosphoric acid (PPA), the
main chemical ingredient in many of the blends used in our flue gas
conditioners.
RECENT DEVELOPMENTS
Private Placements of Common Stock
From December 1998 through February 1999, we sold a total of 1,360,623 shares
of Common Stock and received net proceeds of $1,237,000. The shares we sold
are restricted from resale until after a registration statement becomes
effective covering their subsequent sale or 90 days after the sale which ever
occurs later. We have the obligation to issue the Additional Shares in the
event the market price at the time of sale is less than 125% of the purchase
price. The Additional Shares are limited to approximately two and one half
times the number of shares originally issued. The registration for resale of
the 1,360,623 shares of Common Stock issued and outstanding and the Additional
Shares that may be issued are included in this Prospectus. The private
placements of Common Stock were made to provide working capital for the
Calgary facility for production of purified phosphate products and our general
working capital needs.
News Releases and Current Announcements
Since the beginning of 1999 we have made the following news releases and
announcements:
1) January 5, 1999 -- ADA won a $96,000 contract to demonstrate a technology to
improve power plant fabric filters. ADA's fabric filter solution has the
potential to increase generating capacity, lower operating and maintenance
costs as utilities using fabric filters switch to less expensive low-sulfur
coals.
2) January 19, 1999 -- ADA announced award of its third patent in 12 months
for an advanced flue-gas conditioning technology. The patent will protect
ADA's non-hazardous agglomerating agents that can improve performance of
older electrostatic precipitators without the use of ammonia.
3) February 2, 1999 -- We signed a letter of intent with Chemical Interchange
Co. ("CIC") for sale of 6,000 to 8,000 tons of purified phosphoric acid
annually from the Calgary plant. The expected purchases from CIC could
potentially yield net revenues of $2.6 to $3.4 million per year and will
move product from the plant in Calgary into markets east of the Mississippi.
4) February 16, 1999 -- ADA announced successful completion of a technology
evaluation at a southeastern coal-fired generating station that resulted in
significantly reduced emissions.
5) March 2, 1999 -- ADA's flue gas conditioning unit at a northwestern utility
successfully passed its warranty test.
6) March 18, 1999 -- We received approval of a $400,000 revolving credit
facility with the Hongkong Bank of Canada, subject to definitive
documentation. The credit facility will be used to augment working capital
to finance production increases at the Calgary chemical plant.
7) March 25, 1999 -- We received an extension from Nasdaq until June 30, 1999 to
meet the minimum bid price requirement of $1.00 per share for continued
listing in the SmallCap Market. For duration of the exemption our Nasdaq
symbol will be ESCIC.
10
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of Common Stock by the Selling
Stockholders. In connection with this offering, we estimate that we will incur
costs of approximately $4,000 for legal, accounting, printing, and other
costs. Any separate costs of Selling Stockholders will be borne by them.
SELLING STOCKHOLDERS
The following table provides certain information, as of the date of this
prospectus, respecting the Selling Stockholders, the shares of Common Stock
held by them or to be held, to be sold, and to be held following the offering,
assuming the sale by such Selling Stockholders of all Shares of Common Stock
offered.
Shares Owned
Securities Owned Prior to the Offering(1) After Offering(1)
------------------------------------------ --------------
Selling Common Additional Shares to
Stockholders(2) Stock Shares be Offered Number %
- ------------------------------------------------------------------------------
Augustine Fund, LP(3) 551,876 400,432 952,308 0 -
Daniel R. Bisque (4) 150,385 80,086 190,461 40,010 *
Michael J. DeBoer (5) 61,538 33,692 95,230 0 -
Pegasus Holdings,
Ltd. (6) 220,751 160,173 380,924 0 -
Barry Seidman 220,751 160,173 380,924 0 -
Franklin J. Stermole 160,000 4,163 104,163 60,000 *
R. Scott Tracey (7) 95,332 70,370 165,702 0 -
- ------------------------------------------------------------------------------
Totals 1,460,633 909,089 2,269,712 100,010 *
==============================================================================
* Less than one percent
(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) The listed Selling Stockholders purchased shares of Common Stock from us
at various dates at the then current market price. As an inducement to the
sale, we agreed to issue a limited number of additional shares to such
Selling Shareholders (the "Additional Shares") in the event that the average
bid price on the five trading days prior to the sale of the original shares
is less than 125% of their purchase price. Additional Shares, if necessary,
will be issued so that the total shares held (not including prior or
subsequent acquisitions and assuming no sales) by each such Selling
Stockholder times the 5-day average bid price equals 125% of the amount paid
for the Common Stock. The number of Additional Shares that may be issued is
limited to approximately two and one half time the number of shares
originally purchased. The Common Stock purchased from us and the Additional
Shares that may be issued, if any, cannot be sold until the later of 90 days
from the purchase date or the date that the registration statement covering
their sale is declared effective. The number of Additional Shares shown as
being offered in the table (909,089 shares) is based on a hypothetical 5 day
average bid price of $.6563 per share (which is based on the last sales
price reported for the Common Stock on April 5, 1999).
(3) The Augustine Fund, LP is controlled by its general partner, Augustine
Capital Management, Inc., whose investment decisions are made by John
Porter, Brian Porter and Thomas Duszynski.
(4) Daniel R. Bisque is the son of an officer and director of the Company.
Such officer and director disclaims any beneficial ownership in the Common
Stock held.
(5) Michael J. DeBoer is the son-in-law of an officer and director of the
Company. Such officer and director disclaims any beneficial ownership in
the Common Stock held.
(6) Pegasus Holdings Ltd. is beneficially owned by a number of non US
persons.
(7) R. Scott Tracey is the son-in-law of an officer and director of the
Company. Such officer and director disclaims any beneficial ownership in
the Common Stock held.
11
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to the public offer and sale by certain shareholders
(the "Selling Stockholders") of 1,360,623 shares of Common Stock currently
held by Selling Stockholders and an indeterminate number of shares of our
Common Stock issuable on notice of certain sales 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 Stockholder has advised us 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 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 our 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. 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. 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 us 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 us in
making decisions with respect to the timing, manner and size of each sale.
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 50,000,000 shares of Common Stock,
$0.01 par value per share. All of our issued and outstanding stock 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 our net assets 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 23,554,362
shares of Common Stock outstanding owned by approximately 9,000 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
and the organization and existence of our company have been passed upon for us
by the Law Offices of Reed & Reed P.C., Suite 330, 1919 14th Street, Boulder,
Colorado 80302.
EXPERTS
The consolidated financial statements which are incorporated by reference in
this prospectus by reference from our Annual Report on Form 10-KSB as of and
for the year ended December 31, 1998, 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 $ 416.45
Printing and mailing expenses $ 500.00
Legal fees and expenses $ 1,500.00
Accounting fees and expenses $ 1,500.00
-------------
Total $ 3,916.45
========================
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.
13
<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 Law Office of Reed & Reed, P.C. as to legality of the
shares
23.1* Consent of Hein + Associates LLP
23.2* Consent of Law Office of Reed & Reed, 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, 1998.
(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.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant hereby certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement and any amendment thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Golden,
State of Colorado on April 12, 1999
EARTH SCIENCES, INC.
Date: April 12, 1999 /s/ Ramon E. Bisque
--------------------------------------
Ramon E. Bisque, Member of Executive Committee
Date: April 12, 1999 /s/ Duane N. Bloom
---------------------------------------
Duane N. Bloom, Member of Executive Committee
Date: April 12, 199 /s/ Mark H. McKinnies
---------------------------------------
Mark H. McKinnies, Member of Executive
Committee, 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: April 12, 1999 /s/ Ramon E. Bisque
-----------------------------------------------
Ramon E. Bisque, Director
Date: April 12, 1999 /s/ Duane N. Bloom
-----------------------------------------------
Duane N. Bloom, Director
Date: April 12, 1999 /s/ Michael D. Durham
-----------------------------------------------
Michael D. Durham, Director
Date: April 12, 1999 /s/ Robert H. Lowdermilk
-----------------------------------------------
Robert H. Lowdermilk, Director
Date: April 12, 1999 /s/ Mark H. McKinnies
-----------------------------------------------
Mark H. McKinnies, Director
15
<PAGE>
Exhibit 5.1
Law Office of Reed & Reed, P.C.
Attorneys at Law
Suite 330
1919 14th Street
Boulder, Colorado 80302
Telephone (303) 413-0691
Telecopier (303) 413-0645
April 12, 1999
Earth Sciences, Inc.
910 12th Street
Golden, Colorado 80401
Re: Registration Statement on Form S-3
Covering the Registration of 2,269,712
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 2,269,712
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 April 12, 1999, (as may be
further amended from time to time, the "Registration Statement"), covering the
registration of the Securities. We have also made such other investigations
and reviewed such other documents as we have deemed necessary in order to
express the opinions set forth below.
Based upon the foregoing and upon such further examinations as we have
deemed relevant and necessary, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Colorado.
2. The Securities have been legally and validly authorized under the
Company's Articles of Incorporation, as amended, and constitute (or will
constitute upon issuance as described in the Registration Statement) duly and
validly issued and outstanding and fully paid and nonassessable shares of the
Company under the Colorado Business Corporation Act.
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/ Scott Reed
Law Office of Reed & Reed, P.C.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference of our report dated March 19,
1999 accompanying the financial statements of Earth Sciences, Inc.,
whichreport appears in the December 31, 1998 Annual Report on Form 10-KSB 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
April 12, 1999
